Latest / Real Investor Radio Podcast / Ep 67 | Scaling Multifamily: Leadership, Systems, and Strategic Acquisitions with Andrew Kuhn

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Ep 67 | Scaling Multifamily: Leadership, Systems, and Strategic Acquisitions with Andrew Kuhn · Real Investor Radio Podcast

• Craig Fuhr (00:13) Hey welcome back to Real Investor Radio. I'm Craig Feuer joined again with Jack Bevere and this is our second episode with Andrew Kuhn of Sunrise Communities and if you haven't had a chance to go and listen to episode one yet I would highly encourage you to do that. Lots of great information in there. Andrew it's been such a great conversation with you and thank you again for your time. We were just talking prior to hitting the record button and I was saying to the guy sometimes We need to hit the record button sooner. was such a great conversation. But man, we talked so much about your upbringing, where you came from in the first episode. And we got into financing. You're in the multifamily space, for those of you who haven't checked out episode one yet. just a fantastic conversation. So welcome back to the show. Thank you so much. Andrew Kuhn (01:07) Yeah, thank you. Craig Fuhr (01:09) So Jack, why don't we jump in on sort of, let's really get into the business. And you mentioned Andrew that you're into basically three states. It was Michigan, Ohio, help me again, Indiana. But let's talk, and then you also said briefly that you're basically buying B and C assets. And when I think of that, I think of, know, especially C assets, know, tougher. Andrew Kuhn (01:21) Indiana. Yep. Craig Fuhr (01:35) tougher management issues, tougher operational issues with tenants and things like that. do you, is the, how many, these assets that you're buying, tell us about like the typical client, the typical neighborhood where you're finding these properties. Andrew Kuhn (01:50) Yeah, absolutely. So, for our, our organization, right. An ideal acquisition for us is an apartment community that's anywhere between call it a hundred and three to 400 units in size. they're traditionally in suburban, areas, right. And our, yeah, garden style. I'm not an urban core guy, or core plus, we don't like mid rises or high rises. We like two and three story walk ups. Craig Fuhr (02:08) of on the outskirts of the city. Andrew Kuhn (02:20) One, because they're easier to build, two, they're easier to maintain. And cost management is a huge thing in this business. And I think not enough people understand or pay attention to it, especially when we're coming under the challenges that we are. So BC class assets are traditionally for us, anything from a 1970s build to late 1990s, maybe even early 2000s, know, stick built, like I said, two, three story walkup, preferred brick exterior rather than siding if possible. preferred pitched roof rather than flat roofs, things like that. And so the goal is to stay ahead of the building code so that we don't have to deal with any of the older property issues, right? Because insurance is a whole other topic we go down the rabbit hole of and non-insured and stuff like that for different issues of properties. And really we're looking for anywhere within average median income of call it 55 to 70, $75,000. And you know that are that are good locations now. I'm not a war zone go in and in type return around type person But you know we have run into problems. I mean look you're gonna find anytime you acquire a community that it has its people issues I'll call it and you know, sometimes I'll run into someone who's running a home business or You know doing illegal activities that type of thing that you have to work through it and operate right and so We like to find properties like that that usually have deferred maintenance and or deferred conditions that we can then reposition and through superior operations really run them like an A-class property, right? So top flight operations means can we hit our service requests so that, you know, 95 plus percent of our service requests are fulfilled within 48 hours and at least 80 % of them done within 24 hours that they're responded to and finished. Do we always answer the phone? We track metrics like that. and really try to provide an elevated living experience relative to the type of asset that the individual is living in. Jack BeVier (04:25) So how are you, how are you thinking about building operations? Right? Cause from, from my own experience, we had a very different looking company at 200 properties than 400 properties, then 600 properties, then eight. And, know, now we're trying to like retool again for getting above a thousand. Like, how do you think about those different inflection points when to invest in technology? and how to and people and like when you can afford to and balancing that with how you can afford to like to me that's such a tricky like building that machine, scaling that machine is such a tricky exercise. What's been your experience in that regard? Andrew Kuhn (05:08) Yeah, no, I love to talk about this. So thank you guys for asking about this question, because this is the heart of success, right? Like people think scaling is buying more assets, but the true heart of success that will drive to more assets is actually building the business and the systems in the process first, right? Because if you buy a whole bunch of assets, but you have poor systems, all you're going to do is just make yourself go out of business faster because you have too many. Yeah, right. So. Jack BeVier (05:30) Yeah, ruin your reputation, yeah. Andrew Kuhn (05:33) So we've literally spent the last three years building systems process and investing in assets, i.e. people in culture, right? And so a couple of things from a business operating standpoint, we run EOS. You guys have probably heard the book or read the book, Traction, right? So we do run EOS. We, as far as people goes in culture, because it's one of the most important things, we went especially to hiring our leadership team. We made sure that we were investing in quality people that have done it at a higher level than where we currently are and where we want to go. I found that experience was incredibly helpful, especially on my leadership team for running into situations that maybe lower, like other individuals on our team hadn't experienced before and them understanding what to do and what systems and people and processes needed to be in place. So I actually invested ahead of the growth in my leadership team. because I thought that was incredibly important too. The other thing that doesn't get talked about systems and operations, especially in the multifamily space as much is that coming from the single family world was actually a help. And here's why, for a couple of reasons. Number one, for getting deals done, creative structuring is not really a thing in the big buttoned up, you know, professional commercial space. And having that background and experience to creatively structure deals, especially in hard times like this was a benefit. The other thing was, is that when you own and operate scatter site single families, you learn a centralization model or a specialization model is kind of what they're calling it now in the multifamily space where you have a centralized office, right? And centralized teams. And you've got roaming maintenance technicians and people like that, right? And in teams to go out in triage asset management. And so like operations. In the multifamily space, still, the majority of operators out there have a historic and archaic model where it's like, you know, one leasing agent per a hundred units, one maintenance technician per a hundred years and they're all on site. Well, what's happening is because expense management's getting out of control between all the laws being passed with minimum wage, as well as just the cost of people is going up. Their expenses are eroding any profit margins. So we, early on, because I had sub hundred unit properties like that 20 and 28 unit, we built out a centralization specialization model where our team is at our corporate for the majority. And we actually have less staffing on site for bigger properties than a traditional operator would. And we're more efficient in that sense of managing. So that's like the people operations. And that's actually where you'll find a benefit. So for example, if an operator is 15, 17, 1800, actually I just was underwriting a big deal, a couple thousand units, their payroll costs were $2,000 a unit. Our average across our company in the last trailing 12 is 1375 a unit, right? That's a measurable difference at scale. And that all flows down to the bottom line for net operating income and asset valuation. So. So that's one way we think about it, investing in people. And I can go tech stack, but that's a whole other discussion. Jack BeVier (08:51) Yes, let me give before we go tech stack and I want to go tech stack. Just like people wise, you mentioned investing in your leaders. How how how are like you're you're finding you know, you're finding folks who have industry experience. What kind of industry experience like how are you? What do you consider? You know good people. Andrew Kuhn (08:56) people. Yeah. Yep. Great. Great question. So a couple of things, when you're small, you oftentimes can't afford a full-time person right away. And it's funny because they used to be called consultants, but there's a whole industry now of fractional, roles, right? And you're seeing them pop up. My COO, was a president of a, well, she had, she'd been in the industry 30 years. Her last role, she had literally been the president of a multifamily group that she built up to 6,500 units. had over 100 employees on our team, team members. And then the CEO decided that operations and management wasn't for him and he ended up moving to the third party. And so she went out, created her own business and was in a fractional role. So I hired her as a fractional before I brought her on full time when I could actually afford her, right? But she had experience, she had done what I'm trying to do and I was able to bring her on part-time. So I would look for individuals like that, especially in the leadership position. What I will say is that more property interfacing individuals, I actually like to hire on aptitude and character and core value fits over experience. And the reason being is because property level team members oftentimes will bring with them a lot of bad habits from other operators that are subpar. The actual level, the standards for most people in property management are pretty low. So it's not hard to be good if you actually have systems and processes and care, right? So we have core values. One of our core values is better every day, right? And so we're always working to improve. And so that being said, the other thing is, is our interview process. We got very serious about our interview process. So we, one of the things over the last year was probably a top three for us. We started implementing Culture Index, which is, know, kind of a, it's a leadership tool, right? But it basically shows you how someone is hardwired. So in a traditional interview process, right? The majority of an interview process is all subjective. So you spend all this time, do I like this guy? Is he telling me the truth? Does he have really good experience? That type of stuff. So you spend all this time investing in a potential candidate without any objective data, right? In real estate, math, finance, numbers, money is all a very objective thing. And so we actually put culture index to show us their hard wiring to understand whether or not They are hardwired for success in that role. We have built out an accountability chart for our whole company, both where we are now, where we'll be at 2,500 units, where we'll be at 5,000 units plus, and we build out what success looks like with key metrics, so KPIs, for each individual and what an actual hardwiring for success in that role looks like. And so when we hire, we already have a pre-programmed idea of what the person we're looking for. We don't start an interview process until they're at least a 65 to 70 % match on their culture index. Then we use the top grading process and in the book it's called Who by Jeff Smart. I'm a top grading interview process to test for core value fit, to test for aptitude and to test for ability to learn. And so we start objectively, right? So we minimize our funnel by getting the right people objectively. And then we look to see if there are core value and cultures fit within our organization. So we're relatively slow and very methodical in making sure we get the right people on the bus. Because it is expensive as hell to hire the wrong person. Really, really expensive. Jack BeVier (12:40) I'm a big culture index nerd. I've given a very similar spiel on previous episodes about... nice. Dude, really? That's like mine. That's like mine. That's like very similar to mine. Yeah. Andrew Kuhn (12:46) Yeah. Right here, right here. Everybody in our company has them. Trust me. yeah, 100%. Are you an architect? Yeah, so I'll actually show everybody if you guys want to see what a culture index looks like, right? So I'm what's called an architect. I'm pretty hardcore. I'm pretty, yeah, as you see. So, and that's another thing actually, guys, like culture index. Craig Fuhr (12:52) Ha ha ha ha No shopper there. Jack BeVier (13:07) A pretty good and a pretty severe one. Nice. Andrew Kuhn (13:18) gave me the freedom to lean into who I am, quirks and everything, and really understand also when I get mad at people in my company, it's not them, it's how they're hardwired, it's them and their culture index. So it really actually helps as a leadership tool when you're leading others too, right? Like talking to people how they like to be talked about, right? If someone's a high level, you know, 50,000 foot elevation strategy person, I talk about strategy and future. Jack BeVier (13:33) You sound exactly like me. Andrew Kuhn (13:47) If I'm talking to my controller, her world is this week, this month, I'm having discussions at that level, right? So, but yeah. Jack BeVier (13:54) I'm a huge fan of that. Have you mapped out, you mentioned like at the different scale levels, have you mapped out the org chart and like put like, hey, I'm gonna, here's what the new org chart is gonna look like. And so I'm gonna need to hire a specialist to fill this role. And this person is gonna move up and like backfill with each of the profiles. Andrew Kuhn (14:07) Correct. Yes. Yep. have, we have one for 2,500 units and one at 5,000 right now, units. And so we have everybody, everybody identified and it's a constant thing, right? It's a living document. So we're always evolving. Jack BeVier (14:17) Hell yeah, I love that. That's awesome. Craig Fuhr (14:24) Yeah, I would say for folks who are not up to speed with cultural index predictive index, both are. Andrew Kuhn (14:31) yeah, look at that. Yeah, really similar. I love it. I knew I liked you. Jack BeVier (14:32) It's like pretty similar to yours, man. Pretty similar. Craig Fuhr (14:36) Both. I you know the strange thing about if for those listening who have never taken predictive index or cultural index test one they're highly accurate and two you would be shocked at sort of the test itself. You know you're just basically picking words and the whole thing takes about six minutes 10 minutes max and you get a highly accurate they say 98 percent accurate. view of sort of how you're hardwired. So get up to speed on that for those listening who are hiring or who just want to know more about how you're wired to run an organization. Jack BeVier (15:16) When'd you start using CI, Andrew? Andrew Kuhn (15:19) Yeah. So we started last March. so a little over a year and a half ago, it has been, it is funny because I've used other assessments and things like that. I've always been a nerd. Like if there's one out there, I've tried it from this to Colby to all the others. and it's funny because my initial exposure, once again, sorry for the plug was at RIR when Mark Boland came and did it in 2019. So it was actually a good reference for me to go back and look at my original. Jack BeVier (15:43) really? Andrew Kuhn (15:47) and see how things have changed, not in my top, but also my bottom graph, which is really the role you're sitting in. But it's been incredibly helpful in both personal and professional relationships. as Craig mentioned, statistically, it's the most accurate to show someone's hardwiring, but it's also a really good leadership tool, right? So when you understand how people are hardwired, you can give them the support and guidance they needed, a much more... at a much deeper level than you could otherwise. And so, yeah. Jack BeVier (16:19) Yes. Craig Fuhr (16:20) The thing that I find interesting about it is that you can actually team people up as well who complement each other based on how they're wired. So from a group standpoint, it's also extremely beneficial. Andrew Kuhn (16:27) That's Yeah. And resolve conflict, right? Like that's the other thing too. Like I can tell you how many times like, so full disclosure, like my wife is our chief people and culture officer. She's a very integral part of the business. We work together. We have full time for almost four years now and I love it. It's not for everybody, but it works well for us and culture. She's our, she's our resident culture index guru. And it's helped personally and professionally too, like all our friends want to take it. And it's really given some insight on the friendships too, in personal and family relationships. So total a side note, but just kind of a fun thing. Jack BeVier (17:10) I totally agree. like I said this before on previous episode, but like, like it changed my relationship with my dad, right? Like it was like, like he and I used to like fight like cats and dogs. And then I took this and I was just like, like, you know, he's not an asshole. He's just a philosopher. All the, yeah. Andrew Kuhn (17:26) those philosophers. A lot of philosophers in my life. Craig Fuhr (17:29) He can't help it! Jack BeVier (17:32) And like the, you know, and as a leader, like our job is to like get the most out of our people. Right. And we, we, and we hired them, right? Like we put them in that chair. We gave the job description. We're responsible. Like I feel a high personal level of responsibility for someone's failure, right? Because I'm the one who chose that person and put them in that position. And if I didn't have the forethought, if I didn't have the foresight to be able to real, like to see how they were going to fail and help them not, then. Andrew Kuhn (17:48) percent. Yeah. Yep. Jack BeVier (18:01) You know, that's on me, right? Like it's much and it's and it's I think of there and I think it's far more often on the leader and we put it on. But then it's but it's easy to dismiss somebody as inadequate or like, they were they couldn't cut it here or whatever. But like, really, it's they're not a bad person. They they're just a different person. You just put the wrong person in that particular role where you gave them something to do that you never should have asked that person to do right. Like don't ask. Andrew Kuhn (18:12) it is. Jack BeVier (18:31) someone with a low, low aptitude for details to book your flights and hotels and expect there to never be a mistake at 10 o'clock at night, right? Like that, that was on you because you asked a low D person to do a high D job, for example. and so it's, Andrew Kuhn (18:34) Yeah. Exactly. Yep. Yeah. Yeah. Yeah. I love your, love your touch on extreme ownership too. Right? Like at the end of the day, if my, if anybody on my team fails is because I'm not a good enough leader. Right? Like I, and I think that personal responsibility, often goes on sad, but like true great leaders that like are able to like teach other leaders and create other leaders of people of others. Right. Are it's such a level of leadership and skill. that I think is incredibly important. So I just wanna give you a props Jack for owning that. Cause you're right. Cause everybody else will play it. My team, they're horrible, this, that, the other thing is like, you know, let's look at the mirror first. Jack BeVier (19:17) Yeah. Yeah, yeah. Well, and frankly, before using CI, I hate to keep chiming in or, coming back to it. But before that, I didn't, I didn't feel like I had the tool necessary to, I just didn't have a skill, right? I didn't have the tool necessary to help me develop the skills to do that. But this was the tool that helped me develop those skills. And like we went from, we went from like 25 people to a hundred in a single year, and it was not a smooth ride, but it was, it would have been absolutely impossible. Andrew Kuhn (19:48) Thank you. Jack BeVier (19:54) had we not had this as a starting block for it. And we've grown a lot since then with like, I'm actually like really psyched about the low level of turnover we've had. And I really just don't think it would have been possible had we not been using a tool like CI. So I think it's like one of the most important tools that we as a company have ever incorporated. So I'm a huge fan boy. Andrew Kuhn (20:09) sure. Agreed. That's cool. You know, it's right. Like your low turnover is great because it tells you that you have the right people on the bus. Cause again, people don't understand first, you gotta get the right people on the bus and get the wrong people off your bus. And then you gotta make sure they're in the right seat because there can be times where you have the right person, but they're in the wrong seat relative to how they're hardwired. Right. And so, and that was like another thing, you know, hat tip to EOS that taught us. Like we never create roles for individuals anymore. And I'm as guilty as that as any owner. Like I really like this person. Let's try them here and let's do this when they just weren't a good fit for the seat. you know, it's one of those, it's that road rash and that life experience you have to learn, but you're not doing them a favor either by either keeping someone in the wrong seat or creating a role for someone that really isn't there. And so, you know, just some of those. Those mindset shifts as you grow as a leader are super huge. Culture index and EOS and write people, write seats and all those frameworks to work through. Jack BeVier (21:18) So you mentioned this EOS is for those who don't haven't read the book Traction by Gina Wickman is a entrepreneurial operating system is one of the kind of foundational ideas in that book that we wrote. We've took a lot on EOS as well and run our business a lot with that. You mentioned top grading as a tool that you use from the HR side of things, culture index, any other like frameworks that you guys have integrated into operations. Andrew Kuhn (21:45) Yeah, absolutely. So as far as like business operating systems, I do pull some stuff from Vern Harnish's scaling up business operating system. so a little bit of inside softball. So traction in Gino, Gino is actually a former EO Detroit member. So there's a lot, EOS was kind of birthed basically in Detroit. And if you read the book Traction, I know a lot of the individuals in there because they're local companies. Gino's a Michigander. And he was a Neo member and actually was in a form, kind of like a band or a pod and CG and those others out there. so, actually one of my business coaches helped bring a lot of the people that Gino came in, he's a great marketer, built a great platform for people, pulling from Vern, pulling from a lot of people like that, Chip Conley and everybody. So anyways, and Peter Lencioni, like all kinds of phenomenal business gurus. So anyways, so we pull some stuff from other business systems like scaling up. On top of that though, there's a whole tech stack out there that we use, which we can totally get in the operations tech stack of stuff. And most of it is related to tech stack, but I will say that like, yeah, constantly pulling, constantly pulling though. Jack BeVier (23:03) Let's it. Let's jump in. Let's jump in. Andrew Kuhn (23:06) concepts from other businesses has been another thing that's been very helpful for us and not just staying so inclusive to the real estate space and really trying to get outside of it. So I'll give a rundown on our tech stack currently for those that are out there. And thankfully my COO, Suzanne, had a really strong tech background and does a lot of like industry speaking and stuff like that, which is another benefit of bringing someone in with that experience and expertise. But in general, what I would say is most of the residential real estate space isn't up to speed. You'll see a wide variety of operators. Some people that are Excel QuickBooks people and as far as their PMS or their property management system, they'll just use Excel and it's all paper and stuff like that. By the way, love to buy from those people because they usually don't know their numbers that well. Full disclosure. Craig Fuhr (23:59) Yeah. Andrew Kuhn (24:03) as far as tech stack goes for our PMS and our investor management, we're an at-folio company currently. Although we've assessed them, we've been with them several years, I've used multiple ones throughout the years, Rent Manager and PropertyWare and Ravella and kind of the others, but that's usually just a basis, right? And we're evaluating some of the upstarts right now because we're finally at a boom where evolution of technology is getting so good. that there are a lot of startups that are disrupting, right? So for you guys are familiar with Matterport for the last couple of years, it's been phenomenal. We have Matterport, we have the cameras, the whole deal, but we're starting to get into other virtual showings like QB Casa and some of the other upstarts out there that are phenomenal that you don't even need the Matterport cameras for. You literally walk around, film the entire apartment with your phone, upload it, it can do digital staging, do a video for you. were also as far as QVCASA, C-U-V-I-C-A-S-A, very cool, QVCASA, awesome company. Yep, I've got plenty for you. As far as the leasing process goes, so COVID was actually a good test case because another efficiency thing from an operations standpoint is very inefficient to have someone constantly showing up, especially with smaller scatter site properties to do showings, right? Between no show rates and everything else. Jack BeVier (24:58) That's QE. That's QE casa. QB concept. Okay. We're taking notes. Andrew Kuhn (25:25) Now we have our holder of process. use a company called Trainual where we build all our processes and systems in, right? We can use Loom for video recordings. We can have tests and quizzes for our team members to make sure that they're proving efficiency. And that's where they use kind of our holder of process. But as far as like the leasing funnel or the leasing process, we've started to pivot more from in-person showings to virtual showings, which is a big thing. We also are using AI in the leasing process, but we're also using AI internally by building out our own closed loop, GTP that we're training on our own internal data. And we're using it both as a sounding board, board of directors. We're using it to build out strategy. I mean, outside of the regular stuff of content creation, but we're really leaning in hard to figuring out and utilizing technology to build efficiency and find alpha or find yield, know, edges. Jack BeVier (25:57) do you like best? Andrew Kuhn (26:25) outside of the traditional model that people have looked at. And so there's a whole bunch of others, but that's just kind of a smattering to kind of jump in there. Jack BeVier (26:33) Who do you like for the virtual showings? Because there's a lot of companies that do that, that offer that service. Andrew Kuhn (26:39) Good question. So we've tried several and each have their pluses and minuses, right? And so, so currently right now for virtual, so let me back up, cause we've tried a couple of different things. We've tried just using code boxes, right? Including Lisa, which is the AI leasing bot within that folios program where basically she handles calendar scheduling for our leasing specialists outside of business hours. So when we're doing advertising campaigns, whether it be apartments.com, Zillow, or any of the other refeeds that the sites will push out to, Lisa's our main point of contact where she will communicate with the resident, attempt to schedule a showing, which will then tie in the code box, which will then give a specific code for a specific time for an individual to go on site and do a showing, you know, without an actual leasing consultant there, if it's outside of regular business hours. that has been our current model that's worked best. We will also do sites where we use kind of a hybrid model where maybe a sales consultant or a customer service rep will be on the phone with the, with the resident as they're walking through. and then we're really investing in digital media of all the apartments as well, so that we can drive more and more of our content leads to virtual showings rather than in person every time. so. and those are renewable assets that you can keep and reuse within each space. Jack BeVier (28:12) You mentioned the AI side of things. Is it taking your trainual and feeding it into the proprietary GPT and then having it so that, you know, they can LLM ask questions as opposed to having to scroll through like 80 pages, which no one has any interest in doing. Is that like the basic idea? Andrew Kuhn (28:31) Well, so what we're doing, at least on the leadership team, because AI is so funny. So right now in PropTech or the general industry that creates all these subscriptions that just jack up your software costs on a per unit basis, There's a lot of non-necessary software out there you really got to manage it too, because it can get out of control and be a real cost center for you in OPEX management. What we're using our LLM for is several folds. So first off, you're going to find a lot of softwares have some version of it out there implemented, right? So Affolio has it, you know, with Lisa, know, everything, everything you're talking about, even if you get zoom now or any of the other companies like, we're AI, right? It's an easy selling feature and it's varying levels of success. So, so there's that whole marketing scheme I'll call it because It is only touching the surface of what it truly can do. So when you create a closed loop LLM, then you train it on your data. You can not only use it for it. So let me back up. AI is going to be successful for people who are good at asking good questions from a strategy standpoint. So like we'll take a process. We will give it to our closed loop AI, right? We will say. look at this process and in your experience, find ways to increase the efficiency of this without causing any redundancy steps or any additional costs and expense, right? And so like by setting up the right prompts, we can filter and identify processes for improvement. We can also, as I mentioned, use it as a global strategy board. our last quarterly, we went ahead and kind of revise our mission statement. We revised our strategy, our tactical strategy. or even using it for people analysis of sorts. So there's a lot of unique ways that are kind of like cutting edge that we're toying with internally right now to drive process and efficiency in it. But yes, and it's also for the general audience out there that's like still not aware, I consider myself an early adopter. You can use it for content creation and we do use it on our marketing for content creation. You can use it for repetitive tasks, that type of thing. to build efficiencies, but a lot of it's gonna come down to training and making sure your people understand how to use it as a tool and not a distraction. Craig Fuhr (31:02) Jack, were we speaking with someone who was using AI for tenant screening and sort tenant demographic? Have you experimented with that at all, Andrew, in sort of finding the best tenant? Andrew Kuhn (31:16) Yeah, so without violating for housing, right? So what I will say is that, and again, it's more of an adjunct for a lot of the processes out there. Fraud's a big thing right now, right? And so like we're increasing our fraud protocols just to make sure we do an income verification on top of the regular background checks and screenings and everything else to minimize because eviction costs are out of control these days. Jack BeVier (31:18) Without violating fair housing, course, without violating fair housing. Craig Fuhr (31:21) Yes, of course. Andrew Kuhn (31:45) I was actually on another call this morning on our association. talking about a couple of legislative issues of, you know, going through the eviction process and a local judge at one of our properties, we had an eviction actually allowed a tenant who wasn't on the lease to show up as the plaintiff and eviction of which they were not named and file motions to delay the case and it's costing us thousands of dollars, right? And so like there are things like that. So front end screen. and making sure that you're abiding by the law, but still putting a sufficient level of scrutiny on who gets in your unit is ever increasingly important. So as far as that goes, we always make sure we're on the right side of the law, with using that. And it's getting more challenging, right? Like, as I mentioned in the association, we have a legislative committee, 80 % of my time for our association, our owners association is talking about legislative issues. We have a bill tracker and a weekly meeting or a bi-weekly meeting and a lobbyist. We're tracking like five pages of potential bills in the state house right now. Anything from not allowing you to use a FICO credit score to determine the credit worthiness of a prospective resident, which I don't know how else you're supposed to tell credit worthiness. It's used for every other thing where credit is extended, know, mortgages and cars and credit cards and everything else. do same thing with criminal background checks, right? Like they don't want you to be able to use a criminal background check. There's rent control bills out there. There's all kinds of just things that erode property ownership rights that make this business harder. And so my takeaway for everybody is you really got to be dialed in, in trying to find ways because every day it's a fight to manage OPEX costs, to manage expenses and still, you know, make, run a profitable business. And so that's where technology can come in. Jack BeVier (33:42) I'm in the, we have the Maryland multi housing association as the trade group in Maryland. They do a phenomenal job, I think. and I, we're, we're a member, even though we have a bunch of single family houses, but the issues are all like, you know, the same issues, right. And, I've been really impressed with the quality of the legislative monitoring and advocacy that the trade that these multifamily trade groups will, at least the one in Maryland has, and I've been, we have a, another small like. Andrew Kuhn (33:50) That's great. same, the same, they carry through. Jack BeVier (34:12) nonprofit trade organization for single family landlords and flippers called the Small Developer Collective in Baltimore. And we have tried to replicate the legislative monitoring and advocacy side of things on even on a local level. And it is just really, really hard. And it's expensive and getting single family landlords to pony up dues is in my experience next to impossible. So the multifamilies are a bit more professional in like Andrew Kuhn (34:29) Yes, Tom. Jack BeVier (34:41) forward thinking about those issues because the stakes are certainly much higher and they've got assets, enough assets to be able to afford a budget allocation for dues to what I consider to be an extremely worthwhile exercise. So I'm sure you're getting tremendous experience and insight into what's going on with your position there. Andrew Kuhn (34:57) It is. Yeah, I am. And thank you for bringing that up guys, because like what I will say is in this industry, I think it is one of the most overlooked opportunities and quite honestly, one of the greatest dangers for people that are in the residential real estate space. And I mean that because like, and I'm by the way, I'm not a fan of politics, never was. When I got involved, it was because there were some people I respected that were members like, Hey, you need to join this organization. And then once I started to actually realize what they do and they're literally protecting the future of your livelihood, right? And quite honestly, property ownership rights in America, which carries through from everything from home ownership to being a professional housing provider, you know, at all levels from a single mom and pop, which in the state of Michigan, we have a RPOA, which is rental property owners association. And then we have a managers association called DMA or PMA at the state level. so, but understanding that if you don't have a voice in that, if you don't not only monitor, right, in your words, but just, you know, be an advocate for pro housing, because it is an economic issue, it's not a political issue, but you're going to wake up one day, if you're in this industry, mom and pop that has two houses and that's their whole retirement or not, or a professional operator. and the laws are going to change and you can get a lawsuit, right? And so if you don't stand up and have a voice and be aware, you know, it's really kind of a dereliction of duty or, you know, shame on you for lack of a better term, because it is a very real thing. And I'd rather wake up and know that, you know, myself, my family, the team members, the employees that were responsible for right, providing for their families, as well as the residents that live in our communities, right? Like, All of this matters. And quite honestly, for the economic like livelihood of your state, a lot of people, right, when business go to relocate, they're like, is housing cost reasonable? Are there adequate housing opportunities for people in the area, right? When they look to relocate to states. And so it's a big issue. Craig Fuhr (37:17) talk to investors all the time that I feel like landlords, know, Jack has known for long time that the target is squarely on your back oftentimes and city councils and state legislators. I feel like there's just, and to Jack's credit, he's tried to build an organization around that, a trade organization around that. But I find that there's just so many guys that just put their heads in their sand. Andrew Kuhn (37:28) this. Craig Fuhr (37:45) Especially the smaller mom and pops who probably have more to lose, frankly, when restrictive legislation comes down the line. They're either too busy with managing what they have, too busy with their family lives or whatever. But I think your point, Andrew, is valid in that if more people stepped up and really got involved with what's going on in their state houses and their city councils. probably wouldn't have a lot of this restrictive legislation coming down the line and we're seeing it everywhere not just where you are obviously. Andrew Kuhn (38:17) Yeah. And not just in housing, right? Like honestly, at the end of the day, within our Republic, right, our country, part of the reason I would just, and I don't want to get political, but part of the reason we've kind of ended up where we are is because people have been apathetic and not been involved, whether it be at the local level, you know, being service-based and that type of thing. Now back in the day, right, when George Washington and everybody else was present, they'd go, they'd serve their duty, and then they'd go back to their lives, right? But we've kind of evolved, unfortunately, in a certain way, and a lot of good people have not decided to stand up. And so, you know, I'm just hoping that there's a younger generation that is willing to kind of step up and have a voice, because it shows up in education too. You guys have a four and a seven-year-old, so preschool and second grade, and like same thing with schools, right? I make sure that the information my daughters are learning is going to help guide their core values throughout their life are the ones that we want to see in our children, right? To be amazing humans. And so it's all that stuff. Craig Fuhr (39:20) Hey, the brief time that we have left, I was just thinking, you you have a pretty interesting buy box for the properties that you're looking for and, you know, obviously very well defined. I'm curious as, you know, especially for those that are listening, you know, what, are there a ton of those assets out there? You know, what's really the number of assets out there that you're really looking for right now? And the reason for my comment was, Before I came over back to Dominion, we were looking at mobile home parks across the United States. it's a highly, it's kind like where storage was 20 years ago, just lot of mom and pop still in the industry and so a lot of opportunity. But what we found was it's a pretty small set of properties. mean, mobile home parks in the United States, might be like 50,000 of them. And so not a whole, pretty small space and pretty tough to find those owners as well. You mentioned last year you guys underwrote 200 deals but didn't buy one. That's partly the market obviously, but I would imagine that a lot of those deals maybe just didn't fit your box in terms of the asset that you were looking for. can you talk to the folks about what kind of a needle in the haystack are you looking for out there? Andrew Kuhn (40:39) Yeah, good question. So I like to consider ourselves professional opportunists. We have certain criteria, right, that things need to meet. look, I've looked at things. So an interesting one that came up earlier this year was a student housing portfolio. One of the top two, actually the top state university. And it was 1,500 beds. It was a mix of 210 houses, 14 apartments, and five sites for development, right? and it was a big number, but it's a business, right? And my single family training and experience and running scatter site really helped us to go after that. But as far as like amount of opportunities that are out there, you know, I do keep some flexibility of, you know, sub a hundred unit stuff. If it's in Metro Detroit, because we have an infrastructure set up for scatter site stuff, you know, the 20 to 80, a hundred unit type stuff we'll look at and buy. because we have an infrastructure in place to sufficiently manage it and to deliver the service that we expected on our properties. It's only once we get out of our geographical region that we need larger properties so that we can have more staff on site to manage the day to day. And so as far as like numbers of opportunities that are out there, there's a surprising large amount. So there's over 2 million apartments in the state of Michigan alone when you just look at it that's just our state. Now, a lot of them are sub 100 unit products, right? So there's a much smaller number of 100 plus unit communities, but there's also a much smaller amount of buyers out there going after them. If I'm in the single family or the small multifamily space, there's a really nice niche out there, call it 10 to a hundred units that we would consider sub institutional scale that you can be very successful at focusing on. And there's a lot more quantity of those as well as it's a much more disjointed industry kind of like you're talking Craig of the the manufactured homes and mobile homes. Whereas mom and pop, right, because it's incredibly hard to build institutional scale by intenuance at a time. But quite honestly, again, one of my one of my mentors, John shop wrote a book, making a big on little deals. And two things he said that I again, I tell people this and it's just my ambitions probably outgrow my other parts of where I should be focusing. But like you always said, draw a five mile radius around your house. If you knew that market so well, you could do enough deals in that to be very well. Same thing, it's like just buy a house a year. For people who are starting out, buy a single one house over 20 years, which is gonna go by anyways, you'll have 20 houses. I promise you that'll make a pretty good retirement that's over most people's goals, right? And so. I'm on a mission to build a larger organization because there are some philanthropic things I want to do and use for good, as well as, you know, personal and professional development for others and things like that. But like getting clear on who you are and what your goals are and what you're willing to invest in. Cause everything has a cost and a price, right? And so for me, this is a work life integration. It's a game. I love playing this game. I have more fun doing this than I do any other hobby. So like for me, it's a jam between family, health, growth. It's all in alignment. And so, but getting to know yourself and winning the intergame first, and then you can go back and then you can get ideas on what your target market. I wouldn't be looking at big 100 plus unit deals, Craig, if I didn't have a bigger mission and vision, right? I'd be sticking to my area. I'd be buying, you know, 10 to 20, 30 unit deals that you can be very successful on and have a great life and a great lifestyle on just focusing on just taking down a couple of those quite honestly. So. Craig Fuhr (44:23) great answer. Thank you. Jack BeVier (44:25) So what are you excited about? Let's wrap with that. What's, you know, given everything that's going on in the world, all the risks, all the opportunities, what gets you jazzed up for the next 12 months? Andrew Kuhn (44:37) So again, I hate to say this at some times, it does sound a little cringe, but when there are economic downturns and challenges, that's when the opportunities arise, right? Like 2009 and 2012 was the greatest buying opportunity in my lifetime, probably your guys's as well. And before that, we were on historic peaks, right? And so then we had an extended bull run with a hiccup and then financial. We had fiscal stimulus, which, you know, completely kind of extended the bowl probably longer than it should have. And we're finally at a time where things are right sizing, asset pricing is coming back to normal, things are starting to make a little bit of sense or at least trending in that direction. So I see this as an opportunity for people to make moves that are ready and prepared. Like I said, we spent the last three years building systems and process so that we had the foundation to be able to take advantage of this next three to five years. And so that like, that gets me so excited guys, like I can't wait. Craig Fuhr (45:33) That's awesome. We can't thank you enough for taking the time today, valuable time that it is for these two episodes. A lot of great content in here for folks who are listening. How can folks learn more about you and what you're doing? Where can they find you online? Andrew Kuhn (45:50) Yeah, no, thank you. So best place is probably either LinkedIn, Andrew Kuhn, that's K-U-H-N. Our company is Sunrise Communities, you know, and then our company is GoSunrise.com. But other than that, those are probably the main ways to find me. I am on Twitter, but that's mostly for entertainment purposes as well. So, but yeah, those are the places. Craig Fuhr (46:10) check in on that feed. Jack, any final words? Jack BeVier (46:14) No, I really appreciate you taking the time and you always enjoy the conversation. It great catching up. So thanks for coming on. Andrew Kuhn (46:19) Yeah, you guys too. Thank you so much. Craig Fuhr (46:20) Yeah, it's been a pleasure. So folks, we hope you enjoyed these last two episodes with Andrew Kuhn. Thanks for joining us. This is Real Investor Radio. I'm Craig Feuer with Jack Levere. We'll see you on the next one.