Using Private Capital For Passive And Active Investment

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How significant is the value of sticktoitiveness and how is it related to real estate investing For Kevin Dureiko it meant leaving himself with no choice but to keep going and execute to make life favorable for himself and for his family He brings on a unique aspect of real estate today regarding debt Listen in Kevin Dureiko is a fund manager at Birch Dobson LLC BirchDobson com He is managing Birch and Dobson s capital raising and deployment to short-term bridge clients This fund specializes in funding short-term value-add and stabilization of income-producing assets 00 01 – 03 22 Opening Segment Kevin on transitioning to the debt aspect of real estate Creating a company to buy debt – going through learning curves The ins and outs of launching a debt fund 03 23 – 11 33 Total Control of the Capital Stack Opportunities in multifamily syndications considering value-add and exit gameplan Kevin explains the profile of an ideal investor for debt-only deals Expanding and diversifying assets – the significance of connections 11 34 – 17 55 The Virtue of Sticktoitiveness Kevin gets in-depth about the build-to-rent vs build-to-sell projects When life happens it is all about figuring it out and taking action 17 56 – 20 01 Closing Segment Reach out to Kevin See links below Final words Tweetable Quote I just keep on pushing It didn t matter what really was happening in the economy what s happening with myself I just got to figure out something because I m not a nine-to-five guy never have never will be I had to be something else It s life and putting together an action plan – Kevin Dureiko —————————————————————————– Connect with Kevin Dureiko on Linkedin Visit his website and email him at kevin birchdobson com Resources Mentioned Three Feet From Gold by Sharon L Lechter and Greg S Reid Connect with me I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns Facebook LinkedIn Like subscribe and leave us a review on Apple Podcasts Spotify Google Podcasts or whatever platform you listen on Thank you for tuning in Email me sam brickeninvestmentgroup com Want to read the full show notes of the episode Check it out below Kevin Dureiko 00 00 Having an innate ability to look past problems there s no such thing as a roadblock It s just how do you get around it I don t know what it is what s instilled that in me but I just don t give up I don t take no for an answer Intro 00 13 Welcome to the How to Scale Commercial Real Estate Show Whether you are an active or passive investor we will teach you how to scale your real estate investing business into something big Sam Wilson 00 25 Kevin Dureiko is a husband father private debt fund manager and also a capital raiser Kevin welcome to the show Kevin Dureiko 00 31 Thanks for having me man Sam Wilson 00 32 Hey man the pleasure is mine Three questions I ask every guest who comes on the show in 90 seconds or less Can you tell me where did you start where are you now and how did you get there Kevin Dureiko 00 39 I started in 2007 I had created the company to be debt buying funds then realized that that s more of a game that I don t want to be into for many various reasons transitioned into the debt portion of real estate And now our three and four funds will be syndications ground-up construction and obviously just continuing to do real estate debt Sam Wilson 01 00 Right So this is obviously you gave me a 2007 to 15-year span that you just said it s 15-30 seconds That was pretty impressive by the way When have you thought about how you created a company to buy debt like what we had I mean just wake up one morning and have a you know thing struck my brain and here we go we re gonna buy debt I mean how did that work out Kevin Dureiko 01 23 I wish it would have been that easy But listening to the tales of my family and our history my grandfather was a marshal and in Connecticut a marshal is basically a debt collector Basically told me you know you can buy judgments buy debt buy mortgages for less than what they are And I was like Man that s crazy You can buy money for less than what it s worth right And then there was like yeah that was a concept you couldn t even comprehend So I just went on this learning curve of what you can do with this type of stuff And it just basically led me here Sam Wilson 01 54 Oh wow All right But as you were into this then you quickly figured out that hey you know what that s one thing But buying debt that s attached to real estate is probably a better spot to be was that the conclusion Or am I missing something there Kevin Dureiko 02 06 No that was the conclusion And then you figure that you can that you do put out or the debt that you do collect can be assigned to a real estate deal that can have pliers There are so many different ways you can put money into more money It s just made as the natural course and natural set that we went with Sam Wilson 02 22 Got it Was there a particular asset class you focused on Or was there you buying distressed debt Were you buying and what types of debt were you guys focused on Kevin Dureiko 02 32 Mostly distressed debt that our contract related that goes liens a house we ll buy that lien out and then eventually collect that Sam Wilson 02 41 Interesting Okay very well I know there s a lot to unpack there Is that is that the same Is that the same model you re using today Or is that changed Kevin Dureiko 02 50 That s changed considerably or was not in that business whatsoever Sam Wilson 02 55 Okay cool But you said you guys are launching a debt fund here Have one launched right now I guess Can you walk us through that fun and how that functions Kevin Dureiko 03 04 Sure Yeah we take accredited investor capital we lend it out to real estate investors the simplest form So if you re a guy in syndications we re coming in with the stet In your LP money we re financing that portion of it we re doing fix and flips And up until recently we re doing 30-year term rentals long-term rentals Sam Wilson 03 23 So this is not a conversation I ve had with anyone on this show yet You guys are bringing debt to syndications in the first position like you guys are the bank Is that what I m hearing Kevin Dureiko 03 33 You re hearing correct Sam Wilson 03 34 Okay Well interesting Tell me more about that How did other asset classes you re focusing on Do you see an opportunity Why do you see opportunity is there more color to that Kevin Dureiko 03 44 Multifamily syndication That s where our main asset classes we want to see the value add we want to see a little bit of experience and we want to see an exit in a game plan So you come to us with a deal for 5 million you need to put 25 down or something along those lines and we ll pick up the rest That s really Sam Wilson 04 01 That s really intriguing How are you guys making money on that I mean obviously you re collecting the interest on it But is there Are you flipping that debt Are you holding it in-house How are you guys monetizing those new debt positions Kevin Dureiko 04 15 In sheet we don t sell anything The model that we re running especially with our fund is that we want to have total control of the capital stack It allows us to give you as an investor security knowing that our problem you could pick up the phone rather than me selling it to Wall Street and then you d have to deal with all that Sam Wilson 04 34 What type of investor and I m sorry to narrow in on this because this is just a unique thing that I think you bring into the market maybe it s unique or maybe I m just you know head in the sand But I have met a lot of people that are out raising money for a fund that is the I mean the raising money basically you know 100 lender first position on a deal and then holding it in house I mean one that s a lot of capital to raise Right correct and two units to be a particular type of investor that is good with whatever the interest rates are that you guys are charging and in return you re getting on that capital So what type of investors typically come to you guy to say Hey man I d love to just come in and be debt only on a multifamily deal I mean there are some pretty competitive terms out there from other sources So tell me about the investor that is your kind of ideal investor Kevin Dureiko 05 22 My investor is somebody that doesn t want to tie the Capitol up for a long period of time But they want to be able to be having an asset-backed way to secure their money So the debt that we re putting on multifamily properties isn t the length that it isn t the NA in the Friday the government-backed debt It s the Restabilization debt So the purchase maybe a one or a two-year hold at some renovation budget into it and then we re going to be taken out by sale or refinance Sam Wilson 05 51 Got it Okay cool How have you guys changed the way you guys structure your loans last 12 to 18 months Kevin Dureiko 06 01 We ve structured it a little bit more stringent When it comes to experience the leverage is relatively the same we re still looking in a 65 to 75 range And that s all depending on obviously the property No loan is cookie cutter no deal is cookie cutter no borrowers cookie cutter So it s an ala carte You re out what the best scenario is for the property We re not alone in our own lenders And that s a terrifying string of words if you really think about it So looking for the best portion deal And the most part is getting your invested capital back to your investors Because everybody needs to be happy We don t need a string of lawsuits So we re securing our capital with a great asset a great income-producing asset this particular type of investor that you know wants to tie their money up for a shorter period of time other than syndication itself And we go about it that way Sam Wilson 06 51 Right So your investor again and you know just be careful understand that somebody says hey look I m good with maybe a lower return profile but yet I know I m first position debt And you know where I don t want my money tied up for five to seven years this is great I ll get clipped my coupon and then hopefully we ll exit in a few years and then do something else with it or you know invest is that what I m hearing That s basically it Cool man I like that even the reason I dig in on that is that I think all myself in particular came up speaking just for myself here is that I get this idea that there s one particular type of investor right It s like something the other day that was like hey invest in this and a 5 return And I m like for me personally all of my investors conversations through my own profile what it is that I want which is obviously not the right thing to do But it s interesting just to hear out there that there are other investments or investor profiles are like oh you know what I m cool with just a coupon and a three-year plan and then we re back out and then we do something else So that s that s just a good encouragement to all of us to you know silo our thinking around who our investors are Kevin Dureiko 07 54 Yeah it s diversification just like our fund is fitting and reaching out through these that we are right now At one point I was only a debt fund now we re getting into the ground up rent sell And the best part about those types of assets along with multifamily is you can hold them I can still pay a return regardless of the scenario And that s happening but we have to hold it longer We hold it longer if you want If I could sell it return all the invested capital and everybody s happy we can do that So we re leaving ourselves different avenues for investor capital to come in you get to talk to a lot of people like yourself I share you talk to a lot of people on a daily basis And their sentiment of what they expect out of the market is different for nearly every person So you know people options or via syndication different type of LP bucket or what have you We can structure something that generally is going to fit people Sam Wilson 08 45 Tell me about this 2020 changed a lot of investment theses How has yours changed Kevin Dureiko 08 53 Absolutely changed the way we look at everything honestly don t know what s going to happen anymore We have a country invade another country And we know our capital markets So basically dried up secondary you might not see it too much on the front end But on the secondary market I don t know if you ve seen it in the last couple of weeks or last week Rather Sprott mortgage just closed its doors are the largest mortgage originations in the country and they just shut the doors So 190 million probably toxic assets that are gonna hit the market in the next weeks What s that going to do to the market We don t know So we ve taken the ability to be able to change be liquid the debt markets aren t going to plus out with providing just debt capital but our investors still want a solid return We ll start building some houses and markets that need either a home value on rent or home sale You figure it out and just keep on moving Sam Wilson 09 46 That s really cool I like that I mean build to rent is something that gosh here in Memphis it showed up maybe seven eight years ago is when I first heard about it and it was like Oh that s interesting I would have never really thought about that And yeah it seems to have kind of caught fire across the country And I hate to say it but we re becoming a nation of renters It s just a sad reality of it But it s also you know if we re becoming a nation of renters then why don t we provide what the people want Which are rental houses So it sounds like you know where you guys have gone Tell me how have you scaled that How have you I mean because that s a whole new operating business how have you guys entered that market and done it in a way that doesn t just create a new job for you Kevin Dureiko 10 28 The partnerships you gather throughout the years so it s not something you can just jump into You have to know markets you have to know how it works in certain areas of the country or ships with the right people So that many people in that building space over the last decade And through conversations and what are you doing here What do you do on there a lot of the best opportunities right now and build the rent are developers that still have land from 2008 Fallout So you have people in the South that bought big tracts of land that are sitting on these things with low inventory that you could just print houses with waiting lists Sam Wilson 11 05 That s crazy If you d asked me that question I would have failed that were true and false You had said Hey there s you know tracts of land out there from the leftover from 2008 that still aren t developed that have been like now false They re really not the case That s a needle in a haystack So it s either your partners know those people with those land or finding that needle in the haystack How that how s that working out Kevin Dureiko 11 27 A guy who knows a guy who knows a guy And that s just usually how it ends up working in almost everything Sam Wilson 11 34 Isn t that a fact Man It s not a fact It s who you know me this give me the breakdown on build the rent versus build the cell Because I know you guys are kind of doing Bowles be deciding what you sell what you build the rent Is there a particular type and size that you guys are building You re saying Hey this is we re doing this in this market And this and that market Because there s you know wants and demands I mean can you kind of give me the land on this if it were about what you guys are seeing Kevin Dureiko 12 01 Yeah so the best part about build-sell-build-rent is that it s the same product So you go into the deal like Hey we re gonna build sell this thing Well what if the market really takes a turn The rental market itself isn t getting any smaller So we can fight theory be able to rent the property out service our investors that coupon and hold it until the time comes where you can sell it again Do we think that the land for everything is absolutely not but that is the plan when it comes to building and to selling But we do build to rent portfolios Absolutely But we re going to take the opportunity to give our investors their capital back and their return before anything else Sam Wilson 12 47 Right right Are you guys building Whole neighborhoods Are you doing a one-off infill Lots I mean how does that work Kevin Dureiko 12 54 Most of it is in Florida you haven t broken ground on the bill to sell and build the rent yet We have a partnership that we re putting together in Florida they have the land It s already permitted So it allows us to build for we re not doing big tracts of land because this developer has already put it together it s already given you already He s just allowing us to get into the community as an investor which he does not normally do So we get to piggyback on what he s already accomplished in the area already establishing his communities is a big builder not to say you know he s like all over the south he s got different developments or dealings So it s given us our unique opportunity to work in that market without having to move equipment and not having to do all the permitting It s already there He s just allowing us to come into it And starting with three to three to five homes at a time and little chunks because nobody has a crystal ball We don t know what the markets are going to do But you know if we do 345 House chunks it served us – the investor and the builder everybody should win Sam Wilson 14 01 Are any of these houses going multi-generational I ve seen that in some of the build-to-rent space where they re doing you know 1000 5000 square foot house multi-generational you guys seeing any of that in the product you guys are putting out Kevin Dureiko 14 13 There the product that we re putting out it s going to be 1700 to 2300 square foot range the perfect starter home it s in a little bit more of an affluent area that we re you know nice properties up a high demand for single-family homes and rentals So depending which way the market goes will kind of dictate the size of the home the bill quality and a certain threshold that we have to hold especially in the community But it all comes down to what people want it before they are more on the 2400 square foot range rather trended down a little bit and that s not because of anything else other than we want to make sure they re not sitting there waiting for a particular buyer You want many buyers right Sam Wilson 14 55 Right You want a product that has the largest pool of buyers waiting for We re absolutely let s shift gears a little bit here And let s talk about some maybe softer skills that you have developed over the years when you think back on your journey from 2007 Until now what are some things you feel like you ve done really well that other people should emulate Kevin Dureiko 15 16 I just keep on pushing and dependent didn t matter what really was happening in the economy what was happening with myself I just got to figure out something because I m not a nine to five guy never have never will be had to be something else His life and putting together an action plan Know what the ability wasn t where it came from man I wish I could tell you what you could bottle it But that sticktoitiveness not making money for a long time knowing that there s gonna be something on the other end I mean that takes a special type of human and I wish I could bottle it Give it to people Sam Wilson 15 46 That s awesome Man I love that What are some things you say when you say that Are there some particular scenarios that come to mind where you re like Man this was something where I feel like maybe other people probably would have given up or just you know run over Kevin Dureiko 16 00 Yeah so let s see Here I was an engineer working for an underground utility company I live in Connecticut currently not for long but right now you shut down for half the year Can you tell it is when the grounds are frozen right So was a Cauchy when the ADK a year for the year One year I just woke up So I can t do this anymore I can t sit here You know being away from that people thought I was crazy Basically jump forward a little bit and meet my soon-to-be wife And I was like Okay now I really got to figure this out And a couple of years after that I m gonna retire her And now she gets to stay home with my one son and to be a second daughter And it s one of those things you just don t know how it s going to end up And that goes to the sticktoitiveness And just making any money on the side hustle to figure out your life And it s just like 2007 Now there s been some bumps but steadfast The company s been around and it just figured it out Sam Wilson 16 59 Right right Yeah No I love that I love that Yeah cuz there are a lot of people that do give up too early when they re probably right Run to the brink of success and they don t know it So that s a Kevin Dureiko 17 09 Is that the book Three Feet From Gold Sam Wilson 17 11 What s that now Kevin Dureiko 17 13 That book Three Feet From Gold Everybody turns around Sam Wilson 17 14 Haven t read it but there you go There s our book recommendation for the day Three Feet From Gold and what the write that one down Tell me this what s a mistake you ve made as other people could avoid Kevin Dureiko 17 25 Selling assets My father was a blue-collar real estate investor wish I would have known what I know now And not have and sell the assets in retirement which he could have just held on to everything basically told me how you can have this stuff you really want to know that cash out without your retirement I ll figure it out And what I should have said was well let s put some lipstick on these things get a little value out of them really set you up for retirement That s what I should have done But I just didn t know any better Sam Wilson 17 56 Didn t know any better man Isn t that a fact And that s that s a lesson we share in common where you go oh golly like I look back on everything I ve sold and I go I shouldn t have sold any of that Now maybe one or two were dogs But outside of that It s like Why did I sell anything Didn t make any sense That s awesome Kevin thank you for taking the time to share with us both done well and the mistakes you ve made You ve shared with us about your debt fund how your thesis has changed and what you guys have invested in changed and really brought us a unique angle here on you know the debt side of multifamily syndication I mean that s the real neat You guys are raising a lot of capital so you guys can go out and be that first position debt And then also the opportunities you guys see in the builder and build a sell market certainly are built to sell space Certainly appreciate that Are there any other closing thoughts you have here before our listeners before we sign off Kevin Dureiko 18 49 Keep going don t stop as much information as you can I mean I ve been doing this for a while I still watch every podcast and read every book It just never stopped learning The best investment you can make is in yourself Sam Wilson 19 03 That s absolutely right Gavin if our listeners want to get in touch with you or learn more about you what is the best way to do that Kevin Dureiko 19 09 Then you can find me Google me a pretty hard name to miss out on There s only one of me under Dureiko Throw that into Google And then you can find me on my website BirchDobson com Sam Wilson 19 26 Awesome Gavin Thank you again Do appreciate your time Kevin Dureiko 19 29 Thanks brother Sam Wilson 14 34 Hey thanks for listening to the How to Scale Commercial Real EstatePodcast if you can do me a favor and subscribe and leave us a review on Apple Podcasts Spotify Google podcasts or whatever platform it is you use to listen If you can do that for us that would be a fantastic help to the show it helps us both attract new listeners as well as rank higher on those directories so appreciate you listening thanks so much and hope to catch you on the next episode Click here to visit this podcast episode