February 15, 2022
Joe Fairless

JF2723: 3 Ways to Build Strong Relationships with Investors ft. Margaret Kozlark


 
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How do you grow a good relationship with your investors? Margaret Kozlark, co-founder of investment firm Noblivest, shares three tips that have helped her connect with investors, and in turn, finance her deals.

Margaret Kozlark | Real Estate Background

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TRANSCRIPTION

Slocomb Reed: Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I’m Slocomb Reed. This is the world’s longest-running daily real estate investing podcast. Today we have Margaret Kozlark with us. How are you doing, Margaret?

Margaret Kozlark: Hey, good. Good to meet you, Slocomb.

Slocomb Reed: Margaret is the co-founder of Noblivest, which helps investors build their wealth for noble causes such as spending more time with family, volunteering in their community etc. They are mainly focused on multifamily syndication, hoping to expand into other asset classes such as self-storage and mobile home parks. Margaret is currently the GP of a 111-unit deal, she’s the LP in six deals covering over 1,000 units, and she’s based in Fairfield County, Connecticut. Margaret, we were talking a little bit before we started the interview about where the name of your company came from, and your desire to help people with those noble causes, a couple of which I just mentioned. Tell us more about that.

Margaret Kozlark: Sure, absolutely. It really kind of starts with people’s perceptions of money and people’s perceptions of people who have money. I think all of us were brought up with different variations of money in terms of it’s a necessary evil, or maybe people who have too much money are bad… And really, we’re trying to dispel all that and just say building your wealth is not a bad thing, especially if you want to do it for noble causes, as you said. Those could be on a large scale, like philanthropic endeavors, or community service, or it could be something much more intimate, like wanting to spend more time with your children while they’re actually young, or wanting to send your kids to college, or help your parents. So really, it’s investing for kind of a greater good, whether it’s in your family or the broader community.

Slocomb Reed: Awesome. Yeah, the opportunities available and this kind of real estate investing really do make it easier for people to have the time that they want. I have a young daughter, and real estate investing gives me the opportunity to hustle during business hours, but now that I’ve scaled, I have the ability to spend the evenings and weekends with my family in a way that I didn’t use to.

Margaret Kozlark: Yeah, and you can’t get that time back, so that’s awesome.

Slocomb Reed: Yeah. Tell us how you got into commercial real estate investing.

Margaret Kozlark: I, like so many others that you’ve had on the show, sort of did the traditional route. I went to college, I got a degree in Business and Marketing, started off actually as an analyst at Nielsen TV ratings, climbed the corporate ladder, both on the analytical side of radio and TV ratings, and then later in market research, working for some of the biggest CPG companies in the world. But it was a very nine to five grind, a lot of business travel, and just really started to feel very confining. The money was great, but I felt like I had no freedom. It got to a point where — I think it was around 2014, actually, I think was probably when I first heard about it. It was a former colleague that I worked with, and she was investing in syndication. In fact, she was one of Joe Fairless’s first investors, Holly Williams. Holly told me about syndication, “You’ve got to get into it, you’ve got to get into it.” I hadn’t heard about it; I feel like I’m hearing more about it now, but maybe it’s because I’ve been in this world for six years. Back then I didn’t really know anything about it. I was more “Let me just do the traditional 401K, my mutual funds are doing well.” It probably took me about a year and a half, and then I thought, “Okay.” She had told me about this checkbook IRA, let me do that, because I wasn’t happy with how my 401K was performing. I figured if this didn’t work out, I still had years to recover. So I invested in an initial deal in Texas that lasted about two and a half years, and I ended up with an equity multiple of close to 1.6 after just two and a half years. I’m like “I like this. This is actually great.” I always tell people investing in syndication is like tattoos, you can never just get one; you just keep going, and then you want more and more. Although, full disclosure, I do not have any tattoos.

Slocomb Reed: Although, if I were to get a tattoo, I would really only want it for the five-year hold period.

Margaret Kozlark: There you go, that would be perfect.

Slocomb Reed: I would definitely want to know that I could be rid of it in five years, especially if it was for a profit. Tell me, what has been your biggest learning curve, Margaret, in getting into both being an LP, but then you’re the general partner on a 100 plus unit property? What’s been the biggest learning curve?

Margaret Kozlark: I think the biggest thing is that, obviously, when you become a GP, now you’re literally kind of peeking behind the curtain. But when you’re an LP, you’re literally just passively investing happily, getting your mailbox money, and life is great. But I have so much more of an appreciation for all of the various syndicators that I’ve invested with over the years, because there’s a lot of work that goes into it. And just being on the asset management calls, everything from just making sure that the tenants are happy, and trying to reduce turnover, and learning about everything that’s going on with the rehabs. For this particular property, early on, it just seemed like it was just one thing after another. First, there was an ice storm in Texas, then there was a tornado, and there was some roof damage. Although I will say, the amazing thing is because the deal was structured so well, and the whole way we did the debt service coverage ratio, we had the buffer to handle those things. But it definitely was a little bit of a wild ride there for a while. So I think for me, the biggest learning curve – it’s not a bad thing, but it’s just learning more about those behind the scenes and what goes on behind the scenes.

Slocomb Reed: Specific to that, in your general partnership, you were telling me you have one other major partner. Is that Holly, or is it someone else?

Margaret Kozlark: No. My partner is Christine Chu. Christine is a former market research executive, so like myself. I was on the account management side, and she was actually a food scientist on the R&D side. Her children are still very young, she and I connected about a couple of years ago, and really just had similar values, a similar desire to really kind of live a life where we could be more present for our family. And even though my kids are older, my youngest is in high school now, we just really clicked and we thought, “Let’s just start doing this.”

She had been doing sort of the traditional single-family investing models. Hopefully, she’ll come on your show at some point and tell you, because she’s got some crazy stories, including when a car ran through one of her rentals; true story. So she was kind of ready to get out of the active side of investing and look at passive. So she came on board as an LP for one of my deals, and then now we decided, “You know what? Let’s just partner and just see if we can help other folks like us, who are parents, who are working these corporate jobs, that really want to spend more time with their kids, and want to not have to worry about money, but be able to have time for them.”

Slocomb Reed: Even as a general partner, you’re not typically the one who’s dealing with the car when it runs into your rental…

Margaret Kozlark: That’s correct, yeah.

Slocomb Reed: Within your partnership, Margaret, what do you focus on? Which aspects of the partnership do you thrive at?

Margaret Kozlark: I really enjoy investor relations, so I like having conversations with investors and explaining what we do. Just sort of helping to kind of translate it for people who might be financially savvy with other forms of investing, but more traditional forms, like stocks, bonds, and that kind of thing, but are interested in getting into this. I should also mention that in addition to this, I’m also a full-time real estate agent, so I deal with a lot of investors who, again, want to go the traditional route and buy multifamily or buy a single family… But multifamily in the sense of less than four; smaller. A lot of them, I’ve been able to say, “If you’re interested in investing, let me talk about a way you could go a little bit bigger, but actually have a lot less sweat equity in it.” That’s been fun as well.

Slocomb Reed: Yeah. I’m also a residential agent who specializes in investing. One of the first things if I’m having a consultation with a new investor client… I don’t personally take on new clients anymore. I’m on the largest sales team in the Cincinnati area. Shout out to The Chabris Group of Keller Williams.

Margaret Kozlark: I’m a Keller Williams person as well.

Slocomb Reed: Oh, nice. Well, we are known for sharing, enjoying educating people, and helping them invest. When I’m doing a consultation with one of those investors, whether it’s a friend of mine or a client of another agent on our team, the first thing that I do – I won’t talk about any particular investment vehicle in real estate, until they tell me their goals. I have to know what result they want from investing before we’ll have any sort of conversation about anything else. Ideally, you get to the point of goals taking on the form of 2X from Y, by when… But really, it’s the stuff that leads up to that. What are the end results of real estate investing that they want? Frankly, a lot of them really should be looking to be limited partners and passive in larger deals, because that’s going to accomplish what these people who are getting into real estate want, while also leaving them more time to do things like volunteer and spend time with their family.

Margaret Kozlark: 100%. And I’ll tell you something, the other really crazy thing is – and this is sort of a personal mission for me as well… It’s so crazy how there are so many people that are real estate agents that don’t invest in real estate, which is crazy. Especially because as real estate professionals, there are so many tax advantages that we can get through this; it’s nuts. One of my colleagues, who shall not be named, has 35 rental units, and I’ve been telling him, “You need to be doing syndication. I don’t even know how your property-managing 35 units. This is crazy.” Because it’s 35 single-family houses and a couple of duplexes in there, but it’s not like it’s a 135-unit building. So yeah, one by one.

Break: [00:13:58][00:16:08]

Slocomb Reed: Tell me about the deal that you’re a GP on… 111 units, where is it, where did you buy it, and where are you in the business plan right now?

Margaret Kozlark: It’s in Fort Worth, Texas; it is something we acquired off-market again. We’ve got some boots on the ground there that  we were able to make relationships with some of the local brokers; I’m sure it’s a standard story from a lot of folks. We’ve had it for about two and a half years now. But as you know, COVID sort of lit a match to the real estate markets, including multifamily.

Slocomb Reed: Right after you bought this thing, it sounds like.

Margaret Kozlark: Yeah, exactly right. In spite of all the craziness, it still had a lot of positive upside to it. So we are still in the cycle. At this point, we’re talking about just getting disbursement sometime perhaps this year in terms of selling the asset and moving to another one. But I’m not really able to share any details about that right now, but there are talks going on.

Slocomb Reed: Now, when you were putting this deal together, was it the standard play that you were sharing with your LPs? You were underwriting to a five-year hold, you have a preferred return in the 8% range, and IRR…

Margaret Kozlark: Absolutely. Yeah, we’re not really reinventing the wheel in terms of the ways that we approach things. Definitely, I think telling people the five-year hold is important even if you’re thinking you might be able to divest it sooner, people have to be prepared that their money may be tied up for five years. But we did do that, and it has been performing. For a while, we paused distributions when we were going through some of this craziness with the roof and stuff. But the investors are actually making out great, and it’s performing well, and they’re happy with it.

Slocomb Reed: Nice. So in another two and a half years you are looking to sell, and then you said possibly trade into another asset with the same investors?

Margaret Kozlark: Absolutely, yeah. I don’t think it’s going to go as long as two and a half years, to be honest with you. I don’t think we need it to go that long. But definitely, that’s the challenge. You’ve got all these people, they invested with you, and everything’s going great. But now, how do we find that 1031 exchange property, so that they can roll it right over? That’s something we’re going to have to figure out. But fortunately, we’ve got a bigger team of the other GPs that we can all sort of brainstorm on that.

Slocomb Reed: Gotcha. What markets are you looking in right now for your next deal?

Margaret Kozlark: Texas, obviously, Florida, the Carolinas; mainly the Southeast. I do have one property in Louisville that I’m an LP on. So I’m kind of just watching that just to see how that performs. I’m also thinking about Arizona, because there’s a potential partner that we’d like to work with who’s in Arizona as well, so we’re kind of eyeing it.

Slocomb Reed: Gotcha. So within your partnership, you focus on investor relations and capital raising. Are you involved in the deal-finding aspects of the partnership at all?

Margaret Kozlark: No, not a lot. That’s mainly just because of where I’m located. Being up here in Fairfield County, Connecticut – it’s not an area that I would invest in for multifamily, certainly, for a variety of reasons. It’s not a landlord-friendly state, and the taxes are higher. We partnered with other folks who are on the ground, and we are, of course, not just capital raising, we’re involved in asset management as well. But it’s really great to have the people who live in these markets that have the relationships directly with the brokers.

Slocomb Reed: Yeah, that sounds like a good place to live if you are involved in capital raising, and a residential real estate agent whose commission is based on home value. Thinking about how you position yourself and Noblivest when talking with prospective investors, Margaret, a lot of these people have a lot of opportunities. There’s a lot of capital looking to get invested in deals, but there are also a lot of other syndicators and there are other investment vehicles that these people have the ability to consider. What is it that you’re doing to differentiate yourself with investors?

Margaret Kozlark: I would say that working with Noblivest, similar to in the real estate traditional residential real estate agency, is that it’s really all about relationships. It’s building the relationships of trust with those people. Of course, everyone’s started with our sphere of influence of family and friends, and then a lot of our business comes through referrals, people who’ve worked with us before. I think that’s a huge point, because as you said, there are a lot of syndicators are out there, there are a lot of different asset classes. So really, one of the few ways that you can differentiate is the team and the people that you’re with, and making sure that you trust the team, making sure that they have the knowledge and the education to guide the process for the full cycle, and that you just trust them with your resources. I would say really, for us, it’s all about relationship building.

Slocomb Reed: Gotcha. Now, what is it that you’re doing in your relationship-building just beyond keeping in touch with people who may be considering investing?

Margaret Kozlark: We’re doing a lot of education. We have started talking before about our different responsibilities. Christine, my partner, does a lot of the back-end work. She does a lot of the organization, she writes a lot of our blog pieces, although I do write a few as well. But a lot of it — we feel really strongly about educating people. We’re never going to sell to somebody working with us, or even a project. It’s more let me get you educated about what this asset class is, about how passive investing works, to the point where you’re comfortable. And when you’re ready, hopefully, we’re the people that you think of, because we’ve kind of guided you through this process. So for us, a lot of it is just service, if you will; giving you information, helping you make an informed choice.

Slocomb Reed: Margaret, are you ready for the Best Ever lightning round?

Margaret Kozlark: I am.

Slocomb Reed: What is your Best Ever way to give back?

Margaret Kozlark: I am involved with an organization called Midnight Run. We provide services to the homeless on the streets of New York City. We will go in, set up tables, serve them food, and provide clothing. It’s very humbling and rewarding.

Slocomb Reed: Nice. What is the Best Ever book you’ve recently read?

Margaret Kozlark: This one has been out for a few years,  but I would say The Power Of Moments by Chip Heath. It’s just a really great book about you don’t have to have the biggest marketing budget, you don’t even have to do everything wildly different, but it could just be one thing that sets you apart that makes you memorable. I really liked that.

Slocomb Reed: What is the most money you’ve ever made on a deal?

Margaret Kozlark: I have come close as an LP to a 2X equity multiple.

Slocomb Reed: Got you. How long of a hold period was that?

Margaret Kozlark: It was about three and a half years.

Slocomb Reed: Got you. Have you ever lost money on a deal? If so, what’s the deal that you lost the most on?

Margaret Kozlark: I actually have not. I’ve had some deals that haven’t performed as well as others. I’ve probably been in about 10 LPs and, knock on wood, all of them have been profitable. What I always tell people is, ironically, where I lost the most money was in the stock market because I jumped on the whole pot bandwagon. I bought up a bunch of marijuana stocks and just literally lost my shirt on them. But what are you going to do?

Slocomb Reed: Focus on real estate.

Margaret Kozlark: Exactly. I’ll stay in my lane now, Slocomb.

Slocomb Reed: Margaret, what is your Best Ever advice?

Margaret Kozlark: My Best Ever advice is no matter what, if you’re interested in investing or real estate, take action. Obviously, get educated but we could all have analysis paralysis, and you could be spending so much time waiting until you’re ready. But just go ahead and make a change. I would also say, related to that, you could make the smallest change, but if you do it consistently every day, it could end up having a massive impact, whether it’s your personal or business life. Getting up half an hour early, doing one extra thing for your business, making that one extra phone call. If you do it consistently, it can lead to really big results.

Slocomb Reed: That’s awesome. Margaret, where can people get in touch with you?

Margaret Kozlark: We are at noblivest.com. I’m also on LinkedIn, Facebook, or you can reach me at margaret@noblivest.com.

Slocomb Reed: Awesome. Best Ever listeners, thank you for tuning in. If you enjoyed this interview with Margaret, please follow and subscribe to our podcast, leave us a five-star review, and please share this with someone who you think could benefit from the advice that Margaret has given. Thank you and have a Best Ever day.

Margaret Kozlark: Thanks so much. Take care.

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