I’ve got another Corey on the show today, and he is seriously my hero. Corey Peterson, the CEO of Kahuna Investments, is crushing the scene right now with his million dollar multi-family investments. He’s made $3 million in net profits off of some of these properties. On today’s episode, he’s breaking down his profit master investment strategy and sharing the secrets of OMP. That’s Other People’s Money for those of you wondering. Corey’s got some incredible tactics for linking up with investors. He’s going to walk us through his elevator pitch and give us all pointers on how to build the right kind of investment relationships.
Corey’s going to tell us how we can stop listening to the tiny voice in our head that tells us we can’t. Self-talk and self-doubt plague a lot of us in this business. Real estate investment comes with a lot of risk, and no doubt these risks are intimidating. But Corey gets support from some amazing people, and his strategies for overcoming fears and investing wisely will really propel you forward in your own business.
If you’ve never considered multifamily before, don’t shy away from it now. It’s very similar to single-family investing, and Corey has a few strategies for breaking down the math and really understanding these intimidating concepts. He knows how to find the best accountants and management teams, and he’s even narrowed it down to the little things like when to raise rent and how to improve tenant relationships with lighting. If you’re interested in branching out of your comfort zone and want try a new approach to investing, seriously listen to what the Big Kahuna has to say.
5:00 – Meet the Big Kahuna himself – Corey Peterson!
6:02 – How did Corey get into real estate investing?
8:57 – Who was Corey’s first mentor?
10:05 – What was Corey’s breaking point?
15:00 – How Corey turned his investment process into a lifelong journey
17:40 – Corey’s huge profit master investment strategy
19:33 – What two things are investors looking for?
20:24 – Corey gives us his elevator pitch for finding investors
22:08 – How investors can use their IRA to help you out
25:40 – How does Corey build relationships with his investors?
27:55 – Corey seriously raised $1.4 million in OPM! (that’s other people’s money)
29:22 – Corey’s $8 million “Godfather” real estate investment strategy
32:32 – The powerful value adds you can get from multifamily investments
34:45 – How Corey cleaned up a bad apartment
38:16 – Lighting is more important than you think for your investment
40:15 – Where Corey found amazing accountants
42:16 – What’s forced appreciation and what does it do to your NOI?
45:56 – What is a capex?
51:00 – The greatest lesson Corey ever learned
55:48 – Corey’s favorite motivational quote
58:50 – Corey’s favorite book
1:01:40 – Corey doesn’t use a single app except Facebook
1:02:41 – Corey’s winning morning routine
1:03:41 – A mentor is Corey’s key to success
1:05:12 – How does real estate investing continue to inspire Corey?
1:06:22 – Who is Corey most grateful for?
1:08:45 – Corey’s dropping a brand new education program
1:09:03 – When is Corey’s book coming out?
Links and Resources
Rich Dad, Poor Dad by Robert Kiyosaki
The Richest Man in Babylon by George Samuel Clason
Why the Rich Get Richer: The Secrets to Cash Flowing Apartments by Corey Peterson
Cory: What is going on, my party people? This is Cory Boatright, I am your host of Real Estate Investing Profit Masters and the founder of Real Estate Investing Profits. Man, I am excited, excited, excited to bring to you an incredible interview with a good friend of mine, a fellow mastermind member, and my hero. He’s just my hero, he’s such a great person, and what he is doing right now, a great giver, but he’s also just crushing it right now, doing exactly what I want to be doing for the future, and that is multifamily investing. He is crushing it right now, and just is about to close on a big, huge multifamily apartment deal and going to make millions of dollars as profits, millions. To the point where he can just about retire if he wants to. You’re going to love this interview.
This is incredible. We walk through what the numbers look like, he’s very open about that. I’m excited for him. I know he’s very grateful for the opportunities that he’s been given. He’s got an incredible story, him and Shelly and their whole family are incredible. I hope at some point you get a chance to meet these folks, they are really just big givers and got big, huge hearts and I can learn a ton and do learn a lot. In fact, I’ve sent him over a couple apartment deals just since we’ve had this interview and the guy is just incredible. Make sure you pay attention to who we call The Big Kahuna himself, Mr. Corey Peterson.
Pay attention because you’re going to love it, especially if you’re interested in multifamily investing apartments. Text the word ‘PROFIT’ to 38470, text the word ‘PROFIT’ to 38470 to get your ultimate real estate investing quick start guide automagically downloaded to your phone. If you’re interested in real estate coaching, particularly wholesale coaching, my team, we do a little over 100 wholesale deals a year, often doing six figure profit months, which is awesome, and love to talk to you about what’s working. We do over 30,000 pieces of mail a month, we can tell you how we have things set up, it is a machine, and it has particular sets of processes. It’s important that you follow to get consistent results. How many calls come in, and all those calls don’t necessarily mean they’re all leads, how many leads come in, how many leads turn into appointments, how many appointments then turn into signed contracts, how many signed contracts actually get to the closing table. We break it down on those KPIs and love to talk with you to see where you are on your investing. Go to coryscoaching.com or go to realestateinvestingprofits.com/coachingapplication, watch the video recorded for you on the homepage and I’ll ask you a few questions and then we’ll go from there, see if you’re a good fit.
Here we go, Mr. Big Kahuna himself, Corey, the amazing, phenomenal, Big Kahuna, Paradise is Possible, Peterson.
Corey, The Big Kahuna. What’s going on, my man?
Corey: What’s going on, buddy?
Cory: What’s up, what’s up? Where are you calling in from?
Corey: I’m in Phoenix today, I’m actually from the home office.
Cory: Hey, man. I love Phoenix. We have a lot of friends out there in Phoenix, you and I have a lot of mutual friends out there in Phoenix. It’s an incredible place and I know that you’ve crushed it with investing out there but you also do investing all over the country. What I’m super excited about having you on here is you are my hero! Right now, Shawn and I, my business partner, we’re in a stage right now where we want to be doing what you’re doing. I know you’re working with Jack, but basically transitioning from wholesaling to multifamily and doing it in the smartest way possible. I know that you’ve already crossed that and you’re working on the deal of the century of your lifetime, the biggest one. The potential for it is just incredible. It is successful. I’m excited to talk to you about that.
Before we get into some of that, who are you, tell us a little bit about you and what got you involved with real estate investing and what area are you focusing on right now?
Corey: Yeah. My quick little who the heck am I, real estate prodigee, I came from nothing. I grew up in a small town in West Plains, Missouri that no one would ever know. I grew up on a farm and like many people, I didn’t get a degree. When you don’t get a degree in school, you got to manage some stuff or sell some stuff. I chose to sell some stuff, which is used cars. On the mile of cars in Norman, Oklahoma.
Cory: Aha! The Big Kahuna!
Corey: Anyways, fast forward, I read Rich Dad, Poor Dad like a lot of people and right there, I knew that that’s exactly what I wanted to do. I knew real estate was key for me. I went on an endless journey to educate myself, find right mentors. I started off wholesaling because I had no time, I had no money, I had no credit, and then I eventually got into flipping. How I got into flipping is I learned a secret called OPM (Other People’s Money).
The one thing I can say I am good at is raising private capital. I got really good at it, so good that I got doing fix and flips, fix and flips, fix and flips, I made a whole bunch of them in Phoenix area about 2008, 2009, we were killing it. We did so well that in 2010, we had all this money lined up, couple million dollars of private capital saying, “Place me, place me, place me.” All of a sudden, I came into my first big hurdle, that was a new hurdle for me, is that it was harder to find REOs and Short Sales. I didn’t know about marketing back then, all I knew is I didn’t have to get on the MLS and find deals.
For me, I’m a creature that I take the path of least resistance. When I saw my deal flow shrinking, I still had all this money behind me saying, Corey, you’re the man! I remember driving by an apartment complex and I used to always drive by these complexes and say, “I wish I could own an apartment.” That’s all it was, was a wish. I don’t know what day it was, but one day, in that drive, I just changed my mindset and I asked myself how can I own an apartment complex. Once I put it in that frame, all the fireworks, my brain started working, and I went down to Barnes and Nobles, read all the multifamily stuff that I could, educating myself, you’re probably the same way, right?
Cory: Yup, same thing, yup.
Corey: I met my first mentor, Dave Lindahl. I actually flew all the way to Boston just to have lunch with David. David actually is authoring my foreword of my book that I have coming out. He’s really cool. I learned his system. That was in 2010. In 2011, I bought my first apartment complex and I raised $1.4 million in private capital.
Cory: That property raised $1.4 million. Up to that point, had you raised that much money before?
Corey: This is actually a good story. I need to tell the story, how it all happened. This is crazy, this is my first deal. Do you need to ask more questions because this is a good story. You tell me.
Cory: What are your biggest influences? We’ll shelf it for just a second. We’ll come back to it. I definitely want to hear. But one of your bigger influences is Rich Dad, Poor Dad. That was the same thing for me, it changed my mindset, changed everything. Dave Lindahl was actually in multifamily, want to hear more about that mentorship there.
Before you got into this whole real estate game, did you have a breaking point? I always like to ask this question for my guests because I think some people that are listening right now, they either are working part time jobs or they’re working full time jobs and they’re doing real estate investing. To do it fulltime, it’s a risk, there is sacrifice involved and there is that moment where you go I think I can do it, but there’s a breaking point for a lot of people whether you’re sick and tired of their boss or something happened. Did you have that moment in your life?
Corey: Yes, I did. Oh, yes. For me, I started 2005 doing fix and flips. I got a second loan out of my home, Oklahoma, we bought three or four real properties, then all my money ran out, that was my first hurdle. I got a job as a financial adviser. The whole goal was just to make some more money so I could buy more real estate. I was doing that on the side. I got transferred to Phoenix, that’s how I came to Phoenix as a financial adviser with Edward Jones. I had about one good year and then the market crashed. Every investment that I made just went down the toilets. I remember sitting there at my office. I looked at my wife, I just had an interview with my manager. I just told Shelly, my wife, I said, “Honey, there may be a good chance that I get canned today, I get fired.”
Cory: That’s not a great conversation. Did you have kids? How were the kids at that point?
Corey: I had two kids. I had a 5-year-old and a 7-year-old.
Cory: Oh my goodness, I can’t imagine. We may lose the job. What did she say?
Corey: She was busy. She just left and went to work. As I go into the office, I looked at my secretary and I know the call has been made. It’s on. I’m getting canned today. She can’t even look at me. I have two hours before he’s showing up. I’m sitting there in my office and I’m having this discussion with myself. It really is that discussion of, where do I go next? What’s plan B? I acquitted to this, I always say there is this little boy in me, little voice that was like the little kid that used to dream big and wild and believed that he could do anything. That kid was wrestling with the 48-year-old man behind the desk of why he couldn’t do it.
Cory: Everybody struggles with that, Corey. Everyone struggles with that, sure.
Corey: The question was: Can I do real estate? Can I be successful in it or not? That’s the quintessential time, I got laid off, I went to Starbucks, I sat for an hour and a half with that question. I finally made up my mind. What I like to say is I made the most gut wrenching, deep down, honest commitment to myself that I was going to do whatever it took, as long as it was legal, to be successful in real estate. I said I’m willing to do anything. For five minutes, I’m doing the rocking. I get in my truck and realized, sheer terror falls on me, I’ve got to go sell my wife this dream now. Because what’s at stake? It’s real stakes here; my kids, my marriage. It’s reality. Luckily, I have a great wife, I have an awesome wife, she’s an amazing partner. I told her the whole story and she said, “Corey, I believe in you. don’t screw this up.” Gave me a pat on the butt and said, “Go get ‘em.”
That’s what I did. I went to work, I went searching for a mentor. I didn’t know how I was going to do it. She’s like, “How are you going to do it?” “I did not go that far yet.”
Cory: Create the wings on the way down.
Corey: A lot of people say the answer, the secret, those couple books that I read, think it and it was going to come true. You gotta put some action behind it. I believe you got to put some action behind that stuff. I put so much action that everything I ever needed has shown up exactly when I needed it. It’s the craziest story. I think it’s a God thing, fortunately. I put myself out there and I said I was willing to do whatever it took. I think that’s the difference between success and not so much success.
Cory: There’s someone listening right now that just got chills probably because they are exactly where you were and they’re deciding, they’re on that factor of man, do we go all in? Do I push in everything? I’ve got kids, I’ve got family, I got the risk involved. I don’t think it’s necessarily one size fits all, everyone has their own situations but I will testify to the fact that often we make excuses for all the things that we want to do in our lives and then we wake up one day and have regrets that we didn’t go forth and risk and sacrifice. Just a kudos to you, man. So cool that you and your wife, Shelly the rock stars, that she was supportive of you going out there and pursuing your dream, pursuing what you knew was going to be your path to financial freedom, to time freedom, to everything you ever wanted. It’s just incredible, man. Kudos to you.
Corey: I can remember, the countless hours sitting at my computer, sitting there doing talks, learning little areas where I got so good at a point in time where someone said, “Hey, I’ve got a property in this subdivision.” I’m like, “Is it in the front or the back? Is it one story or two story?” Once they told me all these things, I knew how much I needed to pay for it and how much the average rehab was going to be and how much I could sell it. I became so good because I mastered my craft, man. That’s what it takes. It takes that level of commitment to move. It is a journey, Cory. But it is, it’s a journey into the whole process of what you’re going to do. The journey that I’m on now is I’m playing a whole different game of cash flow in multifamily.
Cory: Let’s talk about that because one of the questions I have, I ask everyone that comes on the show is what is your profit master investing strategy that’s impacted your bottom line? What are your better strategies on making this business work? I know that you’re focused not on your fix and flips or wholesale. Even though your product at that world, you really migrated out the smart way into multifamily, which is exactly where I’m on the path, exactly Shawn’s on the path, others I know are on the path. What is working right now in that pursuit that you can share, a strategy, a tactic that’s working well that could benefit others that might be wanting to do that as well?
Corey: The strategy that I like to implement first of all is the ability to find private capital is probably your biggest asset that you can actively start working on now.
Cory: How do you raise private capital? What’s the fastest way to raise private capital that you found works for you?
Corey: This is going to sound weird. There is no fast way, but there is the right way. The right way is to start asking your friends, your family, and every conversation I’m having is when I’m talking about what I do in multifamily, we provide solutions for investors that are tired of the stock market and we do it through real estate and we do it through passive investing through apartments that provide cash flow.
Cory: It sounds like you have an elevator pitch down pretty good. You said the same thing over and over and over again. Correct?
Corey: Same things over and over. We were just talking about a cash flow story. I find that investors are looking for two things. One, will I not lose my money and two, can I make some interest? If you can answer those two questions in a relatively fundamental way that doesn’t look like we’re not giving up the world. People understand apartments, people understand that if you consolidate everything into one place, and have a bunch of doors in one area, that it’s easier. You could talk about management, it’s easier to manage everything in one spot. It’s really just this story of just sharing what you’re doing with enough people. People self select, when you’re telling this story, you’re asking the question, “How’s the stock market treating you?” That leads to that discussion or that open ended question where we’re going to start talking about their investments.
Cory: Pitch me. Give me a three to five minute pitch. I’m interested, you see me in the elevator, maybe a friend told you to talk to me, pitch me.
Corey: Cory, how is your investments treating you nowadays?
Cory: Okay, nothing crazy. Maybe 4% or 5%, 6% on some private things we’ve got. Mutual funds, if you leave them there overtime, they’re going to produce for you but man, you get a beating on the stock market right now.
Corey: Sometimes I wonder what the hell my money’s doing. You ever feel that way?
Cory: Yeah. Thank God Trump’s in there so stock market’s going crazy right now. There is definitely a lot of investments that I haven’t looked at. But what are you involved in?
Corey: Here’s what I do. We help people just like you, Cory. We actually take investors that are looking to diversify their portfolio with actual real estate. A lot of people don’t even know that you can do real estate with their IRAs.
Cory: You mean real estate like apartments or houses?
Corey: Yeah, we do apartments but you can do it on the houses too, but it’s really just the way of taking your real estate money or portfolio money that you have with your stockbroker and diversifying it in actual real estate. We do that through a couple different multiple ways. One of it’s through single family homes but what we feel as the most safest investment is in our multifamily portfolio that we offer.
Cory: Multifamily apartments and stuff like that.
Corey: Yup, apartments.
Cory: You said something like IRA. How can I invest, I got some money in IRA but I didn’t know I can invest real estate, I can buy houses out of that or apartments?
Corey: Believe it or not. Cory, I bet you if you ask you stockbroker right now if you could invest in real estate with your IRA, they would tell you no.
Cory: He’s never told me anything about that at all.
Corey: The reason for that is there is a rule for that and it’s called selling away. When I say stock brokers, I talk about financial advisers that manage money. The reason I know this is I used to be a financial adviser.
Cory: Oh! Who did you work for?
Corey: I worked for Edward Jones. One of the things that we were not allowed to do was called “sell away”. In other words, I couldn’t steer you to a product that I couldn’t sell.
Cory: You wouldn’t have made commission on it.
Corey: Actually it’s not only for my brokerage, any brokerage, they don’t allow that. It’s the rule.
Cory: They probably signed something that says you couldn’t tell me about other investments, sure.
Corey: No, I could talk about it but I couldn’t definitely sell you something. As a financial adviser, I’m trained, and every financial adviser is pretty much trained this way, is to keep the money where?
Cory: In the brokerage.
Corey: In the brokerage, into my house. Believe it or not, people are conditioned to do this. They’re not going to tell you about all the other things that you can invest in because mostly things are just paper assets. If I was rehab junkie, you told me you want to do real estate, Cory, I will say, “Hey Cory, I got this wonderful real estate investment trust.” That’s what I’ll be trying to push you into and I will tell you, “You’re going to go off and go with somebody else, that sounds really risky.” But you can actually invest in real estate with your traditional IRA. You just have to do it through a different company. We have partners that work with us that allow you to open up your qualified account, qualified is just unique government program that allows you to open up your money to do real estate investing.
Cory: Is it risky? Corey, what’s the risk involved? What’s the potential of me losing my money? What kind of returns are we talking about here? How much higher can I get my return? Can I get higher than 7%?
Corey: I would love to talk about all this. I’m very regulated on what I can and cannot say because honestly Cory, we’re just meeting for the first time. The best way where I can share all that information is like having a second meeting where I can give you a lot more details because I am regulated by the Security and Exchange Commissions, even though I’m not a stock broker anymore. But the investments that we do with apartments are regulated. I can’t give you all the interest rates and all that stuff. I would love to.
Cory: You’re in the elevator, we’re not going to get much done anyway. It’ll be great but we could maybe sit down and talk about this more over dinner or something like that.
Corey: That’s basically it. We’re going to be talking after where you’re interested in and then I’m going to pull away and I’m like I can’t give you anymore.
Cory: I like it Corey, it’s great. I love that it’s casual and I love the fact that you had some great responses. The takeaway for that, if you really watch what happened there, is that I wanted more and you knew it but you steered me in the direction where to give me more, you wanted to be in a setting where you have my full undivided attention. That’s a big key to what you just did there. I think it’s really smart and obviously it’s worked in a big way for you.
Corey: Yeah. All I’ve done is that I just cultivate those relationships, talk to them and then when I go to that second meeting after I really share more detail, we go through the whole process, how our investments work, whatever. Again, I’m not saying, “Hey this is a good thing for you Cory.” I will say, “Cory, the reason I want to share this with you is because I know you have influence. I know you’re the kind of person that can open up a lot of doors for me and I want to make sure that you understand this really good. Because if you don’t, then it means that I need to fix it.” That’s how important your input is to me. What I just asked you to do without saying is, “Hey Cory, critically look at my stuff as I’m presenting it to you.” So now you’re critically looking at it and then at the end, I’m just saying, “Cory, who do you know that I should know?” That’s my favorite close at the end. People will self select, they’re like, “Corey, you’re not even asking me if I want to be on the investment.” I guess you are, right?
Cory: I guess you’re interested. I love it.
Corey: I never, ever, ever ask anybody to do my deal. I just keep going.
Cory: They ask you if they can be a part of it. It’s brilliant, Corey. It’s a fantastic negotiation strategy and the tactics that are involved in that have been obviously very successful for you. I think that was a great demonstration for the pitch and also, there are some great little tactics in there. Thanks for sharing those, man. It’s awesome.
I want to get back to the story of have you ever raised more than $1.4 million dollars before, because you said there is a story there. Let’s hear it.
Corey: At this point in time, remember I’m in my single family deals, I got all my capital behind me. At this point, I need to find an apartment deal. I’m going to a Dave Lindahl event, I can’t remember what it was called but I decided I was going to do something different. Normally, I’m going there with everybody else, I’m trying to find the deal, the guys that are players, what we call them, the guys that are seasoned. This time I was like, man, I want to stand out, I want to stand out in front of the crowd. It just so happens, at the very first opening of the meeting, they say does anybody want to comment or has something to say. Of course I did. I stand up at the very back of the room and I’m like, “Hey, I’m Corey Peterson. I’ve got a crack ton of money, and I’m looking for some deals. Is there any deals out there?” That whole week, I never paid for lunch, I never paid for dinner. I saw every deal that was at that event.
Cory: What are the tactics that you’re doing there? Again, you’re asking a question you already know the answer to. It’s one of the most incredibly powerful and profitable strategies that you can use in negotiating. Continue.
Corey: I call it the Godfather. Because here’s the thing I realized after going through that is that, it’s not even my capital but I told everybody that I had capital, which I did, I could deploy it if I asked. What I realized is that money is always patient, it always has the last look, the money is able to negotiate the best deals, the money is in the money. Because I have this capital, everybody gave me their deals and their pitch.
Cory: Corey, what do you mean by that, the money is in the money?
Corey: Because I had capital, I was able to find the deal that I liked that these guys were pitching me, and I negotiated a 75% ownership of that deal because I had the capital. In other words, they had $100,000 card, they needed to close in three weeks, they needed $1.4 million of capital which I had and I negotiated 75% ownership. The money is in the money. I always say do you find the deal first or the money? Find the money because you can always find the deal when you have capital, you can always put yourself in a deal if you have capital.
Cory: That’s incredible.
Corey: Got that deal, that very deal, I bought it for $3.2 million, I ended up buying out both my partners. That’s a whole another story for a whole other segment.
Cory: There is 25% left on the deal. You bought 12 ½ each?
Corey: Yeah. We bought it for $3.2 million, I’ve got it under contract right now for $8.8 million.
Cory: Big Kahuna! $8.8 million! That’s what I’m talking about, my man.
Corey: That’s a lot of reasons why apartments are pretty awesome.
Cory: The time frame of that was from 2011 to now, so about six years?
Corey: We bought it at the end of 2011. It’s really about five years.
Cory: About five years. When that goes through, that will pay you over a million dollars a year of owning it.
Corey: It’s GC.
Cory: Your profit will be $5 million, so it’s going to pay you under a million dollars a year to own it, profit.
Cory: That is pretty incredible. I know there’s a lot of questions on you bought it for $3 million, whatever and then you value added, which is what’s so powerful about apartments, just give a broad stroke, I know we can get granular which I like, but give me a broad stroke on what was the value add from the point of acquisition. For those that don’t understand this game with multifamily, you can make a dollar amount when you acquire the money, acquire the property. Let’s just say you acquired something for $3 million, typically on $3 million, from everything I’ve read, it’s between 1% and 3% a dollar amount that you get immediately whenever you close.
Corey: Two percent for us.
Cory: Two percent, there you go. 2%, so there is $60,000 right when you close and during the time you own it, you have a management fee. Management can be anywhere from 1%-3% for paying you to manage the property and that’s on a yearly basis. Correct?
Cory: And then whenever you sell it, you have a dispositions fee often on this one can or cannot come out in the end but often it will come out at the end between 1% and 3% on the disposition fee. What did you do from the value add perspective? Meaning that you bought it for $3.3 million but now, why would it be worth $9 million now? You bought it at what cap rate and selling it what cap rate?
Corey: I think we bought it at a 9 cap and we’re selling it at a 6.5 or 6 cap.
Cory: For some of those that think about that like, wait a minute, you bought it for a 9, you sell it for 6.5. In multifamily, what’s incredible about it is that you actually want to buy it for a higher cap rate and then you want to sell it for a lower cap rate because when you sell for a lower cap rate, it actually makes you a lot more money. It’s reversed math for some folks.
Corey: It’s weird to understand but when you do the math, the numbers look really good when you go from 9-6.
Cory: It looks really, really good. What is the value add, man?
Corey: We bought this property, it was an REO property. It had a reputation of being a bad apple. There was drugs, it was about 79% occupied. It wasn’t very occupancy problem. Really, that was the issue there, it needed updating, the units inside needed new carpet, new linoleum, new counter tops and new fixtures. That’s what we saw. We immediately hired a sheriff, policeman, to live in our property for free. We actually had their drug dogs because we knew we had a drug problem. I came up with the idea, “Hey, listen, you guys have drug dogs, K9 units?” They’re like, “Yeah.” I said, “Hey, can we have them at the property? Let’s just run through our property, see what we can find.” They’re like, “Yeah, yeah. Let’s do it.” We put notices on everybody’s door.
Cory: And if you have any drugs, get them out because there’s drug dogs coming or what did you say?
Corey: Pretty much. Told them police are going to be around with their K9 units tomorrow and we just wanted to put a notice that we’re going through everybody’s units.
Cory: You went from 79% to 40% occupied.
Corey: We did have two move outs in the middle of the night. We like to say that was their problem.
Cory: Maybe probably 80-20 rule, right?
Corey: In fact, when he first came over, he’s like, “Corey, I can’t tell you how many doors we kicked in over here. We’ve kicked a lot of doors.” Fast forward, we knew this. At first I was like, hey, let’s take and do a name change and try to rebrand this property. But we said, you know what, that’d be like putting lipstick on a pig, it’s still a pig. We’ve got to clean this thing up from the inside out. That’s what we did. Once we got rid of the drugs, everybody liked it, then we started up with our lighting program.
Cory: What was the time frame for getting rid of the drugs? Six months?
Corey: No. One month.
Cory: You went hard and heavy. Wow.
Corey: We did not mess around. Our policeman, every night going through the breeze ways, making sure there’s no smoke in and joke in, writing people up, we policed it very, very hard. Apartments, you don’t want two things happening. You’re either managing your tenants or your tenants are managing you. Once we put on the face of this is the new owner, new systems, new procedures, you got to get in line or you can’t stay here. We actively got rid of that. First year we got a lot of churn, a lot of people had to move out.
Cory: Did you raise the rents the first year or did you do it the second year?
Corey: Really, the second year. We had set aside about $500,000 in capex for money for improvements. We started just doing blocks of units. Hey, let’s do this building, let’s give this building right. Alright next building. Rent it up. We had a very methodical procedure on how we get it. One of our biggest thing is lighting, we’re big thing on lighting. We got rid of all the incandescent lights and put LED lights.
Cory: That immediately cuts down your expense on electricity which raises your NOI.
Corey: Yup. More importantly, what it does is for our tenants. That’s such a dramatic effect at night for the women that come into our property, they’re coming into the office saying, “Thank you, thank you. We appreciate what you’re doing, we see what you’re doing, we see the change, we’re starting to make a community, we started to make community events every month, we’re cooking. My staff is staying extra hours, our staff live on site, it’s mandatory for us.” You’ve got to live and breathe on my unit, if you’re going to be managing one of my properties, you live and breathe it every day, 365.
Cory: You require that. That was a requirement.
Corey: There are certain things that we do differently and overtime, we kept on raising rent. Here’s the good thing, when we first started, out two bedrooms rented for $525, we rent our two bedroom now for $775.
Cory: Wow. That’s a huge difference.
Corey: You will not even recognize. If I showed you my demographics when we first started, the percentage of people, unit mix and demographics to what it is now, is completely different.
Cory: That’s a huge difference, man. Wow.
Corey: Yeah. That’s why we were able to sell it. We sold it at a cap rate that is ridiculous for the market. It’s still an older property, it was still maybe trade a little bit at a higher cap rate but what we have is five years of very consistent history in our financials and we have perfect books. Anybody could take our books and give it to their CPA and every dollar’s accounted for.
Cory: Where did you find that CPA? Where did you find that level of help in resource and partner? I think that’s a big part of doing this business correctly, is having those books really clean.
Corey: Most good management companies are going to have an in-house bookkeeper or bookkeeping system. The key is to interview lots and lots of managers, probably management companies, and you got to ask them detailed questions. Show me your books, how do you guys handle evictions, how do you handle late paying tenants, how do you collect the money? You’re looking for them to see if they have systems and procedures. It’s the systems and procedures is what you’re buying from that management company. The training of their staff, how do they train your staff, do they bring in trained staff into your new acquired property, do they try to train up the people that are already there, is it a combination?
What we found works the best is we initially start with the people there, they almost never work out, we know this. We train them but we always bring in an outside person that’s in our system from one of our other properties to come in.
Cory: So you could audit or they can see where the gaps are?
Corey: Yup. They also know our systems all in every shape, way and form, so then as our people that are on site are starting to watch this happen, they start seeing this is the way we do, we are different. Then they start buying into the philosophy of our culture on how we operate. We’re sick of other cultures.
Cory: That’s awesome. What’s interesting is, I think there might be some questions on the values. When you already have value of multifamily, what’s really a big a-ha moment for me understanding it was this thing called forced appreciation. Forced appreciation happens because of your NOI, which is your Net Operating Income increasing. To come up with a cap rate, a simple formula is to take your NOI and you divide it by your value. You take your NOI and you divide it by your value and that is going to give you a cap rate. To come up with your value, you can take your NOI and you can divide it by your cap rate. Just the reverse and you can come up with your value. Whenever you increase your NOI, your value substantially increases.
Corey: Let’s do the math. Let’s say we have 100 doors, 100 units and we raised the rent $25 per door. 25 times 100, that’s easy math, 2500 times every month, 12 months, that’s 30,000. Divide that by a 6 cap, 0.06, that’s $500,000 of value you created that you can sell a property for by raising the rent $25 dollars.
Cory: Can you say that one more time? Just to let people resonate with that? You take your $25 increase in rents, you do that times 100 doors, that’s $2500 a month. Now times 12 which is $30,000 and then you take that and you divide it by your cap rate.
Corey: 0.06. That’s half a million dollars.
Cory: Just by raising rent $25.
Corey: Yes. You know what, our tenants expect rents to go up each and every year. Guess what, we never disappoint them, never.
Cory: You probably heard Corey say that he had rents $500 or so and now they’re up to $750. Now you’ve bumped your $200 and I’m guessing your amount of units is over 150 or probably.
Cory: Some of the math there, if you have a calculator. It equals big.
Corey: That’s where we have $5.5 million profit.
Cory: That’s awesome, man. Raising rents, the lighting, anything else that we can take away from that? This is awesome, by the way. I’m taking lots of notes.
Corey: It’s really just having a vision. We knew that we could get better rents. We like the area, it had good bones. All we needed to do was fix the perception of the property. We didn’t even do that much, we just put carpet, carpet was going to have to be replaced anyways, and then we put the nice wooden looking linoleum floors on and then we didn’t even replace the countertops. There is a product that you can spray on top of old linoleum or countertops that can make them almost like brand new, almost like resurfacing them. That’s $300. That’s what we did and then we painted all our old cabinetry and put new knobs. That was like a $2,000 turn per unit. That was fairly cheap.
Cory: Then people are asking, where did that money come from, Corey? Did you have that in reserves whenever you purchase property?
Corey: That was part of our capex money, that was part of the capex, we have that $400,000.
Cory: When you say capex, you mean reserves?
Corey: Yup. In the apartment business, we call that capex. In single family we call it rehab money. That’s what we had. Apartment call it capex, capital improvements.
Cory: Capital improvements, yup.
Corey: We set aside that money and then we also started to use operational money because when we first did this deal, we didn’t realize how much money it was going to take. It was a little bit more, we did a lot of things, too. We’ve remodeled the laundry room, we did a lot of landscaping stuff, we added grass, we took out an old dilapidated tennis court, we jack hammered all the concrete, we removed it.
Cory: All of these things were done with strategy, though. If we did this, then we’re going to make more money or we’re going to add a new type of tenant draw.
Corey: The only reason we do things in this business is to raise rents, or decrease expenses. There is no other reason.
Cory: There is no other reason.
Corey: Raise rents, decrease expenses, that makes money on the NOI, which is all we’re looking for. As an operator, that’s what I’m thinking, is what am I doing to raise rents or decrease expenses and maintain my asset. A lot of people skip on that, maintain my asset. You got to make sure that you still put money back into your property as you go to up keep it and keep it nice. If you do this right, you’ll have a nice asset that looks in. When you’re ready to sell, that’s when you get top dollar for because there is no deferred maintenance or things that are wrong with the property.
I got to tell you this last piece, this is the best part of this whole deal. Ask me how much money of my personal money I have in this deal.
Cory: I don’t know if I event want to ask. The acquisition was $3 million what?
Corey: It’s a big goose egg, Cory.
Cory: Oh my gosh. Do you have zero?
Corey: I have zero.
Cory: You literally have zero dollars in this deal, Corey?
Corey: Not even one, not a dollar.
Cory: You had your time, you had your experience and you had your ability to be able to raise money and connect the dots. Is that basically it?
Corey: First deal, yes, man.
Cory: First deal and you’re going to make a profit of over $5 million dollars, on a deal you had zero money in.
Cory: Dude, I love America. God bless America.
Corey: Only in America.
Cory: God bless capitalism. What a fantastic opportunity, what a big blessing for you. Because I know how much of a giver you are.
Corey: I want to back up because I don’t want to have the misconception. Not all that $5.5 something million dollars is mine. Because I have capital, we raised $1.6 million in capital, it’s initially $1.4 million, we raised it next to couple hundred thousand. Out of that, I got to pay that back. $1.6 million goes back to my capitalist original money plus about another $500,000 to pay them all their interest on the sale.
Cory: You’re still going to walk away with about $3.5 million.
Cory: That is profit. That’s net profit.
Corey: I just don’t want people to see, oh he made it 5 point whatever because it’s not. But if it’s $3 million, $3.5 million, I’m pretty happy with that.
Cory: I see the smile that says I’d take it. Anything else before we move on, ask you couple more questions that I think are important, other people want to know and you inspire me, you inspire everyone else.
Corey: I want to preface this.
Cory: You’re going to be my next private lender, I appreciate that.
Corey: I did not do it for the sale, though. I’ve been in this game for only one reason Cory, and that’s for cash flow. The only reason we’re selling this property is because all my investors are really cool, there are only six of them in this deal, and we’re going to do a 1031 exchange and we’re going to buy a $15 to $20 million deal on our next go around so we can make more cash flow.
Cory: Now you’ve got some funds liquid that you put in that, you put a million in if you want or whatever.
Corey: My money’s working now.
Cory: I get it. It makes a lot of sense, I’m inspired by it.
Corey: I’ve got three other deals that are in some way, shape or form in that process.
Cory: Awesome, man. It’s inspiring. What’s one of your greatest that you’ve learned to get to where you are today?
Corey: The greatest lesson I’ve learned is to not doubt yourself and not doubt your ability. I say this because I have, I think everybody, if you’re honest with yourself, there are times in your life where you almost said, boy, I can’t do it, I’m not good enough, I don’t have all the things lined up.
Cory: Self-talk, self-doubt, self-talk.
Corey: The only thing I went anyways, I went anyways and I did it despite how I felt about myself, I just kept on in action and because of that, good things happen. I failed a lot, I bruised my knees, but I just kept on persisting and I did it enough that I actually became really good. I always say you’re learning in your defeats and in your successes. You just grow either way, that’s called experience.
Cory: Biblically, a story that we’ve all heard before, as Christian, you’ve heard it before, give you a quick version of it. But basically there is a storm going on and Matthew, Peter, the disciples are in a boat and there’s a storm going on and it’s getting a little crazy. Peter sees Jesus out there on the water. It’s just like he sees them out there in the water and he starts walking out in the water, towards Jesus. At one point it says that, Peter started to doubt, this is my point. Peter started to doubt and he started to sink. Whenever he was asked to walk out in the water towards Jesus, it says in the bible, he started to doubt, he started to sink. Jesus reached out his hand, essentially, came back up, he didn’t sink obviously, and said, “Ye of little faith, why did you doubt?”
My whole life, I always thought that Peter doubted Jesus. But I think there’s another side to that, that he doubted himself. I think that what a testimony to think about it that way that how much Jesus believes in you, how much God believes in us. I want that story to resonate, how much more God believes in us, than we even believe in ourselves. Just an another incredible testimony for you believing in yourself, dude, and walking forth as you were created, to be a victor and to inspire others, and I know for a fact, create legacy for generations to come. Not from just the money but from the experience and from the relationships. Just an amazing thing, man, that you are able to do that.
If you had to start all over again, Corey, what would you do differently? What would you make changes in?
Corey: The only thing I would do is I wish I would’ve went into multifamily harder and faster, quicker. That’s it. I cut my teeth on those single family, I’m glad I did. If I can go back and say Corey, look ever here a little harder, it would just be on I could’ve picked up I think maybe three or four more deals in 2010, 2011, I’d be smiling really, really big right now. That’s it.
Everything happens for a reason, I truly believe this. Maybe I wasn’t right, because my mindset now is it’s really not about the money per se, for me anymore, it is about the journey. Really, the story behind why I’m doing what I’m doing and it’s more than just for me, personally, I want to give to my family, my goal is to retire, do a deal with each and every one of my brothers and sisters, my aunts, my uncles, to do apartment deals. I want to set my whole family, I want to create a legacy that everybody has an asset that will keep them financially free.
Cory: That’s awesome. What is one of your favorite motivational quotes?
Corey: It’s actually by Homer, “The journey is the reward.” I believe it is. I believe every time I went out and sought to do something, I believe the journey is the reward. When you look back on things that are really huge successes or not. You focus, and what you remember is the hard times. I always think about how hard I had to work or the things that happened that are negative and I thought about how I persevered and that’s what gives me the most pleasure in that journey. Know that every journey has struggle, every good story in the bible is surrounded by chaos and struggle, stride, and how you come through it. Why should we be any different?
Cory: One thing I say is a happy life is the appreciation of every moment. I think often we live in the future and we live in the past, but it’s so hard often to appreciate the moment and appreciate life as it’s given to you, right now, as it’s happening right now. That’s the beauty of the painting of life is the appreciation of each and every moment. I think that’s incredible that you have that perspective because it’s obviously giving you a way to see past the challenges and the journey but you seem passed it and now you understand that it’s not going to be easy necessarily, but it’s worth it.
Corey: I’m not as afraid anymore. I used to be afraid a lot. I was like, man, I’m scared, I’m nervous. I still get that, I’m getting ready to do a with $22 million deal, it’s the biggest deal that I’ve ever done.
Cory: Makes your butt clinch a little bit.
Corey: I go back into, I’m a little nervous, I’m a little scared, but I don’t let it overwhelm me. I used to let that stuff overwhelm me almost to the point where I couldn’t sleep at night. I sleep like a baby. All I do is I give it to God truly. I’m just a vessel. My job is just go out and toil during the day and try to give glory to Him and when I do that right, I do it from the right heart and the right mindset, it really doesn’t matter the outcome and most of the time, the outcome is good. I’m happy with that.
Cory: I love that, man. What books do you recommend besides Rich Dad, Poor Dad, that’s really changed your life?
Corey: I like The Richest Man in Babylon, that’s an old one but a good one. A tenth of everything I make is mine to keep, love that story in there. This is going to sound corny, I like the Bible, dude.
Cory: It’s not going to sound corny at all. I’ve read the bible several times and the stories in it, it’s the living word. It doesn’t sound corny at all.
Corey: It gives me goosebumps a lot of times when I go back and I just start reading. I was pretty upset, I want to get into your book acts or something and just start reading. Getting those stories and you start applying to your daily lives. I find there’s so much truth in that stuff. It helps me be a more humble servant. Just when I’m dealing with people, be compassionate, I always feel like in this day, shape and age, so many people are focused on themselves that we try to break away from that and focus on how can we help others and how can we help someone’s day. Maybe it’s just by smiling. You can impact people more than you’ll ever know just by what you’re doing daily.
Cory: That’s true. Have you ever heard of a parallel bible? It’s pretty interesting. It’s called the comparisons study bible. When you open it up, you see four different versions of the same verse. Four different versions. You can see King James simplified, New American Standard and New International and you can get different parallel Bibles. What’s interesting about it is that if you read the verse in one way in King James and maybe it looks completely different in the International. I find that it’s a great way to really challenge the way you think whenever you’re going to the scriptures and one scripture particularly stands out to you. You can go in there and look at the other versions of that scripture and get another context from it.
Corey: Man, that’s awesome.
Cory: Do you have a mobile app that you use every day in your business, Corey?
Corey: No. My bank account, my MidFirst Bank and my Facebook.
Cory: We got to figure out a way to talk to the brothers. You know the brothers own MidFirst Bank. Two brothers own MidFirst Bank, they bought a bunch of real estate back not in the crash but the resolution trust days and they’re actually two brothers. One started MidFirst Bank and the other one started that of the mortgage side, that they do.
Corey: I just know that we’re originally from Oklahoma, that’s why we have MidFirst Bank account and they just so happen to open up a lot of branches in Phoenix, and we’re like, hell yeah! That’s why I have my OU card.
Cory: Right. OU! Oklahoma City.
Corey: Let me see if I can produce it, there we go.
Cory: Nice. I’m going to screen capture that. That’s going to be in the screen capture. You said you sleep like a baby. Do you get eight hours of sleep every night?
Corey: Always, always. I’m a later cat so we go to bed 11:30ish, 12:00AM. I wake up at 7:00AM.
Cory: What’s your morning routine? Do you have a morning routine?
Corey: Have some coffee. I’m actually starting a new routine right now. I’m doing this with my wife, it’s not pilates but it’s like pure bar. I’m doing pure bar, dude.
Cory: I have no idea what that is, but is it like Yoga?
Corey: Yeah, man. I don’t know, it’s something with my wife and I feel like I’m the only dude there. I’m not proud of this moment but it makes her happy, and I’m happy so it’s all good. That one makes me sweat.
Cory: What point would you recommend hiring a mentor? Obviously, how important has that been to your success?
Corey: Dude, the mentor is the key. Really is. It’s what will change your life. I believe.
Cory: Why do you say that? Why do you say it’s the key?
Corey: Because the mentor has an ability to go into the future of things you’re going to do and pull back nuggets of wisdom. I remember when Dave Lindahl told me one day. I said, “Dave, I got this deal.” I send it to him and he’s like, “Corey, that’s not a deal. And here’s why…” and he was like, “This, this, this and it’s going to be over expensive and I don’t like that deal. Don’t do that deal. If you’re going to do that deal, I’m not going to mentor you anymore.” S I didn’t do it. Someone else bought it, someone that I know bought it and I swear everything that Dave said was going to happen, happened. To this day, I was like, sometimes the mentor could keep you from making the move that’s going to put you out of real estate.
In the beginning, it doesn’t take much to maybe get you out of the game. A mentor really, I think has the ability to guide you, teach you, coach you, and to keep you from making the big mistakes. You got to still make something your small mistakes, but the big ones you can a lot of times avoid with a mentor, and you just get there faster, I believe.
Cory: Right. I agree with that, totally. If you got to summarize it, why do you do what you do?
Corey: Two things that only most people dream of, time and money. I wanted to have some time to spend some of my money and I realized that real estate allowed me to have both. That’s what I got from Rich Dad, Poor Dad and my name of my company is called Kahuna Investments. I wanted to be the Big Kahuna, I wanted to be my kid’s dad, I wanted the time freedom to do what I wanted to do and if I didn’t want to do it, I’d say I ain’t doing it. To this day, that’s how I live. I really live a simple life, I don’t have a big office, I don’t have people that I have to be responsible to, I third party a lot of stuff out because I wanted to have that autonomy to be like my own dude. If we want to go to Vegas on Friday like we are, we’re going to go and we’re going to stay till after the fourth. I’m not worried about my whole operation, everybody’s doing their job.
Cory: That’s a freedom thing. What are you most grateful for?
Corey: My wife. God put my wife in my spot. I don’t know why, but I’m so grateful that she believed in me when I couldn’t believe in myself. This is how cool my wife was, I was a used car salesman when I met my wife. She was the cool chick that would take her card and slip it underneath the table so I could pay on my side. I can get emotional about that because she really had my back so much and just has been so faithful. I honestly feel like God sent her on this Earth to be my partner. I am thankful for that because I wouldn’t be anything without her, truly.
Cory: It’s such a cool testimony out of that. One thing you guys shared was your love journal and Leslie and I have been going through that love journal and I tell you, it’s really powerful on how you and Shelly have put together rituals, put together certain things that protect your relationship. Whenever your spouse is also your business partner and she runs some of the aspects of those things, it’s crucial that you protect that relationship and you honor that relationship and you reward and you build up that relationship because it’s so important and it’s so crucial to the other parts of the success of your life.
Corey: It’s the juice that’s worth the squeeze, dude.
Cory: It’s the juice that’s worth the squeeze. I think that’s a great way to tie this thing up. How can we get in touch with you? What can we do to serve you, Corey? It’s been an awesome interview. I’ve taken a lot of notes, we’re going to have a lot of things notes on the show notes. What can we do to serve you, man?
Corey: If you guys want to learn, we’re getting ready to kick off some education stuff on multifamily. You’ll find that at kahunawealthbuilders.com and if you want to go there, we’re giving away some free video series on how to find deals and how to find money.
Cory: Kahuna Wealth Builders, that’s awesome, man. I know you’re coming up with a book as well. When is your book going to be out?
Corey: The book’s going to be ready in about four weeks. We’re actually for the final editing mode, it’s called Why The Rich Get Richer, The Secrets to Cash Flow in Apartments. Then we’re getting right to launch a podcast. You got me going on why I need to do a podcast and I believe you’re right and we actually come up with a slogan with “Your Paradise is Possible” I want to thank you for that because I think it’s so powerful.
Cory: I love it, man. I absolutely love it because when I think about everything you’re doing, your logo, the Big Kahuna, whenever people think about paradise, it’s sitting on the beach, drinking a margarita or just chillin’ by the ocean. I think so many people feel like it’s so far away that it’s not possible for them. I love that tag line, man. I think that’s going to be awesome.
Corey: Yeah, it is, man.
Cory: Love that. Cool. Thanks, man. Thanks for taking the time to be on here. I love you, man. I’m so excited for the things that are going on with your life and you and Shelly and I follow you on Facebook and you got a big family, just living a regular life but on your terms. I think that’s so powerful. You’re such an inspiration and again, I can learn a ton of stuff from you. I’m so excited that we’re in each other’s lives and it’s exciting, man. Thank you for taking the time, truly, to be on here and to go through this with all of us on here. Really appreciate it.
Corey: Rock and roll, brother.
Cory: Alright, make sure you are on the next Real Estate Investing Profits Podcast series where we’re going to continue to bring phenomenal guests, just like Corey, to tell you things that are working and give you some inspiration and some things to make decisions about. Until then, remember, be a servant. Thanks again, Mr. Big Kahuna.
Corey: Thanks, buddy.
Cory: Alright, bye now.
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