How do you become a real estate millionaire without using your own credit or money? Learn to implement and use various real estate investing strategies to grow your own portfolio.
Today, Clint Coons of Anderson Business Advisors talks to Daniel Kwak about reaching 87 doors in a year and becoming a real estate millionaire by the time he turned 24 years old.
Over the past 7+ years, Daniel and his brother, Sam, have built successful real estate investment companies, educational courses, coaching programs, and software to help emerging real estate professionals grow their own real estate investing businesses. The Kwak Brothers are on a mission to help as many families as possible achieve financial peace of mind.
Highlights/Topics:
- Daniel’s Dream: To constantly learn, experiment, expand, and grow
- Why Daniel got into real estate: Of top 1%, 76% earned money via real estate investing
- Daniel’s Problem: He had no money, no credit, and minus $187.65 in his bank account
- Four Currencies Concept: Time, money, knowledge, and relationships
- Daniel’s Philosophy: Never look for properties but for people to solve their problems
- Daniel’s BOLD Strategy: Build trust with older landlords/property managers to find deals
- Seller Financing Benefits: Tax advantages, make money as bank, and passive income
- Build a business by using FORCE:
- Find the property
- Owner-finance it
- Raise the capital
- Cashflow it
- Expand your empire
- Rent Bubble: Increasing rent has priced out tenants from entering housing market
Resources
The Kwak Brothers’ YouTube Channel
Anderson Advisors Tax and Asset Protection Event
Full Episode Transcript:
Clint: Hey, what’s up, guys? It’s Clint Coons here. In this episode, what I want to do is introduce you to someone that I’ve been following. I was just really impressed with his life story. This individual had 87 doors—get this—by the time he was 24, and he didn’t do it with his own credit or his own money.
This individual that we’re going to be bringing on today is Daniel Kwak. He’s got a great YouTube channel—a huge following—and he talks all about various real estate investing strategies that you can use to implement in growing your own portfolio or about the financial aspects of investing. It’s a real treat to have him on basically to share with you some of the strategies that he’s currently using and used in the past to put him where he is today.
Daniel, thanks for coming on.
Daniel: Thanks, man. I really appreciate this. It’s an honor.
Clint: Excellent. Your story is so compelling—to be a 23-year-old, go out there as you were telling me, start investing, and realize this is a tough nut to crack if you don’t have a great credit score and a big, thick wallet. How did it all work for you? How do you get this thing going?
Daniel: To your point, I’ll just paint the picture of where I was. My family and I actually emigrated to the United States when I was five years old in 1999.
On a side note, I was a huge basketball fan in South Korea. When we flew to Chicago and O’Hare, literally, the first person I saw on TV was Michael Jordan. I was like, oh, this place is cool.
But nevertheless, I still remember we were at Domino’s. We waited 45 minutes because I had won a reading competition that got me a free pizza that was probably the size of a Samsung Galaxy 20. I still remember our family waiting 45 minutes. My dad actually used a pair of scissors to cut the pizza into four different pieces. That was our dinner that night.
Many nights, we’re sleeping in the car because we couldn’t afford to pay the heating bill. I actually remember we were in the park one time. I saw my mom picking up different plants and weeds, and I saw that on the dinner table two hours later.
Life was definitely interesting, but when you’re a kid, you don’t really think that you’re poor. You think everyone just lives this way.
I will say that’s the genesis of why I do what I do today, why I get out of bed in the morning, and why I will still, to this day, read real estate books just looking to learn new things, looking to experiment, and looking to constantly expand and grow.
I remember when I was six years old. Ever since I was a kid, I always had a tough time sleeping. It was about 1:30 AM, and I looked out. We lived next to, let’s call it, a gentleman’s entertainment center. Let’s call it that.
I saw this man who was probably about in his mid-40s who was stumbling out and was clearly intoxicated. He had a really nice, shiny watch on. I still remember the street lights bouncing light off of his really fancy watch. He wore a suit that was probably costing maybe between $3000–$4000. He got in the car. I don’t remember the exact brand, but I remember it did have a big L in it. It was a super nice car. He’s driving away, and of course, he’s swerving.
I look over 90 degrees to my left and I see my parents sharing a twin bed in a room that doubled as our dining room table, kitchen, living room, and also as my parents’ bedroom.
The question that I asked myself was, man, what would it look like if my parents had the ability to produce the resources that that guy who was stumbling out of the gentleman’s entertainment center had, or vice versa? What would it look like if the guy who was stumbling out at 1:30 AM had the heart that my parents did? My dad was the type of man who would give the shirt off his back even if it was his last shirt.
That’s what inspired me to want to do something big. I’m a faith-driven guy. I tell people all the time that you can’t serve a God that’s so big and dream so small at the same time.
At 17, I read an article by Forbes magazine saying that out of the top 1% of people in the world, about 76% of those people earn their money by investing in real estate. I said, man, that’s what I got to get into, except the only problem was I had no money, as you said. I had no credit, no money, nothing.
Actually, a commercial lender at one point laughed at me when I was 22 years old. I told him I want to get into buying apartment buildings. This was after I told them my DTI, my credits, and all these things.
When I first started learning about real estate at 18, I had -$187.65 in my bank account. I still remember seeing two credit card max balances. Those maxed out. I still remember that night where I dug through the dumpster looking for my dinner. It was a really interesting time. You see that kid and you’re like, okay, that kid is going to invest in real estate. Yeah, okay. Let’s see about that.
Then, I learned this really interesting concept that there are actually four currencies in the world. There’s time, money, knowledge, and relationships. Although I didn’t have the money portion, what I did have was time. I had the ability to receive and gather knowledge and also gather relationships and network. I had this core belief, this conviction, that I could use time, knowledge, and relationships to create something for myself and to create something huge and fantastic. That’s what sparked the information and the inspiration journey aspect of what I did of the blueprint.
Clint: When you went out and started finding properties—we’re talking about this and we’re comparing stories—tell everyone about how you approached the acquisition side. How did you start contacting sellers and finding deals that were available?
I think that really helps people that feel in this market. Particularly right now, we always talk about it. You don’t go to the MLS, right? I’ve heard you talk about PropStream before. It’s a great service that people can utilize, but even then, when you use PropStream, a lot of times, you call them up and you’ve already lost those deals. They’ve already been sold. Explain what you do.
Daniel: I tell people all the time that markets may change, but people never do. The great real estate investors I know—not the good ones, but the great ones—always view every single deal through the lens of, what problems can I solve? Whether it’s 2008, 2009, 2022, or 2024, there will always be people with real estate-related problems.
For me, the harsh reality and the philosophy I developed very early on that eventually trajected and catapulted me towards having a set of strategies that I use to gather deals where nobody has access to—that philosophy, that catapult—was you never look for properties. You always look for people.
If you’re always talking about problem-solving and that’s the genesis and the mentality of how we actually build a real estate career and organization, we got to look for people. The properties just happened to be the asset that’s exchanged, but really, the business is between two people. It’s between a buyer and a seller. The buyer has a set of needs and desires to fulfill for his or her investors, and then the seller has the same obligation, but they just have a set of problems that need to be solved.
The question I started asking myself is, well, how do I find the best people? I looked at what my product was. I said, at the end of the day, real estate is just like a business. I have my marketing, which ultimately is supporting my sales, and then my sales eventually promote and close my offer. If I’m reverse engineering and I’m asking myself, man, how do I find good deals, well, I got to know what it means for me. What does it mean to have a good deal?
For me, my product at the time was multifamily buy and hold, still is. It’s an apartment complex buy and hold. It was funny because when people ask me, Daniel, how do you raise capital and how are you such a good salesperson, the reality is I’m not. I’m not a good salesperson. I just am very good at creating a situation where people want to buy.
Even with my investors today and even back then, one of the things I used to do is I had an irresistible offer. I tell everybody, you need to have an irresistible offer. I used to give investors 100% of all the depreciation. There are a lot of other things that I did that really incentivized investors, but in regards to finding deals, I looked at my product. It was an apartment complex buy and hold. But another aspect of that product was selling the financing. For me, I couldn’t get bank financing deals, not only because of my age and my lack of experience but also my finances. They just weren’t in the best situation.
I started asking myself, okay, if I have to buy property seller financing, how can I create a win-win? Because remember, it’s about people. How can I create a win-win for the other person on the other end of the table?
I spent about a week researching all the benefits that seller financing offers to the seller, and I got a list of about 6–10. I actually got it down to three. I compiled everything, made a list as big as possible, and I took the best three because psychologically speaking, I think the human brain actually averages out the top three as opposed to the whole list.
Those three were potential tax benefits, and number two was making money as the bank, which of course, the banks are currently the richest entities in the world. Between the potential tax to firms, you make money as a bank by making interest, of course, and all that interest is front-loaded. All that profit is front-loaded because of the amortization.
Then, last but not least is the ability to still be involved with the real estate industry but have passive income. For me, it’s never about the geographics or the demographics. It’s always about the psychographics of who I’m working with. Whether that’s an investor or seller, I want to know how people think. I’m obsessed with that.
I want to know what helps them go to sleep at night. I want to know what makes them get up in the morning. Because at the end of the day, my personal vision is to provide people peace of mind. Even for all our companies that my brother and I own, at the end of the day, it’s to provide people with financial peace of mind.
Those are the top three things, and then those are the benefits for the sellers. Then, the question I ask myself then was, well, who resonates with these benefits? Who are the sellers and the landlords that really resonate with the potential tax deference with having their money make money for them and then also continuing to receive passive income?
After a lot of great conversations with my mentors, with myself, and just a lot of research, I found out that—I’m going to be very careful—seasoned landlords were the best people to target because these were individuals who owned properties for more than 27 ½ years. They have so much depreciation recapture at closing. It’s going to be quite interesting for them.
Clint: You wanted to be nice about it. I’ll just say it. You say look for old people. That’s what you’re looking for, right? Old people like me or maybe a little older than me like my father. My father’s 76.
Daniel: I don’t think they’re old guys.
Clint: Yeah, but my mom’s always like, you need to get rid of these properties because you’re always out there, you’re working on them, and they’re a hassle. [inaudible 00:11:52] my dad, don’t worry about it. I’ll take them over. I’ll just give you the income, and I’ll manage them and run them for you.
But you’re right. That’s the mindset. The older generation wants out.
Daniel: It’s the psychographics because even to your point, Clint, 90% of all these older landlords—always, 90% of time—had a wife who was like, when are you going to sell those properties? When are you going to get out of the game? When are we going to be able to travel?
It just always made me chuckle because I used to always have great banter with those individuals. I made little jokes here like, don’t worry, Mrs. Johnson. I’ll make sure your husband sells me those properties.
Clint: You target the wife because she’ll make the husband do what you want.
Daniel: That’s right. I targeted older landlords. That is exactly what I did. The next question, of course, I asked was for me, what are the best ways to find those people? Because obviously, conventional mainstream wisdom in the world of real estate investing is for everyone to do direct mail campaigns, [inaudible 00:12:53], or use a wholesaler. For me, when I look at the individuals that I was targeting, I saw a different set of channels of being able to find properties.
One of the things I did—I know you and I were talking about this off the air—was building relationships with property managers who are 25 years in the industry because I knew that those guys had a group of their buddies who also owned properties for 25, 30, or 40 years.
I started reaching out to property managers, and I decided to create a little arrangement between myself and them. I went up to them and said, hey what’s the minimum number of units you have to manage in order for your office to stay afloat?
I would target these property managers that had between 100 to about 600 units under management. They would always give me a different answer like, oh, I need at least 175. I need at least 187. I need at least 196.
I ask them how would you like to have a situation where you never go below the number you’re at right now for management? They’re like, go on. I’m listening.
I would say, well, next time you have a client that wants to sell, have them call me first because I’ve got investors I’ve raised capital with. I’ve got this. I’m looking for properties in your area. Have them call me, and I’ll keep you as the property manager. Worst-case scenario, if you and I don’t work out and if I don’t think that you’re that great of a manager, you can make your commission by being the broker.
They love that idea because for them, it was such a win-win scenario. I was creating situations where people want to buy, not situations where I had to completely sell them. That was one. I think I got 64 units off of that strategy of building relationships with property managers.
Then, the second one was actually calling for rent signs. Again, it goes back to the psychographics because I said, well, older landlords probably aren’t going to utilize technology like apartments.com or Zillow. I’m sure a lot of them do, but for the most part, older landlords don’t really utilize a lot of technology.
One of the things I used to do is for three hours on a Saturday morning, I would drive around neighborhoods that had a lot of multifamily apartments of what I was looking for in my avatar. Sure enough, either (a) they had a for-rent sign out, or (b) the landlord would actually be on the premises working on the property.
Because of my research, because of my setup that I’ve done, probably about every 3 out of 4 people that I either called or met while I was there were probably 65 and older. That was a great way that I found properties. I actually did a couple of deals through that.
Last but not least, I used to look at newspaper ads. If you go to the newspaper, I would see these for-rent ads that were there. Again, same thing. Sure enough, a lot of these guys would be 65, 70, or older.
I think my tactic of looking for people, not properties has really paid off for me because it allowed me to be efficient with my time and serve the people that I was looking to serve.
Clint: I got an acronym for you. Here’s your strategy. It’s called BOLD—Buying Older Landlord Deals.
Daniel: There you go, man. I love it.
Clint: What I like is not only finding the older landlord. Many times, I would look at them to see what properties they own. The older the properties are going to be, the better because they’re having to put in more maintenance time which makes their life more difficult.
If you can find someone that’s older that has maybe 15 properties, maybe it’s not a multifamily deal—I hadn’t thought about that, that’s even better because they have several apartments that they’re having to manage—you can get in there and talk to them like you did.
How did that conversation work when you approached them? Typically, what was it like?
Daniel: Clint, I’ll be honest. There was a barrier because they saw a guy who’s a third of their age. At the time, I was just 23 when I was buying an apartment at that point, and they just saw this kid. The sales aspect was fairly difficult. Especially with the seller financing conversation, one of my biggest obstacles was, hey, can I trust you?
It actually all started because the seller started asking for 40%-50% down, and I started to ask myself why they were so stuck on getting a bigger down payment. One day, I just got so frustrated. I think the landlord I was talking to, his name was Mark. I was like, Mark, if you don’t mind me asking, are you asking for a larger down payment because you want me to have more skin in the game because you don’t really trust my ability to run this property?
Mark was a very direct guy. He said, “Yeah, I’m worried that you’re going to run this thing to the ground, I’m going to get the property back four or five years later, and I’m going to have to end up putting hundreds of thousands of dollars to fix it up.”
That was great because whenever you are negotiating with the seller and you identify the real reason why they’re doing something, that’s always a bonus. For me, at the end of day, again, I always care about the psychographics of what that person’s thinking.
I said, well, Mark, would it be fair and would it help ease your mind if every two years, three years, or whatever you decide, I was subject to an inspection? You and I split the inspection costs. You can pick the inspectors, obviously, as long as it’s not somebody who’s extremely biased. I’m subject to an inspection every two years and there’s a certain standard that I have to uphold. My strategy is actually to fix up the property a little bit and raise the rent because that was a very primary strategy and was obviously the value-add even back in 2017.
I’ll be honest with you. I think this is a great transition of the conversation. Back in 2017, I thought the market was going to crash in 2020. That’s what I thought. I thought the whole housing market and the stock market were going to completely crash in 2020 because I was telling myself and a couple of friends of mine that there’s no way that these 10-year treasuries that were issued in 2010 are going to be [inaudible 00:19:15]. There’s just no way. Something has to happen. Historically speaking, there’s usually either a war, a big market correction, or a pandemic, which look at that.
When I had conversations with the sellers, that’s one of the addendums that I used to offer in the contract for deed. It was, hey, every two years, I’m subject to an inspection.
I actually found out that these guys actually preferred a 5% down payment or 10% down payment because it meant that their money was going to accrue more interest which is more profit for them. Not only that, but their monthly payment was going to be bigger, meaning that they could go to Italy if they wanted to, move down to Texas, and do whatever they wanted
I’ve actually done a couple of deals where I put no money down whatsoever, which is pretty neat, I got to say.
Clint: Another way to do it too if you weren’t looking for an apartment building—let’s say you found someone that has 15 homes, you want to buy all 15, and they’re unwilling to sell you all 15. What we’ve done before is we said, sell us this many properties, give us an option to buy the remaining, and we’ll record that option against the properties. If this doesn’t work out here—what we’re telling you is going to work out—then you’re not going to sell me these other deals.
There are different ways to put this together to give the seller some competence to try and buy. Is this person really going to be able to live up to what they’re telling me? You got to be creative. That’s smart.
Daniel: Yeah. I mentioned this before, but for me, it all went back to how can I provide better peace of mind for this individual? Because everyone’s motivated and they feel safe. The risk is mitigated in different ways. I love that. I love buying a portion and then doing an option contract on that. I’m going to steal that if you don’t mind.
Clint: We did that one. It was going to be on a 220-property portfolio. We ended up going through with it. We ended up buying down in Houston. This was a few years back in 2018. I look back on it. We would have a lot of cash flow, but the Houston properties of the package we bought down there have all tripled since then.
Daniel: That’s awesome, man. Thank you for that. I’m here to learn too. I know I’m the guest, but I’m looking to learn every minute of the day.
Clint: Investing is so fun.
You got this FORCE Strategy. Tell me a little bit about that.
Daniel: For the way that we even came up with the name, the first movie my brother and I watched when we first came to the United States was Star Wars: Episode I–The Phantom Menace. We were always big Star Wars fans. Really, FORCE stands for you Find the property, you Own or finance it, you Raise the capital, you Cashflow it which is about management, and E is expanding your empire.
One of the things I noticed a lot with real estate investors is they’re really good at doing deals. They don’t know how to build a business. With my years of traveling, teaching, and training real estate entrepreneurs, and even for me as a real estate investing coach that helps people accumulate a rental property, that’s one of the most, number-one, common obstacles or mistakes that I see a lot of people make.
I’ve got a friend of mine who’s a pretty well-known real estate figure. I won’t say his name, but I’ll say he’s got a great beard. How about that?
He and I were having a conversation about this the other day. I asked him, hey, if you had to start all over again, what type of books would you read? He’s a very well-accomplished real estate investor.
He goes, “Honestly, I would start by reading books about general business because it’s not enough for someone to do deals, but you got to be your own CEO. You have to be your own CFOs, CIO, HR, you name it.”
One of the things I noticed a lot of people struggle with is they know how to do deals, but they don’t really know how to build a business on the back of that. That’s what the FORCE Strategy is all about.
It’s all about from A–Z. Let’s find it, okay, great. Then buy it owner financing, raise capital, and then manage it because I think a lot of times, people over-romanticize the acquisition of a piece of real estate but never the execution of a business plan.
I’m a life-long martial artist. I love martial arts. I’m a huge UFC fan. One of the things my wrestling coaches have told me because he used to teach me using business because he always knew I was interested in entrepreneurship and business.
He goes, “Buying a business or buying a piece of real estate is like a takedown. You can have a great takedown, you could do a blast double flat on their back, you got great positioning, but what you do with it afterward is more important than even getting the takedown. If you can’t record damage, then you can actually get submitted with the person being on their back.”
That’s what cash flow is all about, the management portion, and then of course, how do you build off of that momentum and actually build a business around that piece of real estate? That’s the FORCE Strategy, Clint.
Clint: Nice. Something that we teach as well in our events is that real estate investors need to treat their investing like a business and focus on the high-value work that’s going to make you money and not so much on the low-value work.
You see a lot of investors get caught up in doing things that they shouldn’t be doing on their own like their own books and tax returns and setting up their entities. To some extent, it’s the rehab of the property themselves.
If you’re out there finding deals, do you need to be out there holding a hammer, retexturing, and repainting the interior, or are you better off finding that next deal and hiring that out?
Sometimes, people get in their way because they don’t see it as a business. They see themselves as an investor and they become trapped. They’re unable to scale.
When they hear your story, 87 doors within a year, oh, that’s impossible. Not if you have the right systems in place that will allow you to expand upon your talents like you were obviously able to do.
I think that’s key. So many people don’t teach that. Like you said, what you’re doing is teaching that other side to understand it from that perspective. That’s really, really important.
Daniel: Yeah, I’ll agree.
Clint: What are your thoughts on the market now?
Daniel: I’ve been blessed with my mentor. He’s pushing 75 now. He’s seen four different market corrections in his life. I’m 27 years old, and I’ve never been an active entrepreneur or an active investor during a market crash. I wish I would have.
In 2008, I was 14 at the time. I think I was a freshman in high school. I’m really mad at my freshman high school self that I didn’t buy properties at the time. Instead, I was busy playing basketball.
One of the things I think about the market now is I follow a lot of different channels. I like to read a lot of books and a lot of reports on what’s happening. For me, I get very nervous.
I talked to a couple of friends of mine who are pretty high up in national mortgage companies. One of the things that they’ve been telling me is they get really nervous at the fact that a lot of the appraisal value is starting to be lower than the loan amount and the loan balance.
As much as I love media outlets, I’m not really big on following media like CNN or Fox. I don’t really watch them. I’d much rather get my data from the actual source itself which is the people working in the industry day-to-day.
One of the things that I’m hearing all across the board is a lot of these mortgages are starting to be underwater. Loan-to-value ratios are starting to go above 100%.
I met a mortgage guy the other day where they’re doing commercial loans for apartment buildings. For three years now, they’ve been doing them on stated income, so it makes me really, really scratch my head and nervous.
I think a lot of investors today are buying properties based on speculations of rents continuing to rise. Obviously, the rent bubble as I’ll call it—the increase in rent—has really been built on the back of a housing market that’s priced out a lot of tenants from entering the housing market.
I’m one of those guys who believe that we’ve had a very much of a false lack of inventory in the housing market. If you look at government intervention, if you look at programs because of the pandemic of stuff like the foreclosure moratorium, that’s kept millions of homes from reentering inventory.
I’m also paying attention to a lot of these canceled contracts that are happening within the single-family industry in states like Texas and Arizona. I think inventory eventually in the next coming years—potentially in the next nine months—will continue to balance itself out. I think that rising rates are going to decrease strength in the home buying pool because really, that’s my generation, the millennials.
We’re the ones now. We are the primary homebuyers now. I think that the age range of the millennial now is 26–41 or something like that. We are the prime homebuyers. We are the ones that a lot of people are looking to sell their home to.
I don’t think the liquidity and the financial strength of millennials are as strong as a lot of these home builders think it is. For that reason, I don’t think rent is going to continue to skyrocket as it has. If anything, I think it’s going to go down because a lot of the millennials have been waiting on the sidelines to enter the housing market who are going to start going into.
Obviously, when that happens, the first individuals in the tenant pool that tend to leave are classic tenants. They’re typically the first ones that tend to enter the housing market, and then who knows what we’ll see? All I know is we’ve seen a lot of Class A apartments being built in the last two, three years.
Clint: Yeah. They’re throwing them up all over the place. I was just down in Austin last year, and I just couldn’t believe how many apartment buildings were going up as we were driving around because my daughter was considering moving there with her boyfriend.
I was thinking the same thing. Once this starts to settle down, you have more supply out there. The rents that they think they’re going to get off of these deals with their finance on is not going to materialize because once you have more supply in the market, it’s going to drive that back down, especially homes or people moving in to buy in the properties as you say that shadow inventory that’s been locked up there.
There are so many factors. You got the rent moratoriums that a lot of cities in the blue states have imposed upon landlords—how does that factor in once those kick in—and they can start charging the floor rents again like they intended to. You got to be careful.
That’s why personally, I’ve always liked it over single-family homes even though your CapEx can be a little higher. You know your market, what your tenants expect, and go from there.
Daniel: Yeah. Even in my home state of Illinois, Illinois is not necessarily a number one destination for people wanting to move. I think we’re actually number two in people moving out and yet if you were to draw where I live and you do the 10-minute drive radius, they’re building about 3400 units and they’re all a Class A. A lot of the feasibility studies that I know that these developers have made the decisions on is predicated on a continued rise of rent.
I have a buddy of mine who’s now my business partner who’s responsible for a 364-unit development. They’re charging $3600 for a three-bedroom. Even at that price point, their margins are pretty slim. I don’t know how much of it is sustainable. There’s an interesting parallel because even looking at the stock market, what percentage of companies in the S&P 500 actually make money? I think the statistic that I saw was that 40% are actually currently losing money. They’re just been propped up with a false value in my opinion.
It’ll be really interesting to see because I know a lot of people are building Class A all across the country even in my home state where people are leaving. I just don’t know if I’m very confident in that investment strategy right now.
What we’re looking for in our partnership is we don’t buy anything unless there’s intrinsic value, unless there’s earned depreciation, and the cash flow right now or the income as it is is sustainable to give us a pretty good rate of return for our investors. We don’t even touch a deal unless we can have intrinsic value and the deal works as it stands right now even if the rents aren’t able to be raised.
Clint: That’s exactly right. That’s when you get in trouble, when you think you’re going to make it on the come side of that bet and it’s going to pay off.
I wondered about this just the other day as I was talking to my daughter and her boyfriend. They ended up living in Denver in a Class A apartment building and moved in. It had only been up for about six months. I thought it was really high rent, what they’re asking for a one-bedroom.
Five months ago when those initial tenants came in and they came up for renewal, they almost doubled their rent on them. Then, they saw this mass exodus out of the building, so my daughter assumed the same thing, that they were going to double her rent. When she went down to talk to them because they were coming up on their year, they said, oh, no, we’re going to raise your rent $40. She said, but I thought… They go, oh, we’re no longer doing that.
I know it’s an isolated occurrence, but they’re starting to see that you can’t just demand that from people because there is more inventory out there and there are more options for them, so that’s going to be hard to make their numbers work in this particular property if that’s what they did when they financed it.
Daniel: My wife and I went from living in a four-bedroom house to renting. We actually moved from a four-bedroom house to renting in 2020 before everything happened. Right now, for a three-bedroom, two-bath—she and I actually enjoyed renting more—we’re currently paying $2200 for our three-two, and we got a notice that they’re raising it to $3400. That actually is what prompted us to move to a townhouse that we’re moving to now.
They’re losing really strong tenants because could we afford that? Sure, but at that point, it’s just stupid to stay. Why would we do that? Our mortgage payment between taxes, insurance, and everything PITI is $2600 for the place that we’re buying.
Again, to your point, I’m just seeing a lot of offering memorandums where people are making the assumption that the cap rate is actually going to be lower 5–7 years from now in their exit than it is today. I’m just going, I don’t know if that’s going to happen. I just don’t see that data.
Clint: Buy your market, figure it out, and make those investments.
Hey, it’s been a great interview. You’ve got a ton of resources. Is there a way for people who are watching, if they want to learn more on how you train and the way you look at evaluating properties, where they should go?
Daniel: We actually have a free real estate course. It’s about 40–50 hours with the content. My brother and I recorded everything from a mini raising capital course. I have free meet-ups to talk about that.
If you just go to kwakbrothers.com/freestuff or even if you just go to the kwakbrothers.com, there’s a tab in there that says free stuff all the way at the bottom. It’s called Base Camp. That’s the free course. I have a free book that they can get. We have a free meet-up every other Tuesday, the first and third Tuesday of the month.
I got in a lot of trouble for doing this, but I like to give off my personal email address. Even if people just want to say hi, say what’s up, hey, hope everything is doing well, or share some really crazy real estate stories, then my email is just daniel@thekwakbrothers.com.
Clint: Perfect. We’ll have that information in the show notes as well so they can just click on it and it’ll bring them there. It’s been great having you on. This time went so fast. You have such an interesting story on the inside that people glean from this. It’s our bold strategy.
Daniel: That’s right.
Clint: Anything else you want to say and pass on?
Daniel: No. I hope this is recorded and I hope people listen to this part, but I do a lot of these podcasts and this is probably one of the ones I enjoyed the most. This is really cool. Usually, in other podcasts I do, it’s very structured. For me, I just like it to go with the flow because even as a real estate entrepreneur and an entrepreneur in general, you have to go with the flow. You have to adapt and make a pivot.
I really enjoyed this podcast. I hope more people subscribe and listen to this.
Clint: Great. Thanks, Daniel. Good talking to you.
Daniel: See you, Clint.
