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Today we have an incredible guest joining us, Corey Peterson. Corey is the CEO and Founder of Kahuna Investments, a name synonymous with real estate success. With a career spanning 13 years in the multifamily arena, Corey’s expertise shines as he shares how he’s acquired over $225 million in real estate assets nationwide and raised a staggering $95 million in private equity.
But that’s not all, Corey’s impact goes beyond his impressive portfolio. He’s a bestselling author with books like “Copy Your Way To Success – Standing on the shoulders of Giants” and “Why the Rich Get Richer,” which offer invaluable insights into his journey and strategies.
In this compelling episode, Corey dives deep into the secrets of his remarkable success. He opens up about his multifamily journey, starting from his early days and the pivotal moments that ignited his passion for real estate. Corey shares how he harnessed his determination to build Kahuna Investments from the ground up, acquiring over $230 million in real estate assets across the nation.
One of the key takeaways from this conversation is Corey’s emphasis on passive investing. He elaborates on how he strategically partners with passive investors to create thriving apartment communities that offer both stable cash flow returns and long-term capital appreciation.
Corey’s insights into the art of building these partnerships and nurturing a win-win environment for all parties involved offer a blueprint for those aspiring to make their mark in real estate.
In This Episode
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Corey’s early days in real estate and pivotal moments
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His strategic approach to achieving both stable cash flow returns and long-term capital appreciation.
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The power of strategic partnerships
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Expert advice and actionable strategies to excel in Multifamily
Welcome to today’s show on Wealth Strategy Secrets. Today we’re joined by Corey Peterson. As the CEO and founder of Kahuna Investments, Corey has acquired over 225 million in real estate nationwide and raised over 95 million in private equity. He’s the bestselling author of Copy Your Way to Success, Standing on the Shoulders of Giants, and hosts the Multifamily Legacy Podcast. His company aims to partner with passive investors to create award-winning apartment communities. Families are proud to call home. Corey, welcome to the show.
Thanks a lot, Dave. Thanks for having me.
I’m looking forward to the discussion. The audience is going to enjoy this. You have an interesting background and journey to get where you are today. So why don’t we start there and share your background with the audience?
I love it, man. So I started as a used car salesman the kind you’d picture in your mind that was probably me until my wife said I couldn’t do it anymore. She said she couldn’t marry a used car salesman.
And what age was this?
I was probably about 25, 27. And something magical, it was like 23 years ago, I’ve been married for 21. So two years before I got married, That’s when my life changed forever. My mom was married to a man named Bruce and I call him Bruce Wayne. He wasn’t Batman, but he did have a lot of money. And so we go to Hawaii to stay with him and he’s got a home right on the beach. And I’d never seen a guy that had time and money. Bruce had both. And so I had to ask, what do you do? And that’s when he said the magic words.
He said that he was in real estate and that he owned apartments. Well, I left that island thinking he was the big kahuna. Like he had something that I’d always wanted. And so I had to go figure out what I wanted to do. And I started reading a bunch of books on real estate. Finally, I read that little purple book called Rich Dad Poor Dad, and the light went on for me.
And so from that moment on, I got obsessed with real estate. And I went full-fledged into it. I started as a single-family fix-and-flip guy. And that lasted for about three deals, I did my first three deals and I ran out of money. I was like, oh my gosh. And at that point, I didn’t know how to get past it. So luckily, my wife’s friend had a guy who was a financial advisor. And so when I ran out of money, I was like, I gotta go back and get a job, because I’d quit my job, I thought it was so great on those first three flips.
And then I realized I had no income and like I couldn’t survive any farther than that. And so I got a job as a financial advisor and up, with Edward Jones. And that was around 2004. And what happened was it was a crazy time because, I put my dream on hold of real estate, but the financial world took, taught me everything about money, stocks, bonds, mutual funds, insurance, the whole gamut.
And I was like, that’s what I’m going to do. I was all in all of a sudden, a change moved my cheese a little bit. I still wanted to do real estate, but I thought if I could make enough money being a financial advisor, I could go buy more real estate. And that was great. 2005, six, seven, all of a sudden, 2008, 2009 happened, the great recession. And then Iad built a pretty solid book of clients and businesses. And I realized that I had no control.
I’m telling you, I had a client that was, he and his wife who worked at Intel, they retired at 65, and had about $4 million in retirement funds, right, from 401k between the both of them. I mean, they’d done a great job saving, and this was like in 2006, we diversified this portfolio, and in 2008, they come to me and it’s worth half. And I mean, they don’t come in, they come in. I mean, she’s sobbing, the guy looks distressed, he doesn’t even know what to do. And they’re looking at me for advice. And here I was, I told them I was going to watch over their money.
But I realized as a financial advisor, I had no control. I had to say it’s the market. And here I was, I was younger, I thought I was king hot, hot tingling, yet I hadn’t, there’s nothing I could do. Except say it’s the market. And then they’re like, well, we want to move our money. And then I had to charge them a fee, like adding injury to insult.
And so when that happened, my heart left that business. I realized there is no control on the roller coaster of being a financial advisor. And it is truly indeed a roller coaster. It goes up and down for no reason. And it’s emotionally stressing, I think, on my investor pool. Probably a lot of people are listening to it, they know what they can understand that ride, it’s scary. And so I got fired from that job. When your heart leaves the business, so do your cells. And so that was the best thing that ever happened because it forced me to go full-time in real estate. All I did was take what I learned in raising capital for stocks, bonds, and mutual funds, and I applied it and did, I started doing single-family fixes and flips, ultimately starting buying apartments. I realized that I could not scale single-family homes, but I could scale multifamily investments.
And so the goal was then to partner capital and put it in the right cash-flowing deals that made sense, that could give our investors better returns than they were getting in the stock market. And we’ve done that very successfully, but here we’ve come into another storm. And that’s the one thing about real estate is always going up and down and crazy.
What I realized in real estate is we have levers. There are lots of things you can do to manipulate your property, to make it more profitable. I think for your audience, if you’re looking at syndicators like me, these are the things you’re looking for, some of the clues you’re looking for is how have they performed in times. Because anybody can look great in a good period. It’s when the storm comes, what are you going to see? And when that tide comes out, some people are naked.
And so you want to make sure that you’re understanding what that operator can do. And it’s the things you’ll have to navigate. So we’ve come through COVID. Now COVID was a blessing for most of us in the multifamily sector. But for Quarry, I have a lot of student housing, I rent to colleges or to the kids that go to colleges by bed. So COVID for me was horrible. It was a very hard time. We went with properties that were 100% three years in a row and all of a sudden went to 45% Dave and 45% occupancy is a death wish. It is.
And so we immediately that school year for when it was COVID because no one showed up to go to school. They’re all doing it remotely or at home. They’re not staying at my property now. And so we had to immediately get slim, We wet a skeleton staff. So we started pulling levers. And I’m very thankful to say that we didn’t lose any of those assets and it could have been bad, but we consolidated.
And this year, something extra that we’ve done is we’ve vertically integrated. In other words, we’ve taken over property management. And so property management, it’s a little bit different. Like, why does that matter? Why should you be I pay attention, is it good or it’s bad? Just understand that most syndicators in this space, like me, they’re usually using third-party management companies, and I’ve done it for the 15 years that I’ve been doing real estate, that’s what I’ve done.
It’s only to this point now that I’ve, and I said I would never self-manage or create this thing, but I realized that what became more important as I’ve gone on this journey, and I’ve grown my portfolio, and what I realized is like man, control is more important now than ever. Understand, and it’s not about, it’s about your people. People make or break your business, Dave, It’s your staff at the property level, it’s your ground troops that are on the pavement. Those are the ones that will make or break your company. And when you are using a third-party management company, you do not have access or control over the people aspect.
It’s about your people, people will make or break your business.
And so we knew that we had to get that part of it under control and then influence them with our culture, with our code of ethics, the way we want to do business. And then all of a sudden, and the magic thing about that, and as we move through it is that we started seeing all our costs. I mean, almost across the line start to go down. Our general GNA and admin costs started going down. Our payroll started to go down. Because we didn’t want overtime. And so we said, hey, one of our policies is we can’t, we don’t want overtime.
And all of a sudden things started getting done in the allotted time. Well, because we mandated, we created stuff like that. And so those little simple things produce NOI, You save money, you’re going to increase your NOI. And in a time like right now where we’ve had interest rates double, 100% increase, even though some of us, have cap rates, That’s an expense that none of us perform. And so again, you gotta have, this is about being lean and mean on your current assets. I think for a lot of people who have invested in guys like me in the last three to four or five years, it was great. And this last two years, it’s been very different. It’s been very difficult because you have to get lean. You have to get very price-conscious integration.
I call it Six Sigma, your supply chain, you want that thing dialed in, so you’re not got a bunch of stuff sitting on the shelves. You gotta be efficient. And efficiency is what’s going to win the race right now.
Yeah, such a powerful lesson, Corey. And I think not enough people talk about it, It’s that it’s having control. And I think this alternative strategy is very new to a lot of people to be investing in real estate, to be investing in private equity, because most of us were frankly taught by the financial services industry that we’re going to outsource our wealth to someone smarter than us. And, they’re going to manage it for you. But what you get with that is, you get average returns for the retail investor.
So if you’re looking to outperform that, part of the equation is taking back control. So you have decisions in terms of how you’re, placing capital, How are you allocating today? How are you managing your risk? At your point when you’re starting to purchase tangible assets, there are so many knobs that you can push, it’s a living business.
And the operator, the other thing that’s very different than the stock market, Is you have mutual alignment with your investors. So as an operator, you’re not going to make money, the investors aren’t going to make money. If you don’t make money, we’re like, we all make money together.
So you’re incentivized to turn those knobs, look for new, revenue ideas and new creativity, cutting costs, doing all those things. So I think that point of control can’t be understated.
Yeah, it is. And I always say this too, like, when I think back to the investor base is like, who’s going to care more about your money? You know, is it you or is it somebody else? And I always say it’s you. And if once you understand that you’re like, okay, so then taking a little bit more control a little bit more active, you can still be a passive investor, but control what you’re putting your money to don’t give it. I mean, you think about it, you get to a financial advisor. And what that financial advisor does is he has, a growth fund of America, and he shows you this, 20-year track record history. And so you invest in it.
And I always say like you invest in that fund and then how many people does it go to tell finally that there’s the one guy that says we’re buying blank shares of this company and who is that person and can you call them? You can’t. And so you’ve, again, you’ve settled for average returns. When wealthy people understand this, I think more than ever, is that they understand that if they control their money, they can make it work a lot faster and a lot better most of the time, So there’s still understanding your risk profile, I think is more important than ever, but I find that most investors when they start taking a little bit more control of what they’re doing and understanding the investments they’re putting, the alternative investments out there, They can do a lot better than what the average stock market return of 6% to 8% is.
Yeah, for sure. And the other thing that, as I went through that journey myself, I mean, I got so tired. I’d be at the gym in the morning, and all you see is a sea of red because something happened in China, something happened politically, and you throw your hands up. You’re like I want to do something. I want to get involved, how can I do something? And it’s that feeling of helplessness, it sucks.
But when you can get into, investing in tangible assets and real estate I see it as mitigating your risk three-dimensionally. Because if you have a thousand bucks, let’s say you have a thousand bucks worth of Amazon, the only thing that you’re hoping for is that stock value can go up in price. But when you have real estate, you’ve got tax efficiency, you’ve got passive income. And like you pointed out, you’re driving value every day into that asset to increase your net operating income.
Yeah, I always say Everybody’s expense rents go up and we never disappoint them, You’re always going to make a rental increase every year even as if it’s ten or fifteen dollars That’s typically the train and real estate is we’re all conditioned from the very young age that we pay our rents. WeIfou want a place to stay you have to pay rent and so and if you look at the economics, too, This is what I love about the numbers because the numbers are the numbers and they don’t lie if you look at the supply and demand for What we do in this real estate space and particularly multifamily space There is such a demand for housing for what we do because home affordability is through the roof. It’s hard to get it’s hard for new homeowners to buy a new house It’s almost priced out of the range.
And so what are they going to do? What are their options? They’re going to look for places to stay, Apartments. And that trend is happening more and more than ever. And then there’s a good amount of the population that doesn’t even want home ownership anymore. They want flexibility. So as you start seeing now, not every market’s the same. And this is where you get to understand the business of real estate. And this is why when I say, from your, your tribe’s perspective is you’re going to look for either syndicator or you got to learn it yourself. So you either do the work and learn how to invest yourself or you learn enough about the business. And then you find operators like me that you can partner with and then come into their deals with that have spent, the last 20 years.
That’s all I’ve been doing in real estate. So I have my PhD in it and, we help get everybody there a little bit faster, But you always have the option to do it on your own. But what I’ve found is. What most people want is they want some stability, they want the income, the tax depreciation. Like that’s not as great as it was a couple of years ago because of cost segregation and the way it’s played out, but it’s still pretty decent. And so more and more, it’s not about what you make, it’s about what you keep. Trying to understand the long game of real estate. For us, it’s been a great partnership to partner with passive investors. And create the opportunity for everybody to win. And that’s the thing, and I think you said it best we win together. And that’s the beautiful part of what we do.
Yeah, that mutual alignment, I think is so key. Cause as you pointed out again, if you compare that to Wall Street they’re still collecting fees, even if you’re losing. So, it’s their agenda that they’re winning. So anyway, any time you can bypass Wall Street and invest in Main Street is a good thing.
Yeah. You think about how much money they spend, why is there a financial advisor, on every corner on every street? and they lobby this as they’ve conditioned a lot of people’s minds to say, no, like if I was, I already like when I have people that are, I know they’re in the stock market and that’s all they’ve done. And they’re going to go pitch the idea to their financial advisor.
I said, here’s what he’s going to say. He’s going to say this is a bad idea. And I was like, That’s exactly what I was trained to say when I was a financial advisor. Why would you do that? That sounds risky. Are they going to report, this and this, and you’re going to do it with your IRA? Boy, what happens if they don’t do the reporting? You’re going to be, you’re going to lose your qualified tax shelter there. And we would scare the hell out of them because every finance advisor, their job is to keep assets under management, that’s how big is your book. You keep money at your place. You don’t want everyone to leave. So you scare the crap out of you. You say, well, we would have, we would offer it. Well, why don’t you get this REIT, a real estate investor’s trust? It’s like real estate, even though it’s not, It’s a paper asset. But that’s the conditioning.
And honestly, this is the, I’m going to give you guys an insider look at what they taught us. Those are the words. So is that not a slick-oiled salesman? Are they working on your best behalf? Because if I’m telling you when I got together with a bunch of my guys, when we were, when I was at F and A, we were not talking about our clients well. We’re talking about how much money we’re putting in our pockets.
And so it is a, it’s a direct conflict of what we’re telling and what they’re saying. They’re saying one thing to the customer, but it’s all about Asset center management, 12 B1 fees, how big’s your book, and what money are you making off your client base. And are you churning that enough, I mean, and that’s, even though they’re not supposed to, but they’re like, hey, you should be offering and moving money every certain percentage of everybody’s money so you can create new fees. Scary, but that’s the truth.
Yeah, it is. And I think that’s why we have a significant problem in this country, in terms of retirement, financial education, and the lack of assets that people are holding right now that is a little bit scary. And I think, the more you can take back control, as you pointed out, start to invest in some tangible assets, things like real estate that can make you’re going to start to see some massive gains.
Well, that’s why podcasts like yours, have a more important than ever to, is to, is to alert people and let them know that there are alternatives. And they’re, that to talk about the things that we’re talking about now, is more important now than ever because people need to be saved. They need to be retirement for most people is not good. So how do we make it better? You got to take control of what you’re teaching. Dave is exactly what people need to listen to.
Yeah, 100%. So tell us a little bit about the markets that you’re in.
So we primarily invest in the Midwest and the South. We find that in the Midwest and South, they’re more stable. They’re more affordable. And we only try to buy for cash flow, Dave. This is, where I learned my lesson. So in 2000, I bought properties in 2005, six and seven, single-family homes. I’ve sold most of them, but I owned their way through the downturn of 2008-2009 and they survived. And why did they survive? Because the cash flowed.
And so I’ve learned that, and I’ll never forget that lesson because I know a lot of people lost their shorts. After all, they bought things that couldn’t cash flow. If you can cash flow now, you can normally cash flow tomorrow. The markets go up and down and they’re crazy, but cash flow is key. So we find that in the Midwest, They don’t go up too high, they don’t go down too low. That’s stable, we like those types of deals. And these are like Oklahoma, Iowa, and Indiana. And then we also have a pretty healthy portion of our portfolio in student housing. And so where we rent, we butt up to colleges. And typically that’s almost recession-proof, Dave, except it’s not COVID-proof, okay?
So we learned because usually with student housing, no matter what the market’s doing, it doesn’t matter because when your kid’s 18 or 19 and they’re ready to go to college, that’s where they’re going. And so then it’s about what we look for is D2, D1, we want to be closer to D1 schools if we can. We prefer D1s, but we’ll do D2 if it makes sense. If our location is very close to the college. So proximity. College is very important in that aspect of what we’re doing and making sure we have the right amenities and right structures.
But again, though, even in those markets, we typically try to buy assets that are, 90% occupied, that are already doing what they need. And then we like to make the micro improvements, Let’s go and do a remodel refresh kitchen refresh, We’ll replace the flooring. And redo the kitchen, paint the cabinets, new knobs, and stuff that’s very easy for what I call turn items. It’s like you can do it in your sleep. We like those. We don’t like to move walls. We’re not trying to redo wiring or plumbing. It’s cosmetic stuff. And those are micro repositionings that we can do well. And we force appreciation in that case.
Yeah. Any other types of differentiation besides your vertical integration? You know, what you’ve learned over the years that sets you apart.
Yeah, we’ve learned that funny, we’ve learned, we’ve learned, you have these lessons and it’s like, wow, okay. We only try to buy in markets where there’s a regional airport. I don’t know why that’s a big deal, but we’ve done it where there’s not. And, those have not worked out well. We look for, the trend for growth. We want to see more people moving in the moving out and we want to see, our median house pricing, we want to see that, we don’t need to see it taken off. We want to see steady growth, If our home values are over time, nice and steady, that helps us a lot. We like that data point. We also like more people moving in than moving out. That’s another data point that’s important for us.
And then we’re also looking at employment centers, Dave, who are the main employers? And are they growing or contracting? And so sometimes we’ve been on a property, we’re in Warner Robins, Georgia. For that proper, the location, there’s a base. Well, so there’s one big base and that’s a big employer. And so we’ve got to watch, we’re watching that base to make sure that it’s not going to be part of any closures. And it’s a big enough air force base where it’s a transport base where they have the big planes like C one thirties and that’s not, that’s always going to be needed for what we do. So we’re like, we felt good with that location, but we did a lot of research in those areas.
And so at the end of the day, understanding your markets, you have to go into your, with your eyes wide open and you’re looking for those metrics that those data points, crime, there’s a crime statistic that we look for. And we want to make sure that our zip code is better than the, It has to be a certain metric that greenlights it for us. And because crime can ruin, and crime is so weird, you have to look at it from a zip code perspective because you can go across the street and there’s no crime over there, but on this side of the street, it’s bad.
So trying to understand that is super important when you’re buying these assets. We’ve had it where we’ve gone on-site to properties and our primary goal when we think we have a deal, Dave, is to go kill it. As we go do a site visit. Our job is to say, let’s kill this thing. And if it doesn’t get killed, then it’s something we still want to do. But that has to be, I think for most syndicators, I’m not going to speak for everybody, like that’s our drive. We go there to kill deals and only the great ones are selected because our goal, our job is to find needles in the haystack. It always has been. It’s always to find the needles in the haystack.
And so to do that, you’ve got there’s no special recipe in my mind, Dave. You have to do the work. You got to in the markets that we track, we try to underwrite 98% of the deals that come up. Now, we’re not perfect, but that’s our goal. We want to do a good initial underwriting to say, does this work or not? And most of them don’t. Well, honestly, most of them don’t.
And then from there, the ones that do, merit a site visit. We always do site visits before we make any offers. I know there’s a lot of investors that do sight unseen. We don’t do that. It’s not, I’ve never done business that way. I’ve got to physically put my team on site. We want to because most of the time you’ll go there and you’re like, Oh, that’s a deal killer. We found one. We had a great property and, a great location, but we got there. There’s this little 7-Eleven right next to it. And you wouldn’t think, Oh, it’s 7-Eleven. But at nighttime, that 7-Eleven is like lots of foot traffic. And usually, foot traffic is not good at night. You want people, in the home, locked up tight. And so we think we saw a drug transaction, So we’re like, nope, this property is not going to work. There’s nothing that we can do to fix that problem.
Yeah, great point. I mean, there are certain things you don’t know until you’re physically on the ground, kind of surveying things. So a great, great due diligence step. And what do you think? I mean, given today’s market dynamics with higher unprecedented interest rates, Kind of this reset going on between buyer and seller expectations. How has any of that changed your business model and what are you looking for today?
We are stepping on the gas right now, Dave. So we’ve not bought anything for the last 14 months, So we went on a hiatus. We needed everything to play itself out and we are now starting to see things drop because people that are in these adjustable rate mortgages, they’re coming due and they either have to sell I mean, if they’re selling, no one’s selling right now because they want to. It’s usually because they have to. And so that’s opportunity.
So when do you buy? You buy when there’s an opportunity. And we may not be exactly at the bottom yet, but we’re close enough, and here’s the play. I believe the play right now is if you can buy something now and cash flow at today’s interest rate. And you can still, and you still have some micro repositioning that you can do. Then you can buy it. And then we look, we have a five to seven-year time horizon on anything we buy.
So we believe that in our future interest rate down the road is going to be better. We don’t know what it’s going to be, but we believe it’ll be better than it is today. And that’ll be a micro la little piece that’s going to happen that from, 6% to four and a half or even to five, six and a half to five is a huge step in valuation and profitability. So Our goal is to buy as much as we can in today’s dollars, in today’s pricing, with today’s rates, and make sure that our deals qualify in cash flow. If they can do that, then it’s a green light for us. We’re still going to add our micro repositionings. We’re going to add some value along the way, but we’re going to get a nice little reset somewhere down the road. We’re going to be able to refly our properties, and it’s going to smell like Nirvana.
Yeah, makes sense. So Corey, what do you say the future looks like for you and Kahuna Investments? Talking 10, 15, 20 years out.
Our goal is to become a family office. We have a very robust team. As we started, we’ve been buying deals. We have 10 active projects right now, pretty good-sized projects. And so as they start to mature, our goal is to keep partnering with investors, but our long-term goal is to become a family office where we’re starting to use all our monies to buy all our properties and keep that machine running. I don’t think I’ll ever stop doing real estate, Dave. I love it. My kids, my son are turning 19. He wants to be in the business. My goal is to find a way to, he can’t come to work for me till he’s about 24. But the goal is once he’s matured and learned from somebody else, he’d come and go into all my departments and get everybody’s respect and then stand with me by my side for a minute. And then my goal is to eventually give him the keys and let him do better than I ever thought I could.
Excellent. Creating a nice legacy there. Love it. Corey, if you could give one piece of advice to the listeners about how they could accelerate their wealth trajectory, what would it be?
Take control. Don’t stop learning about things that you’re interested in. Find things that you’re interested in the alternative investment arena, Whether it’s real estate, maybe it’s singles family, maybe it’s lending, maybe there are so many different aspects that you can get into, but find
something you’re passionate about and then get involved with it. I’m telling you, you can make so much more money. Understanding a little bit. You don’t have to understand a lot, but understanding the fundamentals of what, of what wealthy people do. They make their money work so much better than the average investor going into the stock market.
So, by listening to podcasts like yours, Dave, to get knowledge, and then take action. Most people are, they listen to these podcasts and they don’t do anything. And man, it’s a shame because I know if, if you would take action, it would, It would change your life. For most people, it’s a life-changing thing when they take action, especially on the things that we talk about.
Find things that you’re passionate about and just get involved with it… take action, it will change your life.
Yeah. Well said. Appreciate you coming on the show today, Corey, giving so many valuable insights to the listeners. If people want to connect or learn more about what you’re doing at Big Kahuna, what’s the best place?
Yeah, I would love to give it I’ll give away my book for free. Copy your way to success. If you’ll text the word book the OK to 480-500-1127. We’ll send you the book for free. Other than that, go to KahunaInvestments.com. You can look us up see, see about us to see what we’re doing.
Awesome. Thanks so much for coming on the show, Corey.
All right, thanks, Dave.
Alright.