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Show Summary
In this conversation, Kurt Pauley shares his journey from being an investor to becoming a commercial real estate agent in Minneapolis. He discusses the differences between residential and commercial real estate, the rise of mixed-use developments, and the investment landscape in Minneapolis. Kurt also emphasizes the importance of building relationships and mindset in capital raising for real estate investments.
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Investor Fuel Show Transcript:
Kurt Pauley (00:00)
My experience is that it starts slow and it’s hard to do, but you gain momentum over time. And it’s a lot about mindset. A lot of people think they’re going out and begging for money and it feels uncomfortable to them. ⁓But it’s more about providing opportunity to people. And if you provide an opportunity that’s compelling enough, they will invest. There’s a lot of people out there that want to invest in real estate, but are maybe too busy. And you give them this avenue to invest in real estate with someone they know and trust.
Dylan Silver (02:01)
Hey folks, welcome back to the show. Today’s guest is a commercial agent and investor in Minneapolis. Please welcome Kurt Pauley. Kurt, welcome to the show.Kurt Pauley (02:13)
Hey, thanks for having me. I appreciate it.Dylan Silver (02:15)
It’s great to have you. I’m glad to make the connection and I think it’s interesting talking to agent investors. I am one. I like to connect with as many people in the space as possible. Which came first for you the ⁓ agent or being an investor?Kurt Pauley (02:31)
The investment came first in 2016 while I working a day job. A lot of couple properties on the side.Dylan Silver (02:36)
I always like to ask folks how they got into the real estate space when I’m talking to guests. Did you have friends, family, or people that you knew that were involved in real estate? How’d you get in?Kurt Pauley (02:47)
A little bit. always wanted to when I was growing up. grew up on a farm and my dad built five houses on land we owned and also bought farmland. So I saw the power of real estate. Prior to living in Minneapolis, I lived in New York City and it felt unattainable to get into it. Once I moved to Minneapolis, read Rich Dad Poor Dad, a book called The Alchemist. And within a few weeks after that, I had my first property under contract. So it was…Dylan Silver (03:01)
YeahI’m actually from
northern New Jersey. I grew up about 28 miles from New York City. So I had a similar experience of this feeling that this is ⁓ very difficult to be an investor and it never even really crossed my mind at all. ⁓ And then I lived in Massachusetts for a period of years, which is another area where it’s a little bit trickier. I moved to Texas and I saw so many
Kurt Pauley (03:15)
or next.Yeah.
Hmm.
Dylan Silver (03:35)
what I would call mom and pop investors. And that really opened my eyes for me, lot of land in Texas as well. I also came from this idea of being active ⁓ outside of being a realtor. I was a wholesaler for about two years prior to getting my license. What drove you to get a real estate license?Kurt Pauley (03:53)
In my mind then, it was to get out of my day job. know, so I became an agent, soon had ⁓ five or six listings. And I came home and told my family I’m quitting my job. And they all thought I was crazy, but I knew I could be successful as an agent. I already had produced that many listings. And yeah, it really helped me to have that flexible lifestyle and pursue my investments on the side and make decent money being an agent as well.Dylan Silver (05:07)
I had the same reaction, I think a lot of people that are involved in real estate when they’re just getting started, specifically if they don’t have lots of ⁓ connections within real estate or if they’re moving from a W-2 job, people look at you like, what are you doing? And for me, I was very exhausted, I was burnt out from ⁓ a career working in automotive space and I felt like, well, what do I do? And a Google search was what got me involved in real estate.Kurt Pauley (05:20)
Mm-hmm.Dylan Silver (05:36)
I do want to pivot and ask you about the commercial side. Did you know when you got your license that you wanted to do commercial?Kurt Pauley (05:38)
Good. Yeah.Not necessarily at the beginning, you know, ⁓ it always intrigued me as well, but I a lot of residential. And then in my investment side, I bought two mixed use buildings and I love the commercial aspect of those buildings. On the investment side, I love those longer term tenants in a retail space, for example. ⁓ And I like those that market a little better. It’s more about the numbers, more sophisticated investors. It’s not necessarily about emotions like single family. So I was drawn to that. And then ⁓
got asked to join a commercial brokerage called NAI Legacy. And the rest is history, really. I loved it and jumped in and kind of aligned with me wanting to invest in apartment buildings and then also do commercial brokerage as well.
Dylan Silver (06:24)
I want to ask you about the commercial space and deal timelines, deal flow and reasonable expectations, you know, for folks who may be thinking about getting involved as a commercial realtor, right? When you think about commercial versus single family, two totally different ball games and single family is no walk in the park either. But with commercial, you’re looking at so many different factors that come into play. What’s a reasonable timeframe for a full commercial deal?Kurt Pauley (06:36)
Yeah.mean, you’d probably be good if it was, you’d be quick if it was five to six months from start to close. I’ve had multiple deals go longer than a year. And I think about maybe closing four or five big deals in one year. it’s a, you’re, ⁓
tolerance for things to go wrong has to be high because they will go up and down and up and down and deals will get dragged out and every single asset class is a lot different so multifamily might be different than industrial versus a land deal might take two years because you have to work through the city or environmental or anything that could come up you know so yeah I think long timelines you got to get used to it’s part of having a thick skin as an agent you get used to that waiting for a commission right and
Dylan Silver (07:23)
Thanks,Kurt Pauley (07:35)
I’m only gonna four or five big ones this year. What if one drops and you get worried and all those stressors of it, right? So you still kill what you eat and you have to do that. But yeah, it’s an education thing, right? Like personal success really exceeds personal development, they tell me. So I had to develop myself and educate myself with all the commercial assets.and just be a student to be able to be successful in that. I couldn’t expect that I could go right from residential to commercial and it would be easy. I can tell if someone calls me about a deal, can tell in two seconds if they’re a residential agent or commercial agent by how they talk about it. So it’s interesting.
Dylan Silver (08:11)
Yeah.I want to ask you about commercial multi use or flex use. And I think there’s an interesting niche there. And I don’t know exactly when this started to become more prevalent, but as a Texas agent and as just someone who’s lived in Texas, I no longer live in Texas, but as an agent, you see so many of these properties and it seems to be more and more and more common and more demand for it. As you see more apartment complexes and then you see more retail spaces and you
Kurt Pauley (08:19)
Yeah.Dylan Silver (08:42)
tend to see what it feels like a whole, it almost feels like a mini town built around commercial residential plus retail plus restaurants.Kurt Pauley (08:53)
Yeah, I mean, that’s been a huge trend for years and years lately. it’s pushed by investors, developers, but also by the city municipalities that want that retail level on the main floor. So the cities and zoning commissions are driving a lot of what goes there.⁓ It’s it’s funny here in Minneapolis. We see a lot of mixed-use buildings get built in the last few years You know retail on main floor a bunch of apartments and a lot of those retail spaces are sitting vacant So we see developers now go to the city and say hey we want to put ground up residential on the main floor and not commercial and they’re getting some pushback from the city, but I can think of five empty retail spaces right now, so I think dynamics have shifted a little bit where maybe ⁓
Some of these class A buildings are little overbuilt in areas. And also the rent that they need to get from these commercial space has to be so high that they can’t find a tenant. I think about it, interest rates and construction costs and everything. You get this level, you can only have so many tenants who can pay that much for that retail space.
Dylan Silver (09:39)
Yeah.The
those retail spaces, as you mentioned, they’re very niche. They tend to be very high end. So who is the exact avatar of the tenant that can come in there? I think of like San Antonio, Texas, where I saw so of this and there was probably even more building of this that they had going on. And as the city was expanding, ⁓ you would see these beautiful areas and then you would also see this ⁓ flex use commercial. ⁓
And ⁓ now that I’ve met more and more folks like yourself, Kurt, it really drives home that if you want to be active in real estate for any period of time, you’ve got to be able to niche down, but you’ve also got to be able to pivot. Right. So that same type of ⁓ avatar might not have been as common or as sought after, know, 15 years ago. But today it is very common. And as you mentioned, ⁓ there may be another pivot taking place because some of the tenants
Kurt Pauley (11:10)
Yeah.Yeah.
Dylan Silver (11:26)
you know, don’t want to be paying that super high rent and therefore the investors are saying, let’s have residential on the ground floor. I do want to pivot though here, Kurt, and ask you about Minneapolis in general. I’ve had a couple of guests on the show from Minneapolis and I always like to ask folks who are investors, ⁓ if I was looking at Minneapolis, you know, what are some of the benefits of investing in and around the greater Minneapolis area?Kurt Pauley (11:52)
You know, I lived a few different places. Just in general, living in a place, ⁓ it’s the most amazing place I’ve ever lived. I have a creek right in my backyard, but I’m 10 minutes from the airport, five pro sports, all those amazing things.You know, I would say Minneapolis is very, and the Twin Cities in a whole is very steady-eddy. You know, we see, we still have slight rent growth right now, where other like maybe Sunbelt states or certain parts of the country that were so hot to apartments indicators and investors have seen negative rent growth, right, and vacancy and things of that nature. We’ve also felt some pain here, but very steady-eddy, you know, which…
I’ve talked to investors and invest me and they they enjoy that where they say their deals and maybe Texas or Arizona and these other places aren’t going as well. So it’s safe. It’s steady. You know we have lots of Fortune 500 companies steady population growth. So Minneapolis itself unique dynamics you know we see a lot of people moving from Minneapolis proper urban to suburbs and it’s kind of a myth where people think Minneapolis is dying.
it’s really broken even a lot of people have moved to the suburbs but a lot of other people from like fargo and milwaukee and the small markets have moved to minneapolis and taken their spot so the numbers have remained strong here ⁓ but you minneapolis in general i think minneapolis has gone through a heck of a time these last few years and some investors just won’t invest in minneapolis at all and just want like a first string suburb
Dylan Silver (13:23)
Hmm. What I’venoticed from and I can’t speak for every city, right? I don’t think this would necessarily apply to ⁓ New York City, for instance. But for the cities that I’ve lived in in Texas, and then I’ve seen so much interest in Florida, which is another area of the country where a lot of people are looking at ⁓ real estate and then all industry. It feels like there there is this understanding that
Kurt Pauley (13:43)
sure.Dylan Silver (13:48)
If you can invest in an area outside of a city, it may be more favorable to investors. You might not be able to demand the exact rents that you could within the city, but it’s more favorable to investors. So for instance, when I was in DFW, I lived in Denton, which was Dallas, Fort Worth Metro. lived in Denton. It was really closer to Oklahoma than it was to Dallas. But there was a lot and still a lot of investment interest.Kurt Pauley (14:04)
Hmm.Dylan Silver (14:14)
from single family home investors, from people doing new builds and subdivisions, because it’s pretty far from Dallas, but still considered greater DFW. And you get a lot of the favorable climate towards investors versus some of the landlord tenant issues that you may face. And I also wanna say, and I could be wrong about this, but I wanna say in Dallas in particular, ⁓they may not allow short term rentals. So for Airbnb folks, it might have been a difficult situation for them on the Airbnb front. I wanna pivot a bit here Kurt and ask you about ⁓ your own experience investing. You mentioned going from single family to multi unit and I believe I heard syndication in there as well.
Kurt Pauley (14:46)
for sure.Yeah.
Yeah. Yeah, I started small, you know, I it’s funny. I read this book called The Alchemist. It says ⁓ people who chase it hard or give it their all to reach their goal have beginner’s luck. I told my brother that, called him like, dude, we need to buy real estate like yesterday. In like a week, he called me and said, hey, the bank I work at foreclosed on these houses. You should buy them. And I ⁓ I bought three houses right then and ⁓
sold them a few months later for a great profit and continued to 1031 into duplex, triplex, six units and then 11 units, 12 units, stuff like that until I met a mentor and then that’s when I started syndicating, taking investor money. ⁓ So I did that for a few years and now I’m at a point where I’m still buying existing buildings, mixed use buildings, apartments, but I’m trying to develop a building from the ground up right now.
And that’s kind of my new adventure on that side of things. And I’m selling off some of my Class C buildings and smaller stuff now ⁓ to focus on more Class A buildings.
Dylan Silver (16:44)
I want toask you about raising capital. This is something that I love to talk about. Maybe one day I’ll dive into this. actually spoke with a syndication attorney who is a guest on the show who actually, you know, basically said to me, he said, Dylan, you know, I think you might want to take on partners, but don’t do this syndication for yourself just yet because there are some risks with ⁓ raising capital. But what has been your experience with capital raising? And then also what advice would you give to folks who may be interested in getting started raising capital?
Kurt Pauley (16:49)
Yeah.My experience is that it starts slow and it’s hard to do, but you gain momentum over time. And it’s a lot about mindset. A lot of people think they’re going out and begging for money and it feels uncomfortable to them. ⁓
But it’s more about providing opportunity to people. And if you provide an opportunity that’s compelling enough, they will invest. There’s a lot of people out there that want to invest in real estate, but are maybe too busy. And you give them this avenue to invest in real estate with someone they know and trust.
⁓ I tend to, I think a great advice is just mention to people offhandedly with people that say, what are you up to? What’s new? Say, I’m…
investing in real estate and I’m partnering with investors, something of that nature, just so they know. And you don’t know how many times I’ve done that. And then people will come to me and say, hey, can I invest in your next deal? And it’s been very powerful for me. I didn’t come from a lot of money, but I’m a huge net worker. I run a meetup group in town here with 2,500 members. so people knowing that I do that.
Dylan Silver (18:04)
Wow.Kurt Pauley (18:16)
and wanting a local person to invest with has been very helpful. I always say I’m another piece of advice for people. You gotta be a farmer and not a hunter. And what I mean is you plant the seed like a relationship, plant the seed, water it and water it, grow it, generally care. I don’t make relationships, build relationships with people that I think are like jerks or something. It has to be the right fit. Then that tree grows and gives you apples for the rest of your life.Dylan Silver (18:24)
Hmm.Kurt Pauley (18:43)
There’s other people that are hunters, might go to a meetup group and say, hey, I got this deal, 100 units out Texas, you want to invest? And that’s skipping that whole nurturing of a relationship part and building a relationship and building trust. I think it’s so important to generally care about the relationship and grow it and treat it with utmost respect like you would any friend and then see what happens. Not everyone’s a good fit, not everyone will invest and the right people will.Dylan Silver (19:06)
That’s the commercial agent coming in and I like it because when I hear that, it really hearkens back to, in my own life, some of the goal setting that I’ve had to do and you realize that you might set a goal and you might not hit it when you want to. You might hit it a year later and then you say, well, this took two years for me to do this and then that tends to create a shift in mindset. Okay, well, I might have to be patient for this.to matriculate. Relationships can be like that. I know in my experience, I didn’t think that I would become a realtor when I first got started wholesaling and then it was about two years later where I ended up getting my license. ⁓ We are coming up on time here though, Kurt. Where can folks go if maybe they’re in the greater Minneapolis area and they’ve got a deal they’d like you to look at or ⁓ if they’d like to reach out to you, get in contact with you?
Kurt Pauley (19:47)
Yep.I would say go to my Instagram at Kurt-P-a-u-l-e-y, K-U-R-T-P-A-U-L-E-Y. Find me there, send me a message, follow me. And yeah, I’m to talk to anyone. I’m a huge networker and love helping. I had a lot of people help me and great mentors, so I try to give back.
Dylan Silver (20:12)
Kurt, thank you so much for coming on the show here today.Kurt Pauley (20:14)
Yeah, thank you so much. Appreciate it.
