Ken Gee is a longtime multifamily syndicator who recently started his own fund. Ken tells us what his journey has been like, what he’s learned, and what advice he has for other syndicators looking to make the same transition:
- Retain your syndication investors when you make the switch. Ken was told it wasn’t possible, but he was able to retain 90% of his syndication investors as fund investors by designing the fund terms to remain as close to syndication terms as possible and waiving commitment fees.
- Deploy capital responsibly and in a timely manner. Ken recognizes that he now has time constraints. It’s his responsibility to deploy investors’ capital without taking too long because every minute his investors’ capital sits in a bank account, it’s earning nothing.
- Make sure you know what you’re doing before handling other people’s money. Investors are going to ask you tough questions, and you need to understand your business well enough to be able to answer all of them. If you’re not in that position, Ken says, then you probably shouldn’t be trusted with other people’s money.
- Total transparency is the key to attracting investor capital. The number-one thing potential sponsors need to know is whether they can trust you. Ken recommends creating a profile on a site called Verivest, which vets all of your deals to ensure the investors who visit the site know you’re credible.
- After closing a deal, sit on your hands for a bit. Based on personal experience, Ken recommends taking 30–60 days after closing a deal to get to know a property before launching into renovations. This way, if you need to reallocate your improvement money, you can do it in a smart way.
- Do the work and play the long game. When it comes to purchasing apartments, Ken says it’s imperative to thoroughly understand the numbers, the neighborhood, and why people want to live in your property. Doing the work and playing the long game in this business, he says, is the key to success.
Ken Gee | Real Estate Background
- Founder of KRI Partners, part of the KRI Group of companies, which is a real estate syndication and real estate private equity firm that specializes in the acquisition and management of multifamily apartment assets located in the South.
- They have completed 16 deals (10,000+ units) worth ~$50M.
- They invest as LPs in all their deals, and Ken has personally invested in two deals as LP ($100,000).
- They focus on B/C class value-add multifamily between 100–250 units.
- They are GP of several syndications and one blind pool fund.
- They also do some third-party management.
- Based in: Cleveland, OH
- Say hi to him at:
Greatest Lesson: Sit on your hands for 30/60/90 days after buying a property to make sure you know everything you need to know before spending your renovation budget. This hedges against spending all your money only to discover problems you didn’t know about.
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Ash Patel: Hello Best Ever listeners, welcome to The Best Real Estate Investing Advice Ever Show. I'm Ash Patel and I'm with today's guest Ken Gee. Ken Gee’s joining us from Cleveland, Ohio. He is the founder of KRI Partners, which is a real estate syndication and private equity firm specializing in multifamily. They've completed 16 deals as GPs and have also started a fund. Ken, thank you for joining us and how are you today?
Ken Gee: I'm doing great. Thanks so much for having me.
Ash Patel: It's our pleasure, Ken. Before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Ken Gee: Sure. Well, our focus now is 100% multifamily. I started this company back in 1997, back when I was at Deloitte. I spent seven years in public accounting as a CPA with Deloitte, and spent five years as a commercial lender with a local bank. During that time, I bought my first apartment building in a suburb of Cleveland, an area called Shaker Square near Shaker Heights. Over the last 23 or so years, I continued to buy and sell; about 15 years ago, we left. Well, we're still in Cleveland but we don't do anything in Cleveland anymore; everything we do now is in the growth states right now. Central and Northern Florida is where our focus is.
Ash Patel: How long did you work for Deloitte while you were doing real estate?
Ken Gee: Yeah, that's a good question. It was probably three or four years maybe, something like that.
Ash Patel: That's some long days.
Ken Gee: It was. It's interesting that you say that, because I had to make sure that the property that I bought was big enough, that allowed me to have someone on site. It was a whopping 28 units. But I could pay a part-time woman to live there. I gave her a unit for free and she did a lot of the leasing and met the vendors and things like that. Yeah, it was tough. We did all the bookkeeping, of course, ourselves but - yeah, it really drove the bus in terms of what type of property we bought. It's probably the reason we didn't start out like a lot of people do with singles and doubles.
Ash Patel: Ken, when you say “we”, who purchased that first property? Was it just you? Did you assemble a group of investors or partners?
Ken Gee: No. It was me and my in-laws. I wouldn't advise everybody to do this, but I borrowed half of the down payment on my home equity line, my in-laws put in the other half, and we bought the property. They trusted me; it's your family, it's the easiest way to get people to trust you. We worked for three years, and we each put in 35,000 on that first deal, and we each got back 100 three years later. That's how we did it. It wasn't until probably 2004 or 2005, something like that, before we started inviting other people into our deals. Because I don't like learning on someone else's dime, I don't think that's fair, so I wanted to learn as much as I could on my own dime, making my own mistakes. We're still learning, don't think that we aren't learning even today. But it was important to me that we could get our feet wet and really kind of figure out what's going on and show some success before we went out and invited other people into our deals.
Ash Patel: Can you give us the progression between when you started on that first deal and when you took on other people? How many deals were there?
Ken Gee: Probably seven or eight maybe. I'd have to look to be sure, but it's somewhere in that range. Probably six, seven, eight; they were all in Cleveland.
Ash Patel: Were you just recycling your own money for that?
Ken Gee: Yeah.
Ash Patel: In terms of scaling your company, what was your first hire?
Ken Gee: What’s my first hire? Oh, a bookkeeper. Somebody to work in the office to help me out.
Ash Patel: What was your next hire?
Ken Gee: I've gotta back up, my first hire was that property manager lady that helped me on my very first deal. So yeah, let me correct that; she was the first person. The second person was probably a maintenance person, the third person was probably a maintenance person. Then probably, after I left Deloitte, I hired somebody to work in the office with me, in the back office. And then I couldn't tell you what was next after that.
Ash Patel: As you're scaling the company, have you taken on partners, or is this wholly owned by you?
Ken Gee: The company's wholly owned by me. There have always been other partners in my early deals; other than the ones I deal with my family I also did some deals with a local attorney, who's now retired. He was kind enough to trust me and had faith in me early on. We did a number of deals together. That's kind of how that progressed.
Ash Patel: Got it. Ken, now you're starting a fund... There seems to be a lot of interest in people wanting to start funds. Why did you make that decision?
Ken Gee: Good question. The first fund is behind us, it's done, raised, closed; it was about $13 million. The reason we did that - we were buying primarily in central and northern Florida. A super competitive market as you can imagine, I'm sure you know that. People that we compete against for deals, they're generally syndicators. So think about this, "Mr. Seller, I want to buy your property. I'm a syndicator, I promise you, I'll be able to raise the money to get the deal done." Then I come along, "Mr. Seller, I have a fund, I've already raised the money. Consider my deal over the other guys." Guess what? Money in hand is usually going to get the deal. I call it - the syndicators put the deal ahead of the money, we put the money ahead of the deal to make us stronger buyers in the markets that we're in.
The other thing that happened - a lot of other smaller things happened that I didn't necessarily understand upfront, and that was that you were implicitly a more sophisticated buyer. Sellers recognize that and appreciate that. You're going to be more efficient, because you have more experience. It's hard to raise a blind pool fund if you've never done this before. Most people give their money to those kinds of folks in the business. And the last thing was the brokers took us far more seriously because they knew we had the money, and they know that we're at a timeframe to deploy the capital. So they were more incented to bring us deals because they knew that we would get them closed.
Ash Patel: Can you walk us through starting a fund and getting capital from investors? Really, the whole process up until you're deploying it.
Ken Gee: Wow. Let's just talk about the fund itself. Well, the experience was already behind us, so we made the decision...
Ash Patel: Sorry, another way to phrase this question. Sorry to cut you off. If you take somebody who's syndicated deals, how does that person transition into starting a fund?
Ken Gee: Yes, I'll tell you how we did it. Everybody told me in the beginning that you have to be careful when you make that jump from a syndication to the fund concept. Your syndication investors will not follow you. I thought, "Well, I don't want that, because they've been with me for many, many years." I felt like I was deserting them. So the first thing I did was I made the terms of the fund look and feel very similar to that of a syndication - 80/20 split, a preferred return, you get all your money back before the split... So it felt very much like a syndication. Acquisition fee and disposition fee...
Typically, funds have commitment fees. It just didn't make sense to me that you should pay me a fee, because you committed to invest in my fund. I just mentally had a problem with that. I'm like, "I haven't done anything for you yet. Why do you owe me a fee?" Because first-time funds are very hard to do, at least I'm told. And it is tough. A lot of people won't even talk to a first-time fundraiser. I wanted to make it very easy for people to transition and follow us, because they've been following us for many, many years, successfully. I didn't want to make it hard for them. That's how we set our terms.
Then of course, you go to the attorneys and tell them what you want to do. Then you go through the whole process of creating the documents; that's never any fun. You want to make sure that you understand the SEC rules, because you don't want to get in trouble with those. Our fund is for accredited investors only, on purpose, because of lots of strategic reasons that we did that. And personally, I wasn't used to raising money outside my circle of influence, I just wasn't. So it was probably right during the pandemic, or early on.
Three years ago, I would tell people -- you would never catch me on a Zoom call like this. You just wouldn't, I just wasn't comfortable doing it. So I pushed myself out of my comfort zone to get into digital marketing and online marketing. I did some presentations at The MoneyShow in Orlando, and was once even a featured speaker there. What I learned was, "You know what? This is actually fun", to share what I've been doing for 23 years with other people and help them understand why I'm so passionate about what we do. So that whole fundraising process really became a process where I was telling our story. People understand why we do what we do, and then they make the decision to take the journey with us. Is that helpful?
Ash Patel: Very helpful. What percentage of your syndication investors followed you to the fund?
Ken Gee: Oh, geez, probably 90%.
Ash Patel: So you proved your friend wrong.
Ken Gee: I love doing that, yeah. When I went into public accounting, they said, "Ken, don't do it, you're going to be too old to get into public accounting." Then they said, "Don't go into the tax side because they only hire auditors." I proved them wrong. I love it when people challenge me like that.
Ash Patel: Good for you. Ken, how early do you take investors’ capital for the fund, versus the date that you deploy it on?
Ken Gee: That's a good question. In the fund, especially when you're paying a preferred return, if you call capital and put it in your bank account, you're going to owe a preferred return on that to your investors. That's a really expensive way when you're not doing anything with the money; so we call it as we need it.
Ash Patel: The clock starts...
Ken Gee: Pardon me?
Ash Patel: The clock starts when that wire hits?
Ken Gee: It does. So we call the capital. In a fund, your investors are making commitments to you. 100,000 was our minimum investment; they committed that they would give us 100 grand, and then once we had all our investors, they got some percentage of the total; every time we called capital, that's the way they would send their funds.
Now, in return - this is a really important concept with the fund that's different than a syndication - if an investor is going to make a commitment to us, to commit 100 grand, a half a million, a million (we have some pretty big investors), well, they can't do anything else with that money. So now, the responsibility becomes mine to deploy that capital very responsibly, but not take too long to deploy it, because every minute it sits in that bank account, you know what it's earning. Nothing. So the whole fund concept comes with some responsibilities that most people don't think of right away. In our fund, how did I deal with that? I dealt with it by making a very short commitment period. From the time our first deal closed, we have 18 months to deploy the rest of the capital.
Most funds are three years or four years. I just thought, "Good Lord, that just seems too long to me." I just didn't think it was fair to try to tie up someone's capital for that long. Because once they sign that subscription agreement, they're obligated to send us the money when we call it. These are just some ways that we try to deal with all the concerns that someone might have with investing in a fund, and make sure that we're putting our investors in the best place we can.
Ash Patel: You just mentioned that once they sign the subscription agreement, they're obligated to send the money when you call for it. How does that work? Do I commit in the subscription agreement that I'm going to forward $100,000, and then I just wait until you have the deal?
Ken Gee: Yeah.
Ash Patel: Okay, so you're not sitting with idle capital in a bank account looking for a deal.
Ken Gee: I'm not, but they have the capital sitting idle somewhere.
Ash Patel: Right. You're not paying the preferred return until the wire hits?
Ken Gee: Correct. You couldn't afford to do that, there's just no way. On our first fund, our preferred return was 7%. Find an idle investment that pays 7%.
Ash Patel: What are your typical returns now, on this fund?
Ken Gee: We haven't turned any deals yet in this particular fund. We closed our first deal at the end of October of ‘21 and we're about to go under contract for our second deal. I don't know when this will actually air, but probably by the time it does, it'll be closed. We're working on our third and final deal for this fund, and then we're going to start fundraising for our next fund. Does that make sense?
Ash Patel: It does. From your investor's perspective, do you tell them that you're going to put four properties into this fund, or is it a time period that you'll hold it open, or is it a certain raise?
Ken Gee: Yeah. It could be any combination of the above. What's important is when you have conversations with investors... Everyone has to talk to me before they can invest, and it's important to me that I understand what they're trying to achieve with their first personal financial objectives and things like that. In this fund, it was always my goal to close at between $10 and $15 million, to be able to deploy it in two or three assets, and I committed that it will be somewhere in central and northern Florida. Those are some of the parameters that I set for the fund. So we'll probably get to the third; we closed it at $12.5 million. So you don't know exactly where each deal is going to be until you find it.
Some people will go out and buy a bunch of deals, and then go from a fund and put those deals inside the fund. I was concerned about doing that, because if you think about it, if I go out and buy the deals, then I sell it to the fund, I run the risk that somebody might be concerned that I'm marking those assets up, and making a profit on them personally even before they get in the fund. So I try to eliminate, when I do this, every possibility that -- we're all in this together, we're all going to make this investment together, so we go out of the market and buy the deal; I don't know if it's going to need 4 million, 6 million, or 3 million, so it's going to depend. That's part of the process of investing in a blind pool fund, is you really need to vet your sponsor, make sure you understand who they are, and trust that they're going to do what they say, which is the reason most syndicators, people starting out in this business, don't start out with a blind pool fund, because there are so many variables that people don't have any way to say "Okay, what types of deals this can do, what can I expect?"
When we underwrite our deals - you asked about returns - we underwrite to an annual of 15%, that's our goal, returns to the investors. And mostly we were able to beat that. We've closed a few syndications prior to this, one closed at 22% annual return to the investors, another one was at 38% annual returns to investors... So it depends on the deal and exactly what's happening, but we're targeting a minimum of 15. And as you know, with any investment, there's no guarantee we're going to hit that. I'm always going to try to beat it, but that's what we do on our underwriting, that's what we shoot for.
Break: [00:17:17] – [00:19:14]
Ash Patel: You're a guy from Cleveland and now you're buying properties in growth states in the South. How do you find deals?
Ken Gee: Well, interestingly, we are vertically integrated. That means we manage our own properties, we also do third-party management. We've been in Florida for 10 or 15 years but in May of 18, we made the strategic decision to open our doors for third-party management. We'd already managed a ton of properties before, we recruited a senior management team, so our senior management teams manage over 16,000 units. With tons of experience, we went out not only managing our own assets in the various markets in central northern Florida, but we managed them for others. What happens is when you help a broker, not a sell a deal, but when a broker refers his or her client to you and you manage the deal, they want it to be successful so they can get it back and sell it for that person for a lot of money, that's the whole plan.
Well, we became a trusted management referral for them so when you're standing next to someone in a transaction, instead of using an adversarial position like you usually are with a broker, you develop a really different relationship with those brokers. You just do because you're helping them do their job. They'll call us for underwriting advice from time to time, what should payroll be, what should this be, what should that be? We developed that different relationship so we are so very, very networked throughout the market that we're in. That's how you get the deals, quite honestly. They have to know you perform and you have to get to know them so that you're on their radar so that they'll actually give you a shot at these deals.
It's all about networking, getting to know people, and really getting to the point where you develop a very trusting relationship with them. Because their goal is to close a deal without being re-traded, without their seller getting mad at them. Think about all those things that are important to a seller, we deliver that every time and we help them deliver that when they refer us their clients on deals that we don't do.
Ash Patel: Ken, you mentioned earlier that you never wanted to go outside of your circle to raise capital. What advice would you give that individual that has had a good run with friends and family, but now is in a position where they need to go outside of their circle?
Ken Gee: Let me just correct the statement a little bit. It's never that I didn't want to, I'd never understood what it meant to do that. Until you do it, you don't really understand. What I tell people that are trying to make that jump --this is important to me and I get really passionate about this topic-- is to make sure you know what you're doing before you ask someone else for money that you don't know. If you lose your own money or maybe even your family's money, they're family, they can't get away from you.
But when you're dealing with someone else's money, I will tell you that the burden, the responsibility that I feel for someone else's money is many multiple times how I feel about my own money. If that was my own money, okay, that's fine, I'll make it back or whatever. If I were to lose someone else's money, that would be terrible. The number one thing I want to see people do is to make sure they know what they're doing. Because when you're sitting in front of an investor on a zoom call very similar to this, they're going to ask you tough questions. You need to understand your business well enough to be able to answer any question about anything at any time. If you're not in that position, then you probably shouldn't be going out getting money that isn't yours.
Ash Patel: What is the best tactic that you would recommend somebody use to attract investor capital in terms of marketing? How do you...
Ken Gee: In terms of marketing? Wow, our capital comes in from so many different sources. Some of it was referrals, some of it is just pure digital online marketing, some of it is doing podcasts like this, people get to know who you are. What people want to do is they want to know and understand who you are. They're trying to figure out, are you someone that they can trust, that's the number one thing. Somehow you have to get in front of them and show them that you really know what you're doing and you really are going to put their interests first. So many people in this business don't do that, I'm sure you know that. It's tough, that's what they're trying to figure out.
However you can get in front of them and show them that you're the real deal, that you're going to have their back no matter what. If it means you need to cut your fee in order to get them the return that you promised them, then they need to feel like you're going to do things like that for them. Again, our sources are our investors online, we got a lot from The MoneyShow. Just get outside your comfort zone and figure out how to reach new people. Verivest is another one. We're on Verivest, I don't know if you've ever heard of that. We love this site. Transparency is really important to me so if you go to verivest.com you'll see us, they vetted our entire 23 years of track record.
I had to send them tax returns and bank statements and settlement statements for every deal that we've ever done. It's important to me that you can now go to our Verivest page, and you can see that they've taken tide, all the numbers are real, I proved it to them. They went online and did some search to try to find deals that some sponsors might hide, they also did a full background check on me, things like that. It's places like that that people go to because they're trying to find good, trustworthy people to give their money to. When you're fully transparent and you have someone look under the hood to the tune of vetting every single one of your deals, that makes people feel better about who you are and what you're doing.
Ash Patel: Ken, what's the hardest lesson you've learned in real estate?
Ken Gee: What's the hardest lesson I've learned?
Ash Patel: A tough lesson, one that hurt.
Ken Gee: One that hurt. I'm sure I've learned a lot of lessons. But probably the number one thing that I always want to see people do. I see people when they get a deal and they close it, they're full speed ahead with their renovation, they cannot wait to get it done. A long time ago, I was the same way. I spent all my rental money and then I learned something about the property that I wish I would have known 60 days prior because I wouldn't have spent all my money the way I did. I don't remember what it was now, it was a long time ago. But the lesson that it taught me was, when you close, just sit on your hands for a minute.
The world's not going to go away in 30 or 60 days, just sit on your hands. You know the seller didn't tell you everything, there are probably things going on in the property the seller didn't even know. It gives you time to get to know the property and find out where the skeletons are so that if you need to reallocate your improvement money, that you do it in a smart way. That's probably the toughest lesson I learned. Because I went into my own pocket, I did what I had to do. You're going to go into your own pocket, fix whatever it is that needed to be fixed, and that hurts. I wasn't prepared for that. But now, I preach that lesson all the time, hopefully, it's helped some people. I know it's helped us a lot in our renovations
Ash Patel: Ken, what is your overall best real estate investing advice ever?
Ken Gee: Do the work. I talk to people every single day that want to get into this business. It seems really easy, real estate seems like it's easy. How hard could it be? You buy a property, you rent it out to people, you have extra money, you put it in your pocket, it's done. But these apartment buildings, especially the larger they get, they're businesses. You've got to understand what the numbers are really going to look like, you've got to understand what's going to happen in a neighborhood, you've got to understand why people want to live on your property versus the guy next door, you've got to understand all this stuff.
It's just human nature to take the fastest route from point A to point B. I would submit to you that if you slow down and do the work and play the long game in this business, that's how you're going to be successful. That's the number one thing I like to see people do, is just do the work, just do full underwriting, do all this work at least two or three times so you understand before you start using general terms to analyze real estate deals, because I think it'll serve you really, really well.
Ash Patel: Ken, are you ready for the Best Ever lightning round?
Ken Gee: Sure.
Ash Patel: All right. Ken, what's the Best Ever book you recently read?
Ken Gee: Grant Cardone’s 10X.
Ash Patel: What was your big takeaway from that?
Ken Gee: I'm going to use my term. If you think you can kill an ant with your finger, use a sledgehammer, because then you know you're going to get it done. We're trying to be really successful in everything that we do in life. If you give it just enough effort to hopefully get there, well, there's a really good chance you're going to fall short. If you give it so much effort that you're giving it 10 times the effort that is probably necessary, you know you're going to get there. That's my takeaway from that book.
Ash Patel: Thank you. Ken, what's the Best Ever way you like to give back?
Ken Gee: Teaching people and helping them learn. When I started out, I started out so long ago, the only guy out there to help me was the guy named Carleton Sheets. If you know the name, most people probably don't. But that just showed you, when I learned, that was the only thing out there. Learn from Joe and from podcasts like this, learn as much as you can. I love to get back through this process because then when people learn what I've learned, they're going to be incredibly successful in their investing future. There's no better feeling than that than to know that you actually helped somebody else get to where they want to go. That makes me feel good.
Ash Patel: Ken, how can the Best Ever listeners reach out to you?
Ken Gee: Sure, kripartners.com. If you add the /ebook, you can get my free eBook, Multifamily Real Estate is a Total Game Changer. I wrote the book and it just covers two topics. Number one, everybody knows you can make a ton of money in real estate, you just have to figure out how it's going to fit in your life. If you think about that, that's a big issue for a lot of people. Should they be a passive investor? Should they buy a duplex? Should they buy an apartment building? What should they do? How do they fit it into their life? Secondly, because I believe most people should probably be passive investors, how do you vet sponsors? You can already tell from what I talked about, that I'm passionate about transparency, vetting sponsors, and things like that. I want to help people vet sponsors properly so that they put their money with the right people. kripartners.com/ebook.
Ash Patel: Ken, thank you again for sharing your story with us today. All the way back from 1997, working at Deloitte, being a lender, getting into multifamily, and now starting a fund. Thank you for all of your advice today.
Ken Gee: Thanks so much for having me.
Ash Patel: It's our pleasure. Best Ever listeners, thank you for joining us. If you enjoyed this episode, please leave us a five-star review, and share the podcast with somebody you think can benefit from it. Also, follow, subscribe, and have a Best Ever day.
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