July 11, 2022

Achieving Financial Freedom and Helping Others do the same

Achieving Financial Freedom and Helping Others do the same

In this episode, the Owner of Hudson Investing, Kent Ritter, talks about insight on how he has become financially free through apartment investing, as well as how he helps busy professionals scale and diversify their real estate portfolios. And he will also be telling us a few practical tips that helped him succeed in this space.

Kent is a former management consultant, start-up owner, and corporate executive turned full-time real estate investor and operator. Kent is the CEO of Hudson Investing, a multifamily investment firm that helps busy professionals scale and diversify their real estate portfolios. He has been featured on many shows including Best Real Estate Investing Advice Ever and The Real Estate Syndication Show providing impactful interviews and practical tips for investors. Kent has achieved financial freedom, and now he is on a mission to empower others to do the same through multifamily investing.


Segment Timestamps

  • [00:54] Who is Kent?
  • [03:41] What did Kent start with when he jumped into the Real Estate space?
  • [05:29] Should you start first as a limited partner or a general partner?
  • [08:40] Investing in a deal and metrics to consider.
  • [13:17] Transitioning from an LP to GP.
  • [16:25] Money-saving tip.
  • [22:51] Helping others invest passively and finding your freedom at the same time.
  • [26:50] A pleasant surprise.
  • [28:49] Top 3 advice for new or aspiring investors.
  • [30:53] Surviving the pandemic with a stable plan.
  • [34:17] Failures Kent experienced and what he learned.
  • [40:20] Kent’s podcast launch.
  • [41:10] How did Kent benefit from being on Joe Fairless’ and Whitney Sewell’s podcast platforms?

 

Episode Highlights

  • “I started by investing with people that knew more than I did and investing in their deals to learn from them and learn how this whole syndication game works. And I did that for about three years before I lead my first syndication and was the sponsor on the deal myself and brought other people.”
  • “Well, for me, I started out as an LP, and it was a great way to learn, it was a great way to build contacts and build my network.”
  • “The more experienced investors that understand, it's really about managing downside risk and all of the IRR is and all those things, those numbers that are projected for five years out, those are all just guesses at the end of the day that are highly dependent on exit cap rate, number one, which can go up and down and sideways and there's really no way to predict.”
  • “When you're looking at the deal, understanding cash flow, understanding, like I said, downside risks, so cash flow, what's the debt coverage ratio? What's the break-even occupancy, understanding those things.”
  • “And the way that it's allowed me to reach financial freedom is because through running these deals, not only am I investing in each of the deals and getting the same benefits that the other passive investors are, which is the regular cash flow, and then the appreciation when we sell and all those tax benefits, but there's also some fees associated with doing all the work that I'm doing. And so, as a sponsor, I get an acquisition fee.”
  • “Start educating yourself right away. That’s the most important thing, is investing in yourself and your education. So that's the way that you manage your risk is by learning and understanding what's going on.”
  • “Start building relationships right away. I know because this is a relationship business, whether it's relationships with your investors, relationships with your banks, relationships with property managers, or with brokers, all of those people are going to be critical to your success.”
  • “You've got to start putting yourself out there. You got to get out of your comfort zone, and you have to become comfortable being uncomfortable.”
  • “Strike while the iron is hot, as I say versus letting that drag on because you never know who's going to swoop in and steal your deal.”

 

Relevant Links

Website:          kentritter.com.

Podcast:          Ritter on Real Estate.

Instagram:       Ritter on Real Estate.

LinkedIn:         Kent Ritter.

Transcript

[00:00:00] Marc Cesar: Welcome back everyone. And on this episode, we are talking to Mr. Kent Ritter, who is a full-time real estate investor and operator in the multifamily space. He will be sharing with us today insight on how he has become financially free through apartment investing, as well as how he helps busy professionals scale and diversify their real estate portfolios. And he will also be telling us a few practical tips that helped him succeed in this space. And of course, we are looking to hear the roller coaster ride that he has undergone through the journey, which is what we call our scary story on the show. Kent, welcome, sir.

[00:00:48] Kent Ritter: Hey, thank you for having me. Excited to be here today, Marc.

[00:00:54] Marc Cesar: Likewise, I'm eager to hear your story and your journey, so let's jump right into it. So, I see that you are a former management consultant, startup owner, and corporate executive. Can you give us a little background on those illustrious titles that you have held?

[00:01:10] Kent Ritter: Yes, sure. So, I started out at a college as a management consultant, got a job right out of school, moved to Chicago, and I spent 12 years as a management consultant in various roles but within the same industry. In 2010, some partners and I set out to start our own management consulting business. So, we felt that the industry was going to take a right turn, and our company was heading straight. And so, we wanted to capitalize on that. So, we left and started our own business, myself and five others. And we grew that business from 2010 to 2015. And we sold it at the end of 2015. At that point, we had 95 employees and about 30 million a year in annual revenue. So, we sold at the end of 2015. So that's you got the management consultant covered, you got the startup owner covered. And then we went to work for the company that we sold to, which essentially, is typically what you do after you sell a company, they don't let you walk away with the money. And so, I had a four-year earn-out agreement. And so, I went to go work for that company and became a corporate executive for a billion-dollar revenue consulting firm. And so, they've checked all the boxes, and I spent that time, from 15 to 2000, or 16 to 19 in that corporate executive position. That was really when I started investing in real estate as well and really started out as a side thing really, to diversify my portfolio to make sure I didn't have all my eggs in one basket, take the capital from the exit of the company and start to put that capital work. And I really fell in love with real estate and fell in love with doing the deals and the process and found that my skill set of being a management consultant translated really nicely into the work that's required to be a successful real estate investor. And so, I started doing that, picked up some steam and then, inevitably people started saying, what are you doing? What's that? What are you a part of? How do I get involved in that? So, I started bringing other people in my deals, and then it grew and grew from there to the point I decided to launch a business to really formally bring investors into my deals with me and give investors real estate opportunities that they wouldn't typically have because they're not publicly available opportunities.

[00:03:41] Marc Cesar: Congrats on the amazing start on building a management consulting company and startup and eventually selling. That’s a very illustrious goal that a lot of business owners should aspire to do. Now when you jumped into real estate, what facetted approach did you jump into? Did you jump into residential or straight into multifamily?

[00:04:09] Kent Ritter: Yes, I did a few things in parallel really, as I was trying to find my niche, find my place and I've done everything from investing notes, created a small note portfolio. I did some fix and flips. I have still a small portfolio of single-family and duplexes. But I found multifamily pretty quickly. I had a couple of great mentors along the way to guide me in the right direction and show me that multifamily was the best way to scale and it had a lot of benefits over other asset classes in real estate. And, then particularly going from multifamily to multifamily syndication and realizing that I could invest alongside other people and I started out as a passive investor. I started by investing with people that knew more than I did and investing in their deals to learn from them and learn how this whole syndication game works. And I did that for about three years before I lead my first syndication and was the sponsor on the deal myself and brought other people. And so, I did a whole host of different things before ultimately in 2019 waiting my own deal and leading my own syndication.

[00:05:29] Marc Cesar: Nice. Now, I want to throw this question out. What are your thoughts on starting out as an LP on the passive side versus starting out as a GP? Because I think this is a debate that I hear frequently, where a lot of people say, if you're starting to multifamily, you should start investing passively because you get to understand the dynamics that go into the day-to-day as opposed to starting as a GP, while you have another set party who says the vice versa, what are your thoughts on that topic?

[00:06:01] Kent Ritter: Well, for me, I started out as an LP, and it was a great way to learn, it was a great way to build contacts and build my network. I intentionally wanted to invest across different geographies and different sponsors, because I wanted to understand the differences, I wanted to see how certain sponsors did things and everybody does things a little differently. And so, I was able to pick up what I liked and also take note of what I didn't like, and make sure that I didn't do that when I started my own business. And so, to me, it was a great way to start to one, get the returns, because they’re still great returns as a passive investor. But two, always knowing I wanted to do this and be able to take notes from the pros that knew more than I did. And so, I would highly recommend being a passive investor and starting there. It's also a great way, while you are either still in your full-time job, or transitioning out of your full-time job, it's a great way to supplement your income with cash flow. And it's a great way to put your toe in the water and decide if this is something that you want to do. I think that people probably don't realize how much is going on behind the scenes, when you are on the GP side, it's an incredible amount of work. What I would say, if like you're considering being a GP or general partner and leading these deals is, you really have to love real estate, if your motivation is to make a little bit more juice on the deal, being the sponsor versus being the passive investor, that juice is going to be worth the squeeze, when it comes down to the level of responsibility, the level of viability, and just the level of work that goes into it. So, I think you've got to consider, first of all, do you want to be a full-time real estate investor or do you just want access to real estate investments because you have a passion for something else and that's what you like to do, that's pretty clear, you should not be a GP in that case. And so, if it's not something you're really passionate about I think that's an easy decision. Either way, if it is something that you want to do in the future, which is the way that I approached it, I think it's a great way to learn and it'll teach you a hell of a lot more than, the different courses and books and things because you can read about it all you want, hear about it all you want but when you're actually in the deal, you get to see behind the scenes and understand what's happening and ask direct questions and it's just a next level of education.

[00:08:40] Marc Cesar: Great insight. I appreciate you sharing that. So, to piggyback off that question, you started out as an LP investor, investing passively in deals. Did you say, I have $50,000 and we find the next operator that who has a deal, throw my hat in there with them? Or, did you have specific metrics that you looked for before you invested your capital?

[00:09:07] Kent Ritter: Well, one thing I'll say is my sophistication as an investor and even as a passive investor increased quite a bit from my first investment to my 15 passive investments. And so, when I was starting, I didn't know much of what I was doing. My first few passive investments were through crowd-funding sites, really just trying to dip my toe in the water, trying to understand how all this works and I went out to a crowd-funding site, found a couple of deals, and made investments. And that's not the way that I would recommend approaching it. The main piece that's lacking there is the ability to really understand who the sponsor is, have a relationship with that sponsor, and really be able to judge is that somebody that I trust to give my money to and somebody that I trust is somebody going to succeed in this business. In those deals, I didn't vet the sponsor, the syndicator, or the person running the deals. One of the deals went fine. The other one, though, I lost all my money in the deal, as all the investors did, because the sponsor did some things that he shouldn't have done, he committed fraud and ended up losing the deal. And so that I can only look at it as a great, expensive lesson learned, that I hope other people can avoid and the reason that I had to pay for that lesson is because I didn't do a good job of due diligence on the front end. And so, at the beginning, no, I was not doing what you should do and I paid for it the hard way. Over time as my knowledge grew, and I had more data points, as far as expectations, I was looking for certain deal metrics, but it's usually the novice investors that get caught up on, this is what the IRR is going to be and those big shiny numbers. The more experienced investors that understand, it's really about managing downside risk and all of the IRR is and all those things, those numbers that are projected for five years out, those are all just guesses at the end of the day that are highly dependent on exit cap rate, number one, which can go up and down and sideways and there's really no way to predict. So, for me, it really comes down to cash flow, what's the cash flow look like? If there's cash flow, the deal can survive the ups and downs, and then if you hold it long enough, typically, almost all real estate will appreciate over time, in some way, shape, or form. So, if you have cash flow to sustain through. And then the IRR is obviously a good indicator, but people have to understand that, it's a guess and it's a guest that's five years away and a lot of things can change between now and then. So, when you're looking at the deal, understanding cash flow, understanding, like I said, downside risks, so cash flow, what's the debt coverage ratio? What's the break-even occupancy, understanding those things. So, what could go wrong and how wrong do they have to go before you lose your money, I think are the important things really to look at because first and foremost, it's about capital preservation, you don't want to come out with less money than you had going in and then after that, it's what's the upside and what's the probability that we will get there. I think that's also something that people forget about, it's that shiny number, but what's the probability that shiny number becomes a reality? And if the assumptions that the sponsor is making are beyond where you feel comfortable or feel what is reasonable, then the probability of that occurring is pretty low. So, I could show you a 30% IRR, internal rate of return right all day, but what's the likelihood that really is going to happen?

[00:13:17] Marc Cesar: Well said, and I appreciate your sharing that. So, you went from investing passively, and you threw your money into a few deals, lost some money, you made some money, and eventually, you scaled up to wanting to be part of the general partnership size. So, take us through that transition. How did you come to make that decision? what happened? How were you successful transitioning into the GP role or did you fail at the front door?

[00:13:45] Kent Ritter: Sure. So, there's a multi-part question. So, I think the first part, around why I wanted to. After selling that business, I was really looking for an on my next adventure, I wasn't ready to sit on the sidelines, fairly young guy, still had a lot to give, still have a lot of energy, and I have a passion for, building businesses and for that growth and innovation that is involved in doing that. It's really stimulating. So, I wanted to do that, again, I fell in love with real estate. So, I felt like that was the industry that made sense. And I felt like real estate was something that through the ups and downs and, anything that could happen, real estate is something that's never going to go away and, always over the long term is going to be able to make money. So, I felt like that was the right industry. And then I was like, what's the right way to approach this? And, as I decided, basically what started happening was, as I was interacting with sponsors, as I was going to conferences and speaking with people, I realized that because of all the education that I was doing, over those three yours up to that point, I really understood the process, I understood the lingo, I understood the mechanics, I understood the levers that make deals succeed and fail and when people were talking to me, the people standing on the stages at conferences, I said, well, I know everything these guys are talking about and it really built my confidence where I was able to sustain a conversation with a high-level sponsor and really go back and forth like we both knew what we were talking about. So, I had great confidence in doing that. But I'm always self-aware enough to know that there are always things I don't know and there are probably always things I don't even know I don't know. And so, the way that I approached my first deal, I will say, I wasn't in the driver's seat, but I'll say I was sitting shotgun, I was in the front seat but I had folks that I partnered with, knew more than I did, who had a couple of syndications under their belt and that was a way to get started and have the ability to leverage the knowledge of others that have done it before and to continue to learn, but also to take that step forward. And so, I was able to come in, and I was able to help with things underwriting and asset management, and some investor relations and some capital raising. And, and so it was a very good way to get started and continue to learn, and continue to get even more experienced and my feet on the ground.

[00:16:25] Marc Cesar: Wow, awesome. Now, can you share a situation in your journey where you had something that you had a deal mapped out, a business plan put together with you and your partners, but the business plan went totally left, went awry? What went wrong in that situation? So, this is more of a three-part question, what went wrong? How did that situation affect your business and your business plan? And what did you take out of it that helped you and your business become better and grow from there?

[00:17:06] Kent Ritter: Well, that's a good question, it's a complicated question. So, we immediately have not had any business plans go totally out into left field. And that's because we have a pretty good understanding of what we're doing and what we expect to happen and we do our best to mitigate all of those situations. So, I'm trying to think about, from management, realizing that business plan perspective, we haven't had a lot, I've had examples where we've lost deals, and maybe we thought we had, that can be a good one, we've definitely had some things go sideways during the acquisition process, that might be something to share. But, let me get your thoughts, what do you think would be most valuable for your listeners?

[00:18:00] Marc Cesar: Well, it can be anything of sorts, whether it's a property management issue, removing tenants from the property, or acquisition, whichever one you feel would be more educational and beneficial to the listeners, is perfectly fine. If not all, that's perfect as well.

[00:18:18] Kent Ritter: Well, I can give you an example of something that happened on one of our properties that we definitely didn't expect. So, we took ownership of a property and everything was going fine. And then, a couple of months, in maybe six months or seven, we got a water bill, and the water bill was three times what it should have been, from the historical data we had from the last owner, and from what we experienced. And so obviously that comes up, as we look at our variances at the end of the month and say, this is way higher than we budgeted for, what's going on? And, so as we dug in, we realized, obviously, there had to be a water leak somewhere. But we didn't know where, there's no pools of water anywhere. And so, lesson learned, things can leak without leaving pools as the indicator. And, the other item, though in that city that we were operating in, water bills only come out every other month. So, it had been two months without identifying the issue. And so, we had a pretty hefty bill that we had to pay. And so, I learned a lot about how to identify leaks, how to go through a systematic process to figure out what unit it's in, and what's going on and how to fix that. So, what we did was our knee-jerk reaction right away was, we'll hire a leak detection company because we need to figure this out because it's a rather costly problem 1000s of dollars a month. And so, we paid a leak detection company to come in, and they were on site for about a half-hour, they cost about $900. And they told us that, there's a leak here in this one unit, and you can go and fix it and it was a toilet problem. And so, we did that and we went in, we fixed it and we're keeping track now with the water company. Well, it didn't fix the problem. It may slow it down a little bit, but it didn't totally fix the problem. And so, their half-hour on-site really didn't solve our issue, and it cost us a heck of a lot of money. So that's not a path that we go down again. We had to end up going through a systematic process that started with having our property manager well one sending a message out to all the residents and saying hey! is anybody's toilet running? Because most likely it was there's probably a running toilet somewhere or a couple of them, anybody's toilet running. We didn't really get any responses back, honestly, so we had our property manager, walk all the units and really start by listening for leaks, for running toilets, for drips and things, checking the faucets and the sinks, checking all the toilets and went from unit to unit. And we were able to find actually two toilets that were running constantly and have been running for weeks or months and had really been the essence of the problem. And so, we had to figure it out and go through a systematic process, and honestly, I think had we jumped on a little sooner, working with the property manager. I'm sure we lost some time there. There's a lot of lessons learned. But the biggest lesson learned was to watch your water bills closely and stay on top of those things. And as soon as you have a leak, you don't always have a puddle and sometimes you got to do some detective work to figure out what the issue is, if we wouldn't have figured it out that way, what we were going to do is go and turn off the water to all the units and turn it on one at a time and start to see when the needle starts spinning to know which unit actually had to leak in it.

[00:22:10] Marc Cesar: That is actually a great tip. I never knew that was something you should do. So, I appreciate you sharing that now, with this situation. Is that something that you could have assessed during the due diligence phase? Or, is there something that had to be assessed, as it came about, the transition of the acquisition?

[00:22:32] Kent Ritter: I don't think it's really something that we could have assessed during due diligence. And none of the toilets were leaking during due diligence, is something that came about, after we owned the property for several months, so it would have been impossible to really know upfront.

[00:22:51] Marc Cesar: Awesome, okay. Understood, I appreciate you sharing that. Now. In your bio, it says that you've achieved financial freedom through investment in multifamily and you've also helped countless busy professionals scale. How do you help these passive investors and scale? And in turn, how has that helped you achieve the financial freedom that so many people today are aspiring to achieve? And a lot of people, are not getting to that point as of yet or what have you?

[00:23:32] Kent Ritter: Sure. So, the way my business model works is, essentially, I will go out and find a property in a market that I like when we do a lot of data-driven analysis to understand which markets we want to be in, which submarkets we want to be in, which neighborhoods we want to be in, and then the type of properties that we want to acquire. And so, when we find properties that fit, check all those boxes, we'll go in to acquire the deal, we get a deal under contract. And then the way that we do the deal is, I actually bring outside investors, those busy professionals who want access to real estate deals, the returns that they're offered, and the diversification they're offering, the tax savings and everything else, but don't want to be landlords themselves and don't want to manage it themselves and want to hand it off to somebody else. And so those folks come into the deal, they invest right alongside me, we're putting all of our cash into the deal. And that's what forms the equity portion of the deal. And that's usually 20% to 30% of the capital stack to purchase the property and then renovate the property. And then we go out and get a loan for the other 70 to 80%. And so, one of the other benefits of real estate is leverage and the ability to only pay 20 to 30% of the price to purchase the whole property. And so, in that way I allow those busy professionals to scale their real estate portfolio by getting a percentage of owners to scale their real estate portfolio by getting a percentage of ownership in a large apartment complex, and in typically several large apartment complexes. And so, it gives them all those opportunities to have direct ownership without having to be the landlord, manage the toilets and the tenants and the termites and all those other T's. And the way that it's allowed me to reach financial freedom is because through running these deals, not only am I investing in each of the deals and getting the same benefits that the other passive investors are, which is the regular cash flow, and then the appreciation when we sell and all those tax benefits, but there's also some fees associated with doing all the work that I'm doing. And so, as a sponsor, I get an acquisition fee. And there's typically an asset management fee, acquisition fee is for all the work you do before you actually acquire the deal, all the due diligence, everything, and even the 15 deals that you looked at it went through the process, that didn't happen. So, reimbursement for that. And then the asset management fee is really about monitoring the deal and realizing the business plan throughout the life of the deal and managing the property manager on a day-to-day, week-to-week basis. And so, in those ways, I'm able to get paid on these deals, and that coupled with my passive investments, and my investments in my own deals, I've been able to replace my income and, more and achieve that financial freedom. And that's what it's all about, having that freedom of choice to do what you want, and not having to be holding to trading your time for money. And so, I love doing what I'm doing. So, I go to work every day, but it doesn't feel like it. And now I'm grateful to be in the position I'm in.

[00:26:50] Marc Cesar: That is awesome. So, with that said, what is the biggest surprise that you found in your success? What is something that happened that you did not expect?

[00:27:00] Kent Ritter: Good question. I think that just understanding the amount of work that it takes. Obviously, I started another business. Previously it was much more in a formal way where we had multiple partners, we had an equity partner, we raised capital upfront, and grew in that way versus my business now is very much more bootstrapped. And, growing from the ground up, and just understanding the amount of work that goes on behind the scenes, whether it's accounting or marketing, or, through operations and putting the correct insurances in place, and managing your liability and doing all those different things. Even starting my own podcast, which is called a Ritter on Real Estate is probably 10 times the work that I expected it was going to be. And so especially in the early years, it's difficult to do everything and wear so many hats. And so, I really had to be mindful about delegating and finding folks that shared my vision that could help me grow it but this very methodical about that of identifying everything that wasn't my highest and best use of my time, and delegating everything else, and making sure that there was clear operating procedures and a clear plan, in a way to do that and that's the way that we've been able to see so much growth.

[00:28:49] Marc Cesar: So, in retrospect, you were talking to someone who approached you and said Kent, how do I get to where you're at? What would be your top three advice that you would provide that person or someone who's aspiring to be an investor, like yourself?

[00:29:07] Kent Ritter: Well, start educating yourself right away. That’s the most important thing, is investing in yourself and your education. So that's the way that you manage your risk is by learning and understanding what's going on, the other I would say start building relationships right away. I know because this is a relationship business, whether it's relationships with your investors, relationships with your banks, relationships with property managers, or with brokers, all of those people are going to be critical to your success. So, start building relationships. And then the last one would be you've got to start putting yourself out there. You got to get out of your comfort zone, and you have to become comfortable being uncomfortable. I do things every day that I'm not comfortable with. Maybe it's the first time I'm doing it or it's to a bigger audience, and I've done it before, who knows, but you got to become comfortable in that and start to seek those opportunities where you think about doing it, you get that pit in your stomach because those are the growth opportunities versus, if you're staying in your comfort zone, then you're never going to be successful. And like, for me that was starting a podcast. When I started my podcast, the same imposter syndrome that a lot of other people have were like, what do I have to share? And who's going to listen to me? And what success have I really had? Well, I have a lot of experience, and I did have a lot to share, and the podcast has had a great response. But I had not got to started and got out of my comfort zone, it never would have come to fruition.

[00:30:53] Marc Cesar: Yes, those are some great tips on definitely brings to mind the quote that, and I don't think I’m quoting it exactly, but it says ‘if you're doing something where you feel very uncomfortable that you're in the right path’ in a nutshell, so I appreciate you sharing that. Now, that track to multifamily. We know, 2020 was a rough year for a lot of investors, how did your assets and your business fair in the midst of the pandemic up to this point? Did you guys take a hit? Did you guys suffer? Or, were you guys thriving in the markets that you were in?

[00:31:32] Kent Ritter: Really, we were thriving in the markets that we're in and we continue to thrive. And what's important to understand with that statement is going to geography and asset class, because some geographies did better than others, and some asset classes did better than others. And I happen to be in a place where both did well, we focus on the Midwest, and Southeast, both especially the Midwest, really stable environments, not cyclical, and really, don't have those ups and downs of the coasts, and so Midwest, and then I focus on workforce housing, which is, B and C class properties for folks that are median family incomes of about 40,000, to maybe 70,000 a year. And so folks that are long-term renters. Many of them are renters by necessity, versus by choice. And folks that, for the most part, our properties are relatively affordable. And that's one of the things that we really look at closely when we're making an acquisition, is what is that rent to income ratio, how much of somebody's income, are they paying toward rent, and making sure that we're staying below the affordability threshold of 30%. So we want to make sure that the rent that we're charging, even post-renovation is going to be under 30% of that area median income, to make sure that rent is still going to be relatively affordable for folks because I think it's the markets where that was out of whack and people were paying way more than that or the markets that got affected with delinquencies and bad debt and all those issues that folks face. So for us, during the COVID, pandemic occupancies were higher than they had ever been, they've occupancies have continued to increase. And while we had, folks, I'd say pay later, delinquencies definitely increased. We were able to work with folks, whether it was working with them, creating payment plans, working with local charities, or getting government funding, we were able to do a lot of things to make sure that the delinquency didn't become bad debt. And so really while some folks had to pay later, they still paid. And so, we were very fortunate that we didn't have much of an impact in COVID. And we've actually seen a really positive trend throughout 2021. And that's attributed a lot to the asset class, we're in, the general affordability of our units, and the geography that ran as well.

[00:34:17] Marc Cesar: I like that. Now, are there any failures that you experienced or undergone that you would say you've learned something from in your journey of real estate?

[00:34:29] Kent Ritter: Yes, there's a whole list of failures, you don't succeed without a whole list of failures. To give you an example, this is a good lesson for anybody that's trying to go direct to seller and find properties that way. So, we've had success, we've acquired one property going direct to seller and that went really smoothly. We had another property where we were like, okay! this direct seller thing works pretty well. Let's go out and do this again, and luckily, we got another bite right away. And we were working with the seller, we build a relationship with him and we were the only ones at the table and we put an offer out that it was below, maybe was 100,000 below what he wanted, but we felt like we were stretching our numbers to that point, and we got a knew to agree to it reluctantly, and we signed up an LOI, and we thought we were good to go. Well, in the week that it took my attorney to put together the contract, a broker swooped in and told the guy that he could get more money if you listed it, and the guy ended up signing up with the broker and getting out of our LOI, which LOI’s are not a legally binding document, and we lost that deal. And the deal probably ended up selling for about a million more than we had it almost under contract for. So, my lesson learned there was the deal is not done until that contract is signed. And make sure that you don't let the attorney lag time, or anything get in the way of you getting that deal done. And so, the lesson learned was, that we needed to have a boilerplate contract that we feel comfortable executing when we go direct to seller and get that contract in front of them and get it signed and strike while the iron is hot, as I say versus letting that drag on because you never know who's going to swoop in and steal your deal.

[00:36:41] Marc Cesar: Yes, that is a key point. Because I've learned that the hard way and I believe a lot of new investors who are coming into the space, they already start spending the money in their heads and the ink has yet to dry on that paper as of yet. So that is crucial. Make sure that everything is squared, the contract is signed, because as you mentioned, anyone can swoop in at the 11th hour and that deal is gone. So, it's always important to be on top of everything. Now, what is the least favorite part of your job or your day-to-day that you don't care much for, but you still have to do anyway?

[00:37:24] Kent Ritter: There's so much minutia of moving stuff around, whether it's bookkeeping. I have a bookkeeper but there's still a lot of reconciling and invoicing and different things and I'd say it's either that, the bookkeeping aspect of it or probably what I'm going through now is the insurance aspect of it. And going through insurance, we're updating our insurance policies and signing up for some new and different insurance and it's a mountain of information to pour through, and none of it is in plain English. And so definitely not the most fun. But insurance is underrated, extremely important to make sure that you're properly insured. That's the number one thing you can do to manage your risk.

[00:38:15] Marc Cesar: Definitely. Do you have any routines or time-saving hacks that you use to help make your day more efficient and your duties as an operator more efficient?

[00:38:28] Kent Ritter: Definitely. A lot of the technology and tools that we use give me huge leverage. So, I have a fully remote team. So, we use Slack to communicate, which I find so much better than email, it's easy to lose an email with all the hundreds of emails that we get. But with Slack, everything is right there in the place it's supposed to be. We use Monday.com as our project management software, where everybody can go and update their status and I can see across the entire company where people are at and where we're behind or where people need help. And then Calendly is a huge one obviously, where I can just for meeting scheduling and avoiding that back and forth of does this time work? How about this day? No, etc. You can allow people to go out and just click a link and schedule a time on your calendar that you already know works for you. So those have been huge from a time-saving standpoint. As far as routine, what I would say is that I do a lot to make sure that I'm mentally strong, whether it's meditating, or exercising, I love doing yoga. So, making sure that your mental health and your physical health is a priority because you got to show up, every day and that's the way that you can continue to do that. And the other thing I've learned about myself is like I feel I have my most mental capacity and my most vitality around 10 o'clock in the morning, that late morning. And so, if I have something difficult that I need to tackle or a difficult meeting that I know I'm going to have, I try to schedule it for 10, 11 o'clock, or late morning time because I know that I'm going to be at my best. And so that's a little tip of I've learned my own rhythms. And that seems to be the time where I'm hitting it on all cylinders.

[00:40:20] Marc Cesar: Nice. Awesome. Now, Kent, I know you mentioned earlier that you have started a podcast. Can you detail that a little more, and talk about it? And when do you typically air your podcast?

[00:40:36] Kent Ritter: Yeah, absolutely. The podcast is called Ritter on Real Estate. And it's anywhere you listen to podcasts, the same place you can find this one and it's really focused on passive investors and helping passive investors make good investing decisions. The tagline is “Passively Invest like a Pro” and what I do is I interview the pros so that you can invest like the pros. And we've been doing it for about a year and a half. We got about 75 or so episodes under our belt and it's just having a great time, we post episodes every Monday.

[00:41:10] Marc Cesar: Nice. So, I do see that you've been part of the infamous Mr. Joe Fairless’ Best Real Estate Investing Advice Ever and The Real Estate Syndication Show. Those two are my favorite shows. What was it like to be part of those shows? And what was the turnaround for you guys? Did it boost your morale? Did it boost your credibility in your business? What were the end results of being on those two platforms?

[00:41:39] Kent Ritter: So, Joe's and then Whitney's? First of all, those two are both fantastic, guys, awesome guys, Joe Fairless and Whitney Sewell, awesome people and they have amazing followings, they both do daily shows, there's something to that right with the size of their followings. And, obviously, they were huge boosts to my business and my exposure and being able to get out there. That’s why I come on other shows like this to help continue to build my brand and help people know who I am and help share my story and hopefully, through some of the tips I give people are either inspired or they avoid some of the mistakes that I made. And so being on those shows, definitely was a fantastic opportunity.

[00:42:30] Marc Cesar: Nice. So, what is up next for you Kent and Hudson Investing in the interim and in the near future?

[00:42:39] Kent Ritter: It's really about continuing to scale. So, my goal next year is to acquire 1000 additional units. And in addition to that, we've got a couple of development projects going on, they are in the early stages. So, another goal next year is to really start my first development and learn and go through that process. And so that's what it's all about, it's about scaling up because, in this business, there's safety and scale. And the more that you can build out your portfolio, the more you can hire a great team, the more that you can take advantage of economies of scale and lower your costs, and the more that you can do some really cool things with technology. I've got a lot of ideas that I want to implement, and we need to scale up a little bit to get there. So, we're right at about 450 owned units right now. We sold 250 Back in June. So, we're down a little bit and I want to get up to about that 1500 mark, by the end of next year.

[00:43:41] Marc Cesar: Awesome. Now, I typically do ask this question to everyone but in a different way. So, I'm going to ask you in a slightly different way, if you lost everything today, but you have to start over with a clean slate but with the knowledge that you have now, what would you do differently?

[00:44:03] Kent Ritter: First of all, I would do the exact same thing I'm doing right now. I would be starting over. But I've got the skill set to know how to do it. And it's still the right place to be, I'd rather be nowhere else. So, I would do the same thing. Well, I guess what I would do differently is take advantage of those lessons learned I have, big and little along the way. As you're starting a business, you'll learn a lot of things. I think I would figure out a way to invest more heavily in people from the start and to build the team more quickly and to delegate more quickly and to really just try to hit it on all cylinders. I think for a while I was trying to do too much on my own, and that stymied the growth in some way even from editing my own podcasts back when I first started, and that was a whole heck of a lot harder than I thought it was going to be. So, as I've started to delegate, as I said earlier, it allowed me to have so much more growth and by staying in my lane and doing what I'm good at. So, creating those roles earlier and delegating and really trying to grow quickly from the start.

[00:45:27] Marc Cesar: That was awesome. And I agree with you on the podcast thing. It is very tedious to do all of it by yourself, I think I just learned my lesson here because that's what I'm doing right now and it's time for me to start delegating, to focus more on getting content.

[00:45:45] Kent Ritter: It's all an opportunity cost. If you're doing something, you can't be doing anything else. And so, I was spending too many hours in front of my computer trying to learn how to be a good audio editor and video editor and that was not my highest and best use. So, you've got to learn and think about things from an opportunity cost perspective. And when I started doing that, I saw things really start to take off.

[00:46:11] Marc Cesar: Definitely. Now if anyone wanted to connect with you Kent and learn more about what you do or potential opportunities that you may have, how would they go about doing so?

[00:46:21] Kent Ritter: Just go to kentritter.com. You can access everything from there, whether it's my blog, we do a weekly blog, whether it's a podcast, you can see other media appearances, got an investor resources section with resources for new investors, terminology, and frequently asked questions. And you can really get everything there. And if you want to invest, you can sign up to be an investor there as well, fill out our application and we'll reach out to you to have a phone call.

[00:46:52] Marc Cesar: Awesome. So, to our listeners, all the information and links that Kent mentioned will definitely be in our show notes. So, we are at the end of our amazing conversation. Kent, I just want to thank you so much for jumping on and being transparent to share your story with us. Of course, the platform is always open if you want to come back on and share some updates or new stories with us. We welcome you at any time.

[00:47:22] Kent Ritter: I appreciate that, Marc. Thanks for having me on. Hope you have a good rest of the day.

[00:47:27] Marc Cesar: No problem. And everyone who is listening, happy investing and your success. Until next time.

Kent Ritter Profile Photo

Kent Ritter

Owner of Hudson Investing

Kent is a former management consultant, start-up owner, and corporate executive turned full-time real estate investor and operator. Kent is the CEO of Hudson Investing, a multifamily investment firm which helps busy professionals scale and diversify their real estate portfolios. He has been featured on many shows including Best Real Estate Investing Advice Ever and The Real Estate Syndication Show providing impactful interviews and practical tips for investors.  Kent has achieved financial freedom, and now he is on a mission to empower others to do the same through multifamily investing.