Journey to Multifamily Millions

Fearless Fundraising & Fierce Focus: The Road To Multifamily Triumph with Marc Kulick, Ep 113

• Tim • Season 1 • Episode 113

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Welcome to the Journey to Multifamily Millions podcast, where we speak with professionals on financial topics!

In this episode, Marc Kulick founder and CEO of Vesta Capital, a real estate investment firm focusing in multifamily as well as Vesta Realty, his property management company that offers thorough operational control and oversight of the properties in his portfolio.

Marc talks about his amazing transformation from RA in college to multifamily investing specialist. He shares his thoughts on working with co-GP partners, pursuing projects without strict objectives, and overcoming the difficulties of generating money and maintaining properties.

Marc's views and tactics provide invaluable lessons for novice and experienced real estate investors hoping to thrive. Keep checking back!


Episode Topics

[001:24] Meet our guest, Marc Kulick
[04:00] Early Career Challenges and Lessons
[15:27] The First Deal and Fundraising Challenges
[19:08] Creative Fundraising Tactics 
[23:06] The Importance of Property Management
[27:28] Understanding Investor Expectations
[29:25] What is one red flag every investor should look out for?
[30:47] What is a myth about the real estate business?
[33:23] Connecting with Marc


Notable Quotes

  • "I understand property management from a pretty granular level. I think it's also a benefit when I interact with my teams." – Marc Kulick
  • "Your first time managing a renovation, it’s... twists and turns along the way, but it's easier when it's on a smaller scale." – Marc Kulick
  • "If they manage that property themselves... they have a much better idea of what they do and don’t like." – Tim Little
  • "I was doing international affairs, which is about as bad as history, in terms of marketability." – Tim Little
  • "We had a really fluid structure... it allowed us to experience growth and meet new people, and grow the firm that way, pretty organically." – Marc Kulick
  • "The more money you bring to the table, the more say you have, the more leverage you have in that relationship, which I've learned the hard way." – Tim Little



👉Connect with  Marc Kulick

👉 Connect with Tim

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https://podcasts.apple.com/us/podcast/journey-to-multifamily-millions/id1634643497

[00:00:00] Marc Kulick: People have asked me my goals, like particularly when I'm meeting like a new investor, they'll say, Marc, what are your five year goals? And I don't really have goals. I always say that my goal is to do all the deals I want to do and be able to pass on all the deals I want to pass on. That's the goal that I have always kept. And, we've given up 50 percent of our GPs to bring in co GP partners when,when that's been needed to complete a fundraise, we've gone single source when, particularly there are deals that have some hair on it. And I want an experienced partner. We have a preferred fund that we work with. There's a, I got a rude awakening into the world of real institutional equity because I got a term sheet that went nowhere after 45 days and I put up hard money for a deal. 

[00:01:15] Tim Little: Hello everyone and welcome to the journey to multifamily millions. I'm your host, founder and CEO of ZANA Investments. And on today's show we have with us Marc Kulick. Marc is founder and CEO of Vesta Capital, a real estate investment firm specializing in multifamily. And he's also CEO of Vesta Realty, his property management company that ensures comprehensive operational control and oversight of all those properties in his portfolio. Marc, welcome to the show.

[00:01:42] Marc Kulick: Thank you so much. Pleasure to be here.

[00:01:44] Tim Little: Yeah, and it is great to have you. I look forward to hearing more about Vesta Capital and how you're vertically integrated and all that. But before we get there, please tell us how you got started in real estate and how you got where you are today.

[00:01:57] Marc Kulick: I, yeah, it's actually a funny story. I became an RA at my freshman dorm. That was my, that was how I ended up in the industry. and, it was, being an RA was quite transparently the worst year of my life. and,and so at the end of my term, at the end of the year, they asked me if I wanted to stay on and do another year. And I. I was like, no, absolutely not. And they were like, Oh, you did a really good job. We'd love to keep you. And I made an offhand comment. Yeah. If you've got a job that doesn't involve me taking care of drunk freshmen and living at the dorms, I'm all in. And it was a private dorm at the University of Kansas. And they were like, Oh yeah, absolutely. We're actually hiring for a leasing agent right now. And I was like, leasing agent. That sounds. Sounds interesting. and so they described the job to me. It was a dream. Most of my friends were working Retail or food service and I was making ten bucks an hour a hundred dollar commission on every lease I met everybody on campus. I mean it was a really cool job So I basically tell people that I got in the industry and never made it out. I went from,leasing agent to, there to a leasing agent at a multifamily property, elsewhere in Lawrence, and,left school,was done with school at 20 in 2010. It's not a great time to finish university. jobs weren't plentiful. And particularly with my degree, which was history, was even worse. There weren't a lot of options andI had worked in apartments and so I got a job offer, to be an assistant manager and, I was like, yeah, all right, and so I never really thought it would be a career and it was funny. It was probably like, I was probably 26, 27 years old right before I started Vesta. when I rolled over one day and said, actually, I think this is my career. the more that I met people. Yeah. That's pretty frequent in the property management world, at least unintentional. No one, nobody grows up thinking I'm going to be in property management when I grow up. unless you have parents, it's pretty rare.

[00:03:46] Tim Little: Yeah, no, and that's an awesome story. I've never. Heard of someone starting at like literally the ground level of property management with the RA position there. So that's unique

[00:03:56] Marc Kulick: Yeah, it's literally the ground level. It doesn't get any lower than that. no, I think it's been one of the things that transitioning to. To the other side of the business, right? The other side of the world, when I'm raising money from investors or what I'm talking to, people are like in the more institutional world, it isn't, it is an edge that I have people, Hey, how'd you end up here? and my story is pretty unique. And I understand property management from a pretty granular level. and so it's also, I think it's also a benefit when I interact with my teams. Because I can say things like when I was an assistant manager, this was something that frustrated me. Or I can say like when I was a property manager, this is something that I dealt with. and this is how I dealt with it. and it's a meaning, it's meaningful advice, right? So I do think it gives me a little bit of an edge in understanding the industry.

[00:04:41] Tim Little: Yeah. And I think that's true. You could probably argue for any industry, but in real estate specifically, doing the thing,you really learn a lot and it gives you an edge on competition. Even down at the lowest level of single family, so many people buy an investment, And, they deal with property managers that they hate, but they don't necessarily know what they want or need either. But if they manage that property themselves and see all the things that happen, all the things that they run into, then they have a much better idea of what they do and don't like. And what they want in a property manager, if they choose to transition to that third party later, or if they go into multifamily later. so it provides perspective that I think helps a lot.

[00:05:27] Marc Kulick: Yeah, no, for sure. I've talked to a lot of people that start off in a single family and they get a level of experience that I didn't have, which is on the construction side too. your first time managing a renovation, it's I think, twists and turns along the way. yeah, when you have that line of this is where I started and I saw firsthand. mistakes that most people make on their first go of things. It's so much easier when it's on a smaller scale and it's the start of your career versus like a career ending when you're in the middle of, dealing with investments that are, millions and millions of dollars of people's money or funds monies.

[00:05:59] Tim Little: Yeah. And I can relate to your 2010 experience. Because I was coming out of, I was about to graduate from grad school. In 2010, and I was like, this is not a good time. I actually wound up deciding to do a dual degree program. Because I was doing international affairs, which is about as bad as history, in terms of marketability, but I was able to do a dual degree with the business school to get an MBA. And I was like, You know what, for one extra year, hopefully things are better. And it makes me that much more marketable, sometimes you have to make those decisions in turbulent times. But,

[00:06:33] Marc Kulick: I always tell people that, a lot of people will ask me, I'll get Facebook messages. I'll get LinkedIn messages like, Hey, what advice can you give me? Or something like that. And I'm like, it's hard for me to give you advice because I literally, unless if you want to follow my path, you're going to be making 10 an hour and then 12 an hour and then 15 an hour. And you're going to have to spend years like that. I always wanted to go to law school. I had a passion for law. and to this day, my attorney will talk to me, and he'll be like, he'll shake his head sometimes out of frustration and be like,I'm literally talking to another lawyer. I was super into both high school and college mock trials. And so I was destined to be a lawyer. And the thing that stopped it was right around 2010. I started looking around at my older friends. Who were struggling to get in with firms, if at all. people that had graduated top of their class at smaller universities or like state schools weren't getting jobs at good firms. You had to have a top degree from a top law school to get the really good jobs and everyone else was struggling for the rest of the jobs. And so when I got offered $15 an hour to be an assistant manager. And a 25 percent rent discount. I was like, I think it's better than being unemployed. I think it's better.

[00:07:39] Tim Little: yeah, and I think what's important about that is, you talked about everyone having their own path, but at the same time, like. People have to be willing to pivot right to opportunities and you felt like that was the best play for you. And obviously it paid off, right? Not everyone would be willing to make that pivot. So talk to me about how you rolled over and decided to start Vesta. What did that look like?

[00:08:01] Marc Kulick: yeah. it's impossible for me to tell my story, without focusing on one element. Obviously this won't hit with every listener, but I'm Jewish, really proud of being Jewish. And a lot of good things in my life have happened at a Shabbat dinner table. So I moved to Austin. to work under, to work, in student housing, actually. And, I became a general manager and then I became an area manager. And I had this rabbi in Austin who kept telling me, Hey, I really want to introduce you to this guy. He's a high net worth from Australia. He's trying to build a real estate firm in the U S and I'm like, yeah, great. I'd love to meet him, but it's not going to be worth anything. And I'm happy where I'm at. And, for the first time I'm in a company that's big enough that pays enough, that has enough growth opportunities. And I'm actually now thinking this is my career, right? not in a huge rush to leave them. I was developing a really good reputation for myself. I had taken an asset that was the worst performer in the portfolio, the year before in Austin, and I had taken it to lease up the fastest. our tagline for that year was the worst at first. And I really wasn't looking to make a move. The story is actually really funny. My boss is a very good friend of mine, and he's my current COO. he wrote me up. I yelled at a resident. it was a long story, but the resident live streamed me yelling at him.basically, what had happened was, he came to move in, his apartment wasn't ready, I told him that the, we were literally so highly occupied that I had one bedroom available and it was in the worst four bedroom available in the entire property. It was filthy. Like we couldn't lease out that extra space. So I told him, I'm like, Hey, the only other unit I have available, the only other bedroom I have available, you're going to hate. And he was like, I want it. And I was like, Oh man, you'd really be better off just going to a hotel for tonight and we'll have your unit ready for like tomorrow. He was like, no. So we gave him the keys. We moved him the next morning. He was literally waiting for me at my door when I opened up the office and in my head, I was like, Oh God, this isn't gonna be

[00:10:00] Tim Little: Here we go.

[00:10:00] Marc Kulick: And he's screaming at me. He's given it to me. and I'm taking it. I like doing what I'm supposed to do. And then, he left. And he came back in and that's when I lost it. I lost my temper. I was yelling at him. I was like, you're not going to talk to me like that. I told you not to do this. You're stuck there, whatever. And we end up parting ways and my boss calls me and he's Hey, I got a complaint that you yelled at a resident. And I'm like, Oh, we were yelling at each other. I was trying to keep it together. I'm doing the normal thing, right? You're in trouble. You're whitewashing your own part of the story. I'm like, yeah, yeah, we got into it. Whatever. My boss goes, all right, but you don't feel like you did anything too wrong. And I was like, no, I don't think I did anything too wrong. And he goes, cool. The guy live streamed it. So I'm going to watch the live stream and I was like, shit, it's not good.and so the next day he wrote me up. I was upset about the writeup because anybody who's been a property manager has been through it. residents come at you and you can do something right. 99 times out of a hundred. That one time you mess it up. whatever. I didn't say anything too bad to the guy. I didn't insult him as a person. We were clearly just arguing about the state of the unit, his responsibility from my perspective, taking it when I told him not to. So I felt betrayed by the writeup. and so I called my rabbi and I was like, you know what? There's no honor in this world. There's no justice in this world. Introduce me to your guy. I'm ready. I'm ready. And,I interviewed with them for four months. I literally interviewed with 10 different people. They had a really long process and they hired me to be their vice president of multifamily. I was in charge of the expansion from Sydney, where they do a lot of infrastructure. Like they do like big infrastructure deals and in Sydney and Melbourne. and I was supposed to help them grow their multifamily platform in the U.S. that was, 2016. In the lead up to the 2016 election, they only had one investor who would sign on loans for them and in the lead up to the 2016 election, that American investor said no more. I don't know the state of this country where it's going. I'm not signing on any loan. And so we couldn't get any deals across the finish line. Meanwhile, they're having me call brokers in Austin, Denver, Charlotte, Raleigh, really, growing, fast growing, sexy cities. And they're wanting nine and a half percent yield out of the gate. They're wanting six and a half to seven cabs. And I'm calling brokers. Man, I'm just getting laughed at. I'm just kidding. I'm just getting laughed at. So we can't buy anything. Even if we found something, we couldn't buy anything. And I'm getting laughed at. So I grew up in the Midwest. I didn't grow up in Austin. I grew up in Kansas City, went to school at the University of Kansas. I worked in Oklahoma and Kansas my entire career before I moved to Austin. So I said, Hey, look, I think tertiary markets are better. that's how I grew up. I remember, understanding my finances. I remember, Like looking at the cash on cash returns, like it all looked better. And so if you want that sort of yield, I think we need to go to smaller markets. And they said, Oh, that's, it's really interesting. I looked at smaller markets. I looked at Cleveland, Columbus, Ohio. We chased some deals in Omaha, Nebraska. We chased deals in my hometown of Kansas city. We chased deals in Wichita. We looked at deals in Tulsa and Oklahoma city. And I left all of that. 100 percent convinced that Tulsa and Oklahoma City were the best markets in the U. S. For best emerging markets. Clearly, I didn't think it was the best market. Obviously, Austin was better, but I thought it was the best emerging market. and I thought that I would develop that strategy for the guys I was working for. And I took the strategy to the CEO and he said, they said, I'll always remember this. He said, Mate, I love it. I can't get Australian money interested in the state of Oklahoma. He's so if you find investors, I'll back your play. And I start thinking to myself, hold on a second, if I can find an American, if I'm doing all your property management and I'm finding your deals, if I can find American investors, what the heck do I, the heck do I need you guys for? and I made a short list of people that I'd grown up with that I thought might. might have an interest in getting involved in the ground floor of a company. I actually did make a good faith effort and I can, I'm very proud of this. I made a good faith effort to actually try to raise money for the firm I was working for rather than start on my own. but the feedback I got from the only person who was really interested was, I don't want to work with this firm. It was a guy who was getting more involved in his father's family office. I went to school with him when we were really young. So we knew who each other were. We saw each other at weddings, and he's I don't have any interest in working with the company, but I want to work with you. And, yeah, we tried to figure out what that looked like for two months. And one day I got, just to the point where I didn't know if I could stay at the Australian firm I was working for. And I called him and I was like, Hey, look, you keep saying you want to do something together.Here's what I need. I gave him a list of demands, things I needed. and, and he said, yes. So we chased our first deal together. And we had a really fluid structure, which, later on has been a blessing for me because we weren't really free to do whatever I want. Basically, the way we structured it was the ownership of each individual deal is dependent on fundraising, and so we didn't have, a sticky structure where I couldn't go find other equity partners or I couldn't partner with other people, and it allowed us to experience growth and meet new people and, and grow the firm that way, pretty organically. So I was really lucky. And, that's how I started Vesta. So that takes us to 2017.

[00:15:30] Tim Little: Oh, that's interesting. You talked about that Aussie company and then just the Australians themselves, just not having any interest in these, secondary and tertiary markets. And I think that's a pretty common refrain, I think, when it comes to international investors and it makes sense, right? they're going to want to invest in the cities they've heard of, in the States that they've heard of. And probably ones that they could brag about, about it to their friends. so I get it. And so you stayed more local. Tell me about what the first deal that you raised on that where you were actually able to get done, how hard was that first raise and just what did the deal look like in general?

 

[00:16:44] Marc Kulick: So I've tried to start a podcast this year. I've had varying degrees of success, so I have a lot of, or I guess very degrees of lack of success. I don't know, but I have a lot of respect for what you built here. I had my first go at the podcast was the episode about Where best how best to start. The first deal was wild. I'll always remember the number. We had to raise 3, 751, 563. everything about it was wild, right? I wanted to go to Freddie Mac. I was told that Freddie Mac was the gold standard in lending. Freddie came back to us with a term sheet at 65 percent leverage. We perform at 75%. The first deal was actually a really good one. We found a 2000 and 2009 2010 vintage asset. in a growing sub market of Tulsa, at about a six and a quarter cap rate. So it was actually a really good deal. rates were rising at the time. This was early 17. So people who are buying might remember that rates were starting an upward climb and it created some lack of certainty in the market. this deal had gotten under contract and the guys dropped the contract. So here I am, this, this untested buyer and I'm the only offer. so they took it cause. For lack of a better offer, they had me and the brokers felt like if they struck out again, they weren't going to, they were going to lose the listing. So they put a lot of pressure on me. but yeah, it was, I wanted to go through Freddie. Freddie gives us a 65 percent leverage and I can't manage it. They're not leaving me in charge as a first time sponsor.I go through, somebody introduces me to a mortgage broker and I was unsure how I felt about a mortgage broker. Mortgage broker gets on the phone with me and he goes, I can get you 75 percent leverage in first party management. Done. No problem. This is five minutes into the conversation. So I'm like, you can't. And he goes, I can't. I go, you can't. He goes, do I have your business? If I can get you that, yeah, you absolutely have my business, buddy. You're not going to get that. So he introduced me to the very wide world of the CNBS world, and we closed our first deal with CNBS. They gave me 75 percent leverage, first party management. Little did I come to find out the CNBS markets didn't care. They're, they're collateralizing all these deals and, who manages the asset is of minimal importance to them. And so we closed, so we got CNBS behind one of the CNBS lenders behind our first deal. And the fundraiser was really difficult. The funniest story from that fundraiser is I was sitting at a cigar bar in Kansas City and there was a guy who was floating around the bar who I recognized, who I knew ran in these circles and had access to money. And so I literally had a fake phone call. Like I literally took my phone up to my ear. And I'm like, yeah, no. Oh yeah. Yeah. no. The deal's great. The deal's great. it's a projected 17 and a half percent IRR. We're getting into six and a quarter cap rate. I literally had a fake phone call and when I got out, when I pretended to hang up when he was walking by and he goes, wow, that sounds like better than anything I'm doing. And,he got me my first big check. He got me a $500,000 check from a guy he knew. And, so I always explain to people that the first rave was just scratching and clawing for everything. I had done it. Tennis lessons to supplement my income, tennis player. I had done tennis lessons to supplement my income. And one of the families that I taught for had eight kids and I'd always known that they were wealthy, but I didn't, didn't know what their net worth was, what their liquidity was, I got desperate enough that I sent a. A flyer text to them. And I was like, Hey,doing my own deal, you guys, you don't want to participate at all. And not only did they say yes, they put a 50, 000 check in, but they introduced me to three of their friends and their friends all came in. And actually that's been the most fruitful network that I have because they've that network that has expanded to 30 people that today see all my deals.it's just, the first raise is scratching and clawing to get it across the finish line. I heard a lot. Oh, I love your story. I love what you're doing, but I don't want to be a part of your first deal. Call me when you have a second deal. I'm not going to make it to deal too, if you, if enough people think that way. yeah, it was tough. It

[00:20:48] Tim Little: No, and it's, and some of it almost sounds like luck, right? But there's a certain kind of luck that you created, by, with tactics such as the fake phone call, which is brilliant. had you not done that, who knows if that conversation would have taken place and. that 500, 000 may not have appeared or you would have had to scratch and claw to get it from five investors, putting in a hundred thousand each. and I think that's what people need to understand about the scale of money. if you need to raise 3 million, it's a lot easier if you have people writing big checks than if you have a whole bunch of people writing small checks, because it's a lot harder to just. Many people, especially when you're getting started. but you hit on something that's super important, which is, one, the personal touch. but to the network that those people were willing to go to their network. Vouch for you, even though they hadn't done the deal with you yet, maybe that first time and then, sing your praises and give you a chance, which was, sounds like it was huge.

[00:21:51] Marc Kulick: no, it was, it was amazing. and by the way, by the time we, somebody had introduced me to a private equity firm based out of Baltimore, During the raise for the first deal and I flew out to Baltimore, I tried to pitch them and they just weren't, they weren't super focused. By the end of the deal, they called me and they were like, Hey, do you still have this deal available? And I had 200 grand left at that point. So I was like, I could take a 200, 000 investment. It would actually make my life easier. And they were like,no. We have a, 2. 3 million section 1031 exchange to place. And I go, I have a deal that I like, and it was brand new construction in lease up in the fastest growing sub market in the state. And We basically had half the equity raised for deal number two by the time we finished deal number one, and that private equity firm did deals three, four, and five with me, where they were 90 percent of the equity and we were 10. So we got to scale and prove a track record in a really short period of time. And I always joke that I'm the reverse of most people. Most people syndicate until they build a track record and then they go single source. I went single source until I built a track record and then I like the world of syndications. like being, I trust my judgment a lot. I think I know, I think I know how to get through tough parts of multi family. We've been in a tough part for the last two years, right? And property management becomes so much more important. When you do the world of single source, you lose control of your deal. and I like the syndication world because my investors trust me. and my goal that I wake up with every day is do what's in the best interest of my investors and work my tail off to do it. I do prefer the world of syndication to single source equity. that, that's, that, that was an early lesson. so we always joke that we went the reverse of most people.

[00:23:32] Tim Little: Yeah. And that's exactly what I was going to bring up. when you started talking about, that, that balance of the private equity, how much money, how much of that money they were bringing to the table. As is natural, the more money you bring to the table, the more say you have, the more leverage you have in that relationship, which I've learned the hard way in some instances, but I wanted to hear, Your experience. Cause I feel what I know now, like you need to have a lot of trust in that relationship with that private equity, that family office, whoever it is that you're working with,to know that they have your back and you have theirs and that, that there's trust between both parties. Because,like you said, when they have so much of that leverage, So in some cases they can squash you like a bug if they want to and really squeeze you hard. So it sounds like it's worked out beneficially for you, but I'll let you comment on your thoughts.

[00:24:28] Marc Kulick: Yeah, I know. We've done some single source deals. We've been really open. We've done,people have asked me my goals, like particularly when I'm meeting like a new investor, they'll say, Marc, what are your five year goals? And I don't really have goals. I always say that my goal is to do all the deals I want to do and be able to pass on all the deals I want to pass on. that's the goal that I have always kept. And, we've given up 50-50 percent of our GPs to bring in co GP partners when,when that's been, when that's been needed to complete a fundraise, we've gone single source when, particularly there are deals that have some hair on it. And I want an experienced partner. We have a preferred fund that we work with. There's a,I got a rude awakening into the world of real institutional equity. Because I got a term sheet that went nowhere after 45 days and I put up hard money for a deal. and then they, 45 days later, they're like, yeah, the committee denied the, deny the investment. And I'm like, sorry, what? Yeah, the committee didn't like it. They said that they'd rather lose money in a bigger market than make money in Oklahoma. And I was like, they didn't know the deal was in Oklahoma. Like my first email said. Tulsa, Oklahoma audit. What are you talking about? so I have a rule that I really won't put money on the line unless I'm dealing with a principal, with another principal. So the one single source firm that we do a lot of business with is a fund that's in the sole control of one guy. When I want to pitch him a deal, I'm on the phone with him. when we're working through asset management, I'm talking to him.and, when we have problems, we talk it out and get through it. And I have a lot, as you said, I have a ton of trust in him and he has a ton of trust in me and we make that relationship work. But,Code GP structures are basically the same way. you don't, you don't have, you don't have somebody that has control over you, but you do have somebody that has mutual control over the deals and I actually don't mind a co GP structure to this day. That's something that we do a lot of. and, yeah,we've accomplished deals with family office capital before,family office capital is transparently challenging. you're dealing with somebody who it's all their money directly. They just cut you a 10 million check. And, I think anytime, no matter how wealthy you are, when you put 10 million, into a deal that you don't control. There's, yeah, there's some pain behind that. unless things just go, straight up. If things go straight up, obviously you're, as a sponsor, you're a genius. you're the family office, favorite person in the world. But the minute things kind of start going downhill, you're the idiot that's putting their 10 million, property on the line. And I think the thing for investors to really, truly understand is that deals don't go like this and deals really seldom go like this. It's, it's this and. You're going to go through periods in any deal. it's the reason that we all 10 year debt, right? The reason you like 10 year fixed rate debt is because if you have a crappy year, your whole performance doesn't get lost. You might've lost 8 percent cashflow at the worst case scenario, but you can still make that up and you can still get through a bad year. You can still have to evict 5 percent of your tenants and live to tell the story the next year. and so I, I think, okay. the biggest thing that I think investors should know when they get into multifamily is there are ups and downs. There are cycles, there are harder times. And, and just because the market turns or because there's some bad stuff that happens, doesn't mean you're dealing with a bad sponsor. It doesn't mean you're dealing with that property manager. It could, it could definitely mean those things, but it could also just be a blip and a good thing. I always tell my investors, you don't need good property management if you are, if everything's going well, if everything's going well, just find the cheapest third party property manager. You can pay them 1 percent and cap rate compression will take care of the rest.but when things are bad, that's when you need a good property manager that can roll up their sleeves and say, I've been here before. I've done this before. Here's how to fix this. Give me some time, give me a little patience and we'll get through it.

[00:28:16] Tim Little: Yeah. And I think a ton of operators are figuring out that lesson right now. that, what, two, two years ago, yeah, it really didn't matter. but now when it comes down to every number, every dollar, every lease, you're like, Hey, my, my. Property management company is not performing. And this is exactly when I need them to be performing, top notch because we're in one of those. And, like you said, if you have the luxury of a couple of years, then you're probably going to get through it and your investors are probably going to be fine. It's just a matter of, looking at that, that deal timeline. And do you have that runway right now? So obviously a lot, like I said, a lot of operators are looking at that right now. They're, They're putting a microscope on their property management companies, to make sure that they're performing as best as they possibly can, given the circumstances. All right. So I do want to transition to the turbo round now. So I'm going to ask you three questions and I just ask for honest, quick answers. Are you ready for it? All right. So what is a red flag every investor should look out for?

[00:29:30] Marc Kulick: they should look at the trend in rent growth that their sponsors are projecting. If you put 5 percent compounding rent growth for 10 years, Every single deal looks like a home run.try, try asking sponsors to stress test, put in, untrended, completely untrended rent growth. The first time that somebody asked me for an untrended yield on cost, I was like, Oh man, that's going to make the model look so bad. And I was like, it's 7 percent untrended yield on cost. Like I was like, that's really good. And I was like, Oh, okay, great. That's fine. So I learned that lesson, when I was syndicating, I didn't know that before, but yeah, we always, I never tried to do anything too aggressive. I just tried to do two or 3 percent to keep pace with inflation, but now we don't even do that. People love seeing conservative untrended.

[00:30:18] Tim Little: Yeah. and I agree. I think we, in the past, thought we were being conservative by keeping up with inflation. but not going beyond that, but you're right nowadays, to keep investors at ease, you almost have to be ultra conservative and say, yeah, let's just knock it down even more. And if the deal still looks good or better than anything they're seeing, with traditional investments, then it's still a win. And I think that's what's most important. All right. Second one. What is a myth about this business that you'd like to set straight? Okay.

[00:30:51] Marc Kulick: I think I've already touched on it, but I'll go a little deeper. cashflow does not determine if you're an investor and you're receiving distributions, that does not mean you're in a good deal. And if you're an investor and you're not receiving distributions, that does not mean you're in a bad deal.

[00:31:04] Tim Little: And you're absolutely right. And people don't really think about it that way. I think because they got so conditioned,during, again, a couple of years ago when there were the distributions or like clockwork, you're right that holding the distributions may be prudent. That may be exactly what that deal needs. In order to, whether the current storm as it were so that they can, take care of those investors money, that investors money. until they get through it and then they'll start getting those distributions, then they'll get the return on investment that they were hopefully looking for. And, those are banked throughout.

[00:31:41] Marc Kulick: I was talking to an investor today who was like, I've tried to educate my people. " He has his own little syndication group and he's I try to educate my people that some sponsors take extra reserves just to send it back to you. And that's a distribution with your own money. It's not generated by the property cashflow. So yeah, that's the myth, right? If you might be in a deal that hasn't made a distribution in two years and you still get it, you still get a 15 percent IRR. It's just because you're growing rents and you're growing in a lie. You're just not producing cash because you have to put it back in the property.

[00:32:11] Tim Little: Yeah. Yeah. I've seen sponsors talk about raising enough money that they're building in the distributions for whatever it is that the first year. And I'm like, eh, that sounds icky. I don't

[00:32:25] Marc Kulick: Yeah, put it in

[00:32:27] Tim Little: with that because it does re of pyramid scheme if you're doing it that way. And if you are going to do that, at least be transparent with your investors.

[00:32:36] Marc Kulick: docs. Yeah,

[00:32:38] Tim Little: And say it because that's the kind of thing that could come back to bite you later. if you don't declare it.

[00:32:43] Marc Kulick: absolutely.

[00:32:44] Tim Little: All right. Third question, what does success look like to you?

[00:32:48] Marc Kulick: That's probably, that's the toughest one. I don't know. I want to, I think success looks like waking up every day, being proud of the life you built. For me,that's my relationship with my wife. That's doing right by her every day, doing right by my investors, doing right by our employees. I think it's just waking up every day, being proud that we've, I, and we have done the best we can. For the people in our orbit. and again, I think that for me, that's my wife, my family, my investors, and my employees.

[00:33:14] Tim Little: Awesome. Yeah, I love that. All right, Marc. This has been an awesome conversation. Please tell our listeners how they can get a hold of you. And if there's anything else you'd like to share with them.

[00:33:23] Marc Kulick: Yeah. I'm on LinkedIn, Marc Kulick, you can email me at markvestarealproperty.com or you can just go to vestarealproperty.com. All three or all three are going to make it to me eventually. And thank you so much for having me on. This was a blast.

[00:33:34] Tim Little: Yeah. And it's been great having you on. We'll have all that information in the show notes. appreciate you coming in here and educating our folks and look forward to continuing to see you do big things on your journey to multi family millions.

[00:33:47] Marc Kulick: Thank you.


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TIM LITTLE (FOUNDER/ CEO)

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