Working Capital The Real Estate Podcast

Real Estate Power Couple with Charlie Stevenson and Kristina Knight|EP24

Oct 21, 2020

In This Episode

Charlie and Kristina are the founders of Akras Capital. Charlie Stevenson is an experienced entrepreneur and leader, before Akras, he founded and operated three businesses in the travel and marketing industries in the United States and Europe. With deep experience working with startup and growth ventures as both a founder and consultant, he’s able to recognize and support promising businesses and provide them with the strategies, tools and support needed to ensure success while Kristina Knight brings over 10 years of experience in the capital markets, having most recently worked as a senior investment analyst with portfolio management responsibilities at Longfellow Investment Management Company ($9BN assets under management). In this role, she ran the $1BN Agency Mortgage Portfolio strategy, managing over 30 separate accounts to ensure the client needs and objectives were met. She previously worked in the structured products group at State Street Global Markets.

In this episode, Charlie and Kristina shared their journey in real estate, multifamily deals, growing their portfolio, how to generate passive income and great cash flow, how their bond and partnership has led them to success and their mission to produce freedom in the lives of their investors and partners.

Resources and Links:

Joe Fairless

Matt Faircloth

https://www.akrascapital.com/

https://www.linkedin.com/in/stevensoncharles/

https://www.linkedin.com/in/kristina-knight-cfa-9b592b2/

 

 

Transcript

Jesse (1s):

Welcome to the Working Capital The Real Estate Podcast my name’s Jesse Fragale. And on this show, we discussed all things real estate with investors and experts in a variety of industries that impact real estate. Whether you’re looking at your first investment or raising your first fund, join me and let’s build that portfolio one square foot at a time. You’re listening to Working Capital The Real Estate Podcast my name’s Jesse Fragale today. I have two Awesome guests on the show Kristina Knight and Charlie Stevenson. These two are very interesting individuals and what they have done is they’ve decided to pursue a real estate investment career and finally capture the life they had been chasing their goal. Like many of us was to travel and spend more time with friends and family.

Jesse (43s):

And I do say in 2020, traveling sounds pretty good right now. Kristina and Charlie co founded Akras capital with a mission to produce freedom in the lives of their investors and partners. They hope to share their story with listeners in order to educate them on how to generate passive income and live the life of their dreams. Hello? Kristina hello? Charlie eight Jesse.

Kristina (1m 4s):

Yeah, I did to be here.

Jesse (1m 6s):

All right, thanks so much for coming on the show. First of all, how’s everything going on right now? I know 2020 is a, has been quite the year, regardless of the industry you’re in. Yeah, its been going fine. Actually. We just ended up focusing on other things than we originally thought. So just kind of just shifted focus and we’ve kept ourselves really busy by doing that and trading value to the business and investors by doing so, but it’s different than we originally thought when we sat down and January 1st and set, all right, here’s our goal’s for 20 to 20. This is what we’re going to do. It was like a month and a half later. Total sweat.

Kristina (1m 45s):

Yeah. I’d say we’ve been focusing a lot on processes and systems and brand development and it’s best to reach out all those things. Right. Right.

Jesse (1m 57s):

And everybody prepared for the hopefully upcoming opportunities. Awesome maybe before we started, you know, I’ve heard you both of you talk on different podcast. So I have a little bit of a handle of your background, but for listeners between the two of you, if you could just go into a little bit of kind of your area and how you kind of got on this crazy journey of real estate that were all a, were all a big fan of sure.

Kristina (2m 21s):

Yeah, sure. I’ll start. So I actually spent over a decade in the investment management industry, you know, as a portfolio manager trader a research analyst in my focus was on Mortgage investment’s the housing industry, you know, commercial Mortgage investments. And so I not really had a really big background in real estate. I just was in investing. And then I’m, you know, in 2014 we bought a condo or first condo and we ended up renting it out and you know, that kind of started the real estate bug. And umm, when we were kind of thinking about where we wanted to take our business and you know, long story short, we kind of stumbled upon real estate.

Kristina (3m 7s):

Cause we were already making such great cash flow from the condo that we own in Boston. And we kind of had this aha moment like, or what if we, you know, did this time and time again, like we could, you know, create a life of our dreams and have the ultimate freedom that we right.

Charles (3m 21s):

Yeah. And that aha moment came while we were traveling across the Mongolia on that. Or are they actually across ruck in the trans Mongolian railway and tying into my background? I was an entrepreneur. I started a couple of the venture travel businesses out of college and grew those over the course of time based in Italy. And we met a guy and are a married actually if a, just for that context. So just, just, just note that are also got married and a half. So I always loved traveling and I was in the corporate world while she was, while I was, you know, in the corporate side of my career while she was doing the investments thing. And we’re both kinda feeling a little bit, I’m kind of bored, I guess, out of the lack of, of, for lack of a better word.

Charles (4m 6s):

And that’s what we decided to go on this trip, which has when he rented our condo, which was when we discovered cash flow and why we were sitting on a train in Russia having that aha moment about what if we had 10 of these, you know, if we had 10 of these, we could literally retire and continue on this train if you want. But a, you know, we then realized that it was more than just buying condos, you know, required a, a whole business around that. And she was actually on a train with us to I’ll say, and a, and from that point it was about three years ago, we’d started acquiring multifamily properties. It starting small and then growing bigger and bigger. And so when we started our first, when we bought as a four unit and our last one we thought was where we got a 320 for you in and 111 units. So I’d be nice if there could be a little improvement there for two to 300.

Charles (4m 50s):

So that’s a, that’s a fantastic, so it sounds like, and correct me if I’m wrong. I usually tell a tell whether it’s clients or investors that the Good teams are, the good partnerships have complimentary aspects to there a, to the backgrounds. And it sounds like Kristina very analytical from the finance world. And Charlie seemed like the entrepreneurial creative is, is that fair to say, is it a little bit of the diocese and Apollo? Yeah. It’s, I’d say like I’m kind of a, I will start a business is you end up learning how to fail and you end up learning how to fail quickly so that you can then take those learnings into your next business or in that business. And so basically I, as an entrepreneur, I’ve, I’ve failed a lot.

Charles (5m 30s):

And so I bring that into, you know, our current are current successes, you know? And so the systems and processes, raising money, you know, thinking about branding, thinking about marketing and sales, I’m kind of a generalist, whereas Kristina is, you know, the analytical powerhouse as is our other partner Lindsay. And they are the ones that really understand the numbers. I’m just kinda like lawn further over here. Okay. Well, you know what, it’s an interesting, I listen to, we had Whitney on the podcast,

Jesse (5m 58s):

The boat two months ago and I heard Kristina. So when you were talking about asset management and I definitely want to get into that, but before we do, I’m just curious the first condo, like the, that aha moment, what you were a few have the details of, of that line in terms of w you know, when was that a w like what year was at, in that you guys started with that and, and what was the reason that that deal was the one to be like, Oh, wait a minute. We can actually make, potentially make a living doing this.

Kristina (6m 24s):

Yeah. So we bought the condo in 2014 and It, you know, it was in a really prime location when I bought it. I always had the intention of, you know, someday this might be a rental and I wanted it to be really easy to rent out. So that was definitely in the background. And the other thing was I wanted to make sure that the mortgage payment was low enough so that if I did rent it out, I knew I could absolutely cover my Mortgage. Umm, and you know, possibly make some income on top of that. And so that was kind of the thesis behind, like getting started with that. And, you know, we bought the location was in within like a one minute walk to a bus stop, a five minute walk, two, a subway, like, you know, you could walk downtown in 25, 30 minutes.

Kristina (7m 13s):

So it’s really attractive location. And I think at the time, you know, the mortgage on that was around like $2,200 and we ended up renting it out for I’m a little bit over $3,000. So, you know, after like taxes and HOA payments and everything else, it was generating about $800 in cashflow a month. And it was a brand new building. So there wasn’t really any maintenance or cap X or anything else that really needed to be paid for aside from the HOA. So,

Jesse (7m 50s):

And it was also in Boston, in a nice neighborhood in Boston. And so we knew that it was going to continue to grow in value, which was a big part of as well. So the location was a really solid cause Boston’s got a really diverse economy, lots of people that want to rent and buy. So when you do that, that was underpinning the kind of investment itself to yeah, for sure. And its, its, you know, we, we get a lot of people that come on the show that a buy in and kind of tertiary markets on the multifamily side. And it’s always interesting to hear a little bit on the condo side because I’m a city boy and a, we are our prices in my area or are extremely high over $300,000 a unit. So a lot of times whether, you know, you’re just getting into real estate, sometimes condos, they can be the perfect fit.

Jesse (8m 32s):

And to your point, you know, we joke around, you know, they’re built like prisons. So it’s, it’s really hard to do that much damage to a condo. Not that it can’t be done, but yeah, definitely a good, a good kind of foray into real estate. So maybe what we could do here is, but most people that come on, we have a bit of a, you know, a segment where we go a bit of a ah, in the weeds of a deep dive into an investment. And I usually let the guest choose the Investment.

Charles (8m 56s):

So if its, you know, whether its one that you’ve recently done your, the one that you’ve recently done your first one or anything in between to be happy to hear about that and how a, how you acquired them.

Kristina (9m 7s):

Okay. Yeah. So I think probably one of the more unique investments that we did was actually our first deal as Akras Capital in that was a, a four unit and a single family home that we purchased, umm, from a wholesaler in one transaction. And so, you know, we kind of, we’ve been, we actually just sold the property, but it’s interesting because it was, you know, purchased from a wholesaler. It, it was a fixed thing and ended up being a fix and flip a longterm whole that had the seller financing and you know, it came out, it was off market, it came with a whole host of issues.

Kristina (9m 49s):

We had to learn from them and deal with it. And you know, so for new investors out there for people that are, you know, looking to scale their real estate career, I think it has a lot of lessons in that field.

Charles (10m 1s):

Yeah. That was just writing an, a, a post for a bigger pockets about it. I just going to soup to nuts through the whole thing. And it’s kind of like we were trying to figure out what the title was for this thing. And it has all these different components. I’m like, let’s just call it the ultimate first multifamily deal. Cause that has literally everything was, you know, scary situations with gas lines, getting, you know, struck, there was lots of big wins. We were able to a refinance it and take all of our money out for our cash on cash in an infinite return. We sold it during COVID for 350% return on investment. So it kind of had a little bit of everything and it was a fun article too. Right. And we’ll have that on our website. So you’ve got, Oh, so this was, this was a pretty recent if it was a during the, during a shutdown.

Charles (10m 44s):

Yeah. The exit was just in the last couple of months we purchased it like what 18 months ago or 2020 months ago or something like this. And where was that property located? Its in Washington state and they, the second largest city in Washington is called Spokane on the East side of the state of the state that it’s where I’m originally from them. So we chose that Market for that reason, we had some familiarity with it. It had a lot of tailwinds from a growth perspective. So its an inland city in a lot of people from Portland and Seattle and San Francisco, they are moving inland off the primary coastal cities because it’s less expensive, higher quality of life. And Spokane was one of those cities that was kind of recipient of all that growth.

Charles (11m 25s):

So we liked the market for that reason. And what would be kind of the stabilized, you know, once rent, stabilize, what would be the value of a property like that in that area?

Kristina (11m 34s):

Yeah. So just to dive a little bit deeper into the details. So we bought the property for a little less than 350,000 and it came with the four unit, which in that location was worth 350,000 in and of itself. But I’m, it also came with a single family home that had never really been updated. The place was a total dump. And so it was an adjacent to you

Jesse (12m 1s):

And the actual model on site,

Kristina (12m 3s):

He was being traded as a fifth unit. Yeah. But, but the thing that, the thing that was interesting about it is the deal would have never worked. Had you like run the numbers and not come up with the idea that you could parse a law, the single family. So the property actually under the sale price came with two parcels, but no one had ever thought to slip them because they were connected with a natural by natural gas lines. And so, and so we had to, you know, get really creative in work with a bunch of different contractors and figure out, okay, how do we excavate those? How do we split the natural gas so that if we want to sell off the single family home has as its own separate parcel, we can do that, which is exactly what we did.

Kristina (12m 48s):

So that was kind of interesting, a lot, a lot to take on for your first deal with a four unit and a fix and flip at the same time, really it was two deals and one and a, you know, we learned a lot, we ended up selling, so he bought it for three 50. We ended up selling the single family home for a little over 225,000. And we just sold the, for a unit for over 430,000 umm, from a 350 K purchase. So Awesome yeah,

Jesse (13m 18s):

That’s great. You know what, yeah, you’re right. I feel like most people are looking at as Leeds of plans. Not usually have gas lines on their first deal, so that’s a, that’s pretty sweet and it, in terms of the wholesale. So for, just for listeners, that was somebody that was a signing the contract. Was it a, was it an assignment or did you kind of double close on it? How did, how did you work that out?

Kristina (13m 39s):

Yeah, so it was an assignment of contract. The other interesting part is we were able to negotiate seller financing on the deals on top. Yeah. So we actually were able to talk to the seller into carrying the mortgage for 12 months. And on top of that he had an underlying mortgage still on the property. So it was a wrap over, you know, that and we were able to convince him to charge us 0% interest on the balance over at his current Mortgage so definitely a lot of negotiation skills there from the specialty, like back in the Investment in trading days and it worked out really well cause we were in Kansas.

Kristina (14m 26s):

Yeah. We are able to refinance at 10 months later. Umm and you know, appraise it for almost just the four unit for what we paid for it and pulled all of our money out and then some of the deal.

Jesse (14m 38s):

Wow. OK. So you’re, you guys are clearly sharks. The, the, the vendor take back Mortgage, that’s interesting that the M you know, for those that don’t know, and I’m, this is pushing my knowledge a bit too. You mentioned a wraparound. So the wraparound was that would be in second position to a mortgage that you got with the bank, and then you had to have those obligations.

Kristina (15m 0s):

And then we had one escrow company that paid both. So they do the escrow company, paid the underlying Mortgage to the bank, and then they paid the cellar of the battle.

Jesse (15m 9s):

So I know that A, Kristina you been kind of on the finance world? I know you have an IRR on this property. Do Diaz, did you have a ballpark that you were looking for a return on investment for it, or are you looking at purely a cash on cash?

Kristina (15m 22s):

Yeah, so we we’re like purely looking at cash on cash. You know, our goal was to kind of generate that infinite cash on cash return after a refi, which we were able to do, you know, we, we hadn’t really considered, you know, our original plan was to hold this investment long term, but as we’ve grown in scaled, you know, we realized that its so much easier to operate buildings like under one roof. And so we’ve kind of been in the process of consolidating our portfolio a little bit and selling and then being able to stack up and trade up into bigger assets. So just to make operational efficiencies easier.

Kristina (16m 3s):

So, you know, we didn’t really We I knew like our original target was to have, you know, the value of the four unit, you know, increase to at least 375,000. So that was kind of the target, you know, we ended up selling it for almost over 50 K over what we originally targeted during that 18 month period, we were able to increase rents on the building when we purchased it ranks were only about $2,100 a month for the four unit. And during umm, one year period, we brought them up to over 3,300. So quite a significant increase from our business plan.

Jesse (16m 44s):

Yeah. That’s great. And you mentioned It and Charlie you did as well. Can you just explain to listeners when you say an infinite cash on cash return can just kind of explain, you know, the framework and what you mean by that?

Kristina (16m 55s):

Yeah, so essentially when we purchased the deal, we put about $50,000 down. So we had $5,000 to the seller and we had to pay a wholesale fee on top of that, to the wholesaler. And then when we refinance the deal I’m we were able to get all of our original investment out and then some, so we actually ended up taking an additional, almost 10 K out on the refi as well. So essentially we had $0 of our own capital left in the deal. So what that means is any time you get a rent payment and you have cash flow generated every month from rent collections, that money is essentially an infinite return.

Kristina (17m 38s):

Cause whatever dollar you make, its over at the $0 as you have invested in the property.

Jesse (17m 44s):

Yeah. I went, I went a little hazy. They’re just thinking about math in high school. Is it undefined? Is it? Yeah. And that’s listen. That’s a very Awesome yeah,

Charles (17m 55s):

Well like, cause my mind I’m also kinda getting a little boy. It was interesting.

Jesse (18m 1s):

All right. Well let’s take us back to reality here. That’s a fantastic deal. And congratulations on that. And maybe Charlie, you could talk a little bit about Akras Capital and you know, you are clearly you have made, made strides within the, where the portfolio is at today. Why don’t you just fast forward us to today and maybe talk a little bit about that journey. And like I said, Akras Capital itself. Yeah. So,

Charles (18m 25s):

So, you know, we began acquiring those smaller multi-families in Washington state, we acquired three of them and Kristina are focused on asset management. I’ve focused on kind of business strategy and capital raising and investor relations. And then our other partner Lindsay and focused mostly on underwriting as, ah, she had a lot of experience and in that, and as we began operating those three assets, you know, as Christina alluded to, we realized that there was a lot of work in operating assets, even with the property management team of books. And we, we early on began developing a stable of mentors who had experience in real estate investment in development.

Charles (19m 6s):

And all of ’em were basically like you guys’ like, why are you thinking or out in these small multi-families like, get to go bigger. You need to go big or go home essentially. And were like, no, we wanted to learn. And we really want to take our time with this start small and kind of ladder ourselves up so that we aren’t just jumping right to a large asset and getting ourselves in over our heads. Cause we hadn’t brought in the new investors except our own Capital into the, into these deal’s yet. And we wanna be really, really careful M at that moment when we did. And so we finally took their advice and started going to some different conferences that introduced us to larger deals, syndication, a larger, an asset management and met some partners who had already had a lot of experience in acquiring and operating larger multi-family complexes, mostly in Dallas and Fort worth and Orlando, Florida, and a basically asked them to show us what they could and, and they were happy to see us cause we have a lot of energy and it could help to generate deal, flow out for them even.

Charles (20m 7s):

And that’s what we began really studying syndication. And in a more intentional way since that point, we’ve been the general partner on a couple of these larger multifamily acquisitions, which we continue to operate today. And now focus all of our efforts on a 75 to 300 unit multifamily acquisitions, just because there’s so much more efficiencies the game when you have an onsite leasing office, when you have a more systems driven, larger scale property manager to help you to have all those efficiencies. And so frankly for Kristina a life is way easier with these larger, you know, units as the asset manager.

Charles (20m 49s):

And, and that’s sorta where we are today is, is working to grow our, our portfolio and our experience for them.

Kristina (20m 57s):

And right now we’re focused on looking at the Phoenix market. So we have moved away from Washington and are focused on Phoenix. We really like loved that market right now. What has super strong fundamentals, strong job growth, diverse economic and employment base. And you are seeing a lot of people move there, especially from the coastal cities. So I think the outlook for that Market is really strong. That’s kind of where were focused there. You know,

Charles (21m 30s):

Well, the thesis has remained the same, which has inland growth cities and investing in multifamily class B value adds, but are markets have changed a little bit. And our, our focus on, on growth has really been, you know, pushing us towards those larger assets. So yeah, so there’s a, there’s a lot they’re and I’m going to try to do, I’m going to try to start to sequentially hear, but so there are, you know, a number of individuals that are looking to move from the space of using their own Capital and just like yourselves were probably a little bit, you know, whether it’s scared or just, you know, he intimidated by so going to, you know, whether it was coaching or are going to different seminars and, and meetups, at what point did you realize that you could actually be the GP and the operator and felt confident and doing so.

Charles (22m 16s):

And in addition to that, you know, once you know that, which pool of individuals did you go too, when you’re kind of, you know, switched on into raising capital mode?

Kristina (22m 27s):

Yeah. So I think, you know, we always had the intention to wanna bring in investor capital, right? Like, so we knew that from the beginning, just based on, you know, education and books and podcasts and everything, but we wanted to really start with our own money first and build our own Portfolio and track record. And so that we did no, we were doing, and we could take, you know, feel comfortable taking money from investors. And so I think like the GP stuff started, like after we went to a few conferences that had to do with syndication and really meeting solid partners that really became great mentors for us.

Kristina (23m 7s):

And then, you know, on top of that, I’m we took on, you know, doing our own education. We attended multiple boot camps and read multiple, like textbook’s, you know, you know, having, I think the investment background that myself and our other partner does, I felt really comfortable, like knowing how to underwrite and look at investments and, you know, be able to talk to investors about those investments and about those deals. And so I think that, you know, kinda gave us a leg to get there a little bit quicker than a lot of, you know, some people might have a higher learning curve there. Yeah. And as we began,

Charles (23m 47s):

Matt operating our first multifamily are our first kind of a larger syndication. Actually it is our second, when we got more involved in that regard, we’ve kind of saw what the, you know, the lead sponsors we’re doing and we we’re heavily involved and kind of some of the day to day stuff. And we realized like, okay, this is not that different from not rocket science. It’s not rocket science. I mean, there’s certainly more complexities and there’s, there’s a, you know, the decisions are spread across a hundred or 200 units versus just four, but a lot of the fundamentals are the same and Kristina, you know, quickly showed, you know, performance in that regard. And so we felt like, yeah, well lets, lets keep doing this and started doing our own.

Charles (24m 31s):

Or you know, we don’t need to be just a member of the GPU. We can be the lead sponsor, you know, within a, you know, in the near term. So, so, so with those, the deals, if I hear you correctly, you are Koji P on a couple of deals. You’ve kind of saw what the operator was doing, where you at any time and that a learning curve were you on the other side, were you with the limited partner on deals were also limited part that as well, we did a bolt, so we’d come and invest our own money as, as members of the LP. And then we remember is the GP helping to operate those assets and just cause we don’t hear as much we had Brian Burke on the show. Talk a little bit about kind of the other side, the investors, you know, the limited partner, which I feel like gets short riff because people always want to talk about the GPS, but on the LP side, did you find that you also, you know, what, what did you learn on from that side of the deal that helped you, you know, moving from that position and, and doing an operating your own deals?

Charles (25m 24s):

Yeah. I mean, I think that when we were the GP and the LP on these deals, we were watching that we were taking part and it involved in the conversations about how to communicate with the LPs so that they understood how the asset was performing and felt good about their Investment. And then as an LP, we also were receiving those communications. And so I was able to see, and in some cases we’re responsible for those communications. I was, you know, I wasn’t sending emails to myself, but I was sending emails to our investment team, the same stuff that I’ve be sending myself as an LP and were able to watch an hour, you know, mentors really artfully in, in really intelligent ways to communicate with a, the limited partner base. And so I really learned from them how to just, you know, give solid updates on asset performance without, you know, any emotion with a, you know, in a really clear in authentic way.

Charles (26m 17s):

And so learn a lot about how to do that and, and what it’s like to be the person receiving that kind of communication

Kristina (26m 24s):

As an LP. Like there so much you can learn, you know, it’s, you’re receiving, if you have a strong operator, hopefully you’re receiving, you know, monthly communications on how your investment is going to be receiving financials on the property. You’re able to, you look at the overall deal and analyze it yourself. So I think for anyone also like looking to get into a syndication, being an LP is a break because it gives you a lot of experience in terms of like, okay, how do I look at this? Investment and what are some things I should be, have questions to be asking and you know, what is kind of the risks involved here? And so it has you start, you know, being able to think about like Investment investments in a different way,

Charles (27m 9s):

How do you prepare yourself to potentially bring deals to your own investment group as a, as an LP, your learning, all that you’re even while you can watch, you know, the webinars and a model in your own webinars for a future deals you do off of the operator, if they did a good job with it and also learn what not going so well and, and make those improvements for your own operations, once you are, you know, leading your own deals. So that’s very cool. And, and you, you, you basically, what your saying is, is what I hear a lot from a, you know, people that come on the show it’s that, you know, when you mentioned that a, one of the colleagues said, well, what are you dealing with these small unit? Deal’s it’s like, that’s great. Do you know, you still wanna do those to, to kind of learn the industry, but usually once you kind of break in to the larger deals, you’re like, wow, I didn’t, I didn’t know.

Charles (27m 54s):

You could just do this, that not me, or maybe not that easily, but that it wasn’t a, it wasn’t a black box. It wasn’t just, you know, something that nobody else can do except a few people. And you, you know, you start realizing that you can, by bigger deals, I want to talk a little bit about the raising capital piece. So you’re now in this space you’ve done, whether it’s, you know, different coaching, different seminars, and now you’re, you’re literally looking for your first deal, the investors that you’re raising from our, I assume it’s a part of that network that you’re trying to build. Maybe you get a little bit of context on that and start even the dollar value, whether, you know, you had a 25 K or 50 K minimum and, and how you’ve kind of worked out some of the mechanics.

Charles (28m 36s):

Yeah. So we looked at capital raising in a really intentional way, long before we needed to actually raise it. So we can get to put processes in systems in place, which has kind of, ah, the base have a strong replicable.

Kristina (28m 49s):

And I’m going to give us a shout out to M math, their cloth for raising private capital book. His book was probably the, for while a lot of the way that we looked at the Yeah,

Charles (29m 1s):

We love Matt, their clocks, it’s kind of a structures. And so we use some of that and broke. We decided, first of all, that we didn’t want to be raising capital on a per deal basis because we see a lot of people that are raising capital to have a deal. And then they go out and they start raising capital. We decided to have a consistent capital raising effort kind of year round, regardless of our current deal flow. And that way we could build relationships with investors and educate them at a comfortable pace, educate them about syndication, about multifamily, about the deal structures, every a return profiles and targeting. Umm, so that way, when we did bring them a deal, they felt educated enough to make a choice and deploy their capital with us.

Charles (29m 45s):

So that was the first kind of thing that we did. And secondly, we built, we broke our network into three parts, a tier one, tier two and tier three, tier one, being our family and friends and closest colleagues. The people that we could, that we, that we see on a daily basis or we go and spend the holidays with the people that are the most trusted and the most deep relationships. So we started by, I’m kind of bringing them in and telling them about what we were doing. The tier two, it are the people that we’d meet and maybe a networking type of events. So we meet them. A conference are a meetup or, or their colleagues of ours from the past that we have were friends, but we have a decent amount of a relationship with, but maybe it’s been awhile since we talked to them.

Charles (30m 26s):

So former colleagues or friends from college and, and things like that. So that was our tier two. And with them, we began reaching out to them through kind of email campaigns, educating them about what we’re doing through LinkedIn. And that, of course, just in our normal networking activity and then tier three or four people that we’ve never met before. So perhaps someone is listening to this podcast right now would be considered a tier three. And what they do is, you know, hopefully they’re energized to come and check out what we’re up to, coz they like our story in what we do. And they come to our website and start engaging with a suite of resources. They get involved with their newsletter. And at that point they’re a tier three.

Charles (31m 7s):

And with all of those folks, we then begin moving them through a funnel essentially that educates them, onboards them and then asks them to commit, you know, and, and eventually invest with us. And so that’s essentially our structure that we use every day, a week quarter. And it’s been, has been going great so far. So a big shout out to Matt Faircloth for that structure,

Jesse (31m 32s):

That, that guy, I dunno if you guys do it,

Charles (31m 34s):

You do that.

Jesse (31m 36s):

We went, we went, we did a deep dive and the book there. So what I hear from that funnel is you wouldn’t be happy happening to be creating a substantive relationship with these individuals.

Charles (31m 46s):

Absolutely. Absolutely necessary.

Jesse (31m 48s):

Yeah, for sure. And so just on the, on the financial side, you know, when, or whether it’s, you, you can talk to now, or you can talk to, when you first started raising capital, did you have a minimum investment? And what was that?

Charles (32m 2s):

Yeah. Are a minimum has always been 50,000

Jesse (32m 6s):

And you alluded to kind of having deployed Capital ready to go. So did you create that in a fund structure that it was committed, but not, not an actual funded amount or did they literally fund the amount and then you had certain objectives to hit throughout the year.

Charles (32m 24s):

It’s a soft commitment. So essentially they are. And so, so of course like their life situation can change, but at least we have them in a place where they like the types of deals we typically bring. And we look at our past performance to say, here’s generally what we like to do no guarantee of future results, but these are the types of assets we’ve purchased. And so when a deal becomes available, we then ask them to actually deploy that capital into the deal. So just getting them warmed up and on deck.

Kristina (32m 51s):

Yes. It’s just, it’s just a paper on paper commitment so that you have think a lot of the problem is, you know, people are out there looking to do with you, but they don’t really have an idea of the amount of capital that they can raise. Right. So if you’re constantly like talking to your investors and saying, Oh, Hey, if we had to deal, you know, how much will you be interested in committing next time, then you at least have some kind of idea on paper of how much you owe.

Charles (33m 16s):

And, and I think if, you know, from investors that I talked too as well and an operator’s it’s, it gets them on a psychological kind of mowed that they kind of, you know, the work out, the objective, the objection’s that they have, you talked to them, you know, what it means to be an LP in Y you know, you’re adding value to them. I think a lot of syndicator’s and just people were raising capital in general. They think there, you know, their asking for their money, whereas know you’re doing them, the Favre, if you really believe in what you’re doing, your, you are giving them an opportunity. So taking us to where the team is today with Akras Capital what, what does that look like? What does the portfolio look like? And I know you mentioned the geography a little bit, if you have expanded to other markets.

Charles (33m 58s):

Yeah. We’d love to here where you guys are at. Okay.

Kristina (34m 2s):

Yes. So like, like we said, we were focused on Phoenix right now, acquiring they’re we have, or have not yet acquired in asset. There is a new market for us that we’ve been focused on since January and then kind of the whole COVID thing over the last six months definitely slowed that process down a little bit, but were back at it and were actively, you know, submitting LOI is every week, you know, we’ve been best and final on a couple of properties that we haven’t yet one, but, or, or definitely hopeful that in the next couple of months will be able to put something under a contract. So,

Charles (34m 39s):

And the current breakdown of our portfolio is we have that Washington three assets there. Two of those are dispositioned and one remains, we are working to sell it now have kind of active tours happening there. And then we have and asked them in North of Orlando, Florida. And then we have, which has a 324 unit class B, and then we have 111 unit in Dallas Fort worth. So that’s kind of the makeup of our, our current portfolio and, and, you know, helping to grow that in the Phoenix space. Okay, great. Well, we are coming close to the end of the show here. I’d like to do a fast for a final questions here. So if you guys are game for that, we can get started.

Charles (35m 21s):

And in terms of, you kind of mentioned a little bit about kind of mentors, but are there a couple individuals that really kind of took your journey to the next level with real estate that you’d like to shout out? Definitely. I mean, a, one of our partner’s in Dallas Fort worth, and we met at the, the best of what Joe Fairless is best to have a conference we’ll first of all, Joe Fairless and the best ever conference was a huge place. Were we started interacting with a lot of professionals in this space that were thinking really big, and that really started to elevate our mindset on what we could do and what our capabilities were. So, you know, a shot out to him, you know, his book was probably a pretty transformative and under the understanding of syndication.

Charles (36m 5s):

So, umm, while we know him a little bit, it superficially a little bit, we’ve stood in some photos with a guy and he was definitely a, someone who was really formative and are thinking about all of this. Well he’s, he’s got to blueprint that that book is, I mean its called the book. It really is a blueprint. Its pretty a pretty well done to save the least thing totally right now. And folks that, you know, along the way from contractors to, you know, property managers who just gave us a little bits of advice and wisdom here and there. But yeah, one thing that I would say that were doing is putting together a strategic advisory board right now of, for individuals who can help to provide us with operational and strategic guidance.

Charles (36m 54s):

And so we’re kind of formalizing some of the people that were already mentors to us in a way that they’d just join us on our strategic off-sites every quarter and helps us give us a little bit more or a little bit more of a tangible guidance. So that’s great. Yeah. So, and the next question is A, it’s usually about books that have impacted your, you mentioned to this can be, you know, something that was transformative for you, whether it was a, it related to real estate or not, you know, just one or two that, that really that we found was beneficial. Yeah. So a book that’s unrelated to real estate, but it can absolutely be applied to it. I was given when I started my first travel business is called the E-Myth revisited it and it’s by Michael Gerber.

Charles (37m 38s):

And I feel like a lot of people on right now, this one, but yeah, just systems and processes turning, you know, you’re business into a replicable success is a little bit of a little machine that was a huge influential book for me. As soon as I started in Group businesses over the course of my career or anything.

Kristina (37m 54s):

So I’ll give a shout out to, I just finished a couple months ago, I’m this book called profit first and for any new entrepreneur who is starting in business, I highly recommend it cause it helps shift your mindset as an entrepreneur and why you should pay yourself and how you should be thinking about making that happen and you know, just really great read, so

Charles (38m 18s):

Awesome. Alright. We got two more and the next one is something you wish you knew when you started this investing career.

Kristina (38m 27s):

Mmm. Okay. So I think it’s just like, what I wish I knew is like mentally preparing yourself for ups and downs of real estate. You know, it’s definitely at sometimes a little bit of a roller coaster in that definitely took some getting used to. And so, you know, I think I would tell myself three years back, like this is going to be okay. Like it was a lot of ups and downs and just, you know, focus on your mind set and gets the right place.

Charles (38m 58s):

Yeah. That’s a hard one too. And I find, you know, friends that I’ve had that have come to real estate from the financial world, you know, its one thing when your dealing just with stress of a job, it’s another, when you’re dealing with human beings and, and people on the tenants and asset managers, property managers, that’s a great answer. The last one just cause listeners know I’m a huge car guy, your first car make and model kind of a car guy to be, there you go. The first car was a 2000 Jeep Cherokee, a it kind of, one of the classic one’s before they a retired, that kind of bond ruined everything. Okay. So then that was my, my first car paid for it myself. And then for, I dunno where it is these days, but had a lot of fun with that thing.

Charles (39m 39s):

Awesome. We normally don’t get cool. We normally don’t get cool cars for a long time.

Kristina (39m 44s):

Well like van that was really hideous.

Charles (39m 49s):

It’s awesome. Well, listen, thank you so much for coming on the show today. It’s been a slice it’s usually when you look at the clock and you’re at the end, that means it was a, it was a great talk for people to reach out to you, a Google your name. Is there any specific area that you’d like them to reach out? We can definitely put anything in the show notes. Yeah. I mean certainly our website Akras, Capital a K R a S S capital.com has a great place. So you can go and connect with us, sign up for our newsletter. We have a white paper that we feature their, and if you have any interest in getting involved with us, you can fill out an, an investor application that’ll, you know, ping us directly. There’s also links to schedule and book meetings with us independently.

Charles (40m 31s):

If you like, you can find out on Facebook, Instagram, LinkedIn, all over the place. Yeah. Awesome. Awesome. We have people on the show that maybe a little bit older than us, you know, WW does and I’m like guys, we will put it all there. You are going to be able to find them. My guests Awesome my guests today have been Charlie Stevenson and Kristina and Knight thanks so much for coming on working capital, right?

Kristina (40m 56s):

Yeah. Thanks for having it.

Charles (41m 2s):

Thank you for listening to the working capital. Podcast my goal is to help individuals break into real estate investing as well as educate experienced investors. If you enjoyed the show, please share with a friend or subscribe it, give us a rating on iTunes. It really helps us. If you have any questions, what to learn more or like me to cover a specific topic on the show, please reach out to me via instagram@joeforgalsorheadtowwwdotjessefragale.com. My name is Jesse Fragale we’ll see you back here for the next episode or the Working Capital The Real Estate Podcast

Kristina (41m 35s):

Right.