Multifamily Is a Contact Sport: Networking, Trust & Syndication Tips with Roman Kirzhner

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Show Summary

In this conversation, Roman discusses the potential risks involved in real estate transactions, particularly focusing on the worst-case scenarios that investors might face. He emphasizes the importance of understanding the implications of having a Letter of Intent (LOI) accepted and the subsequent steps that follow, including the necessity of earnest money deposits and the urgency of signing a Purchase and Sales Agreement (PSA).

Resources and Links from this show:

• • • Investor Fuel Real Estate Mastermind
    • Investor Machine Real Estate Lead Generation
    • Mike on Facebook
    • Mike on Instagram
    • Mike on LinkedIn
    • Roman Kirzhner’s Website
    • Roman Kirzhner’s Phone no.: (917) 601-7768

  Listen to the Audio Version of this Episode

  Investor Fuel Show Transcript:

  Roman (00:00)
  Only regrets that I have right now at my age and I never use my age as an excuse that I should have done that business and I should have started like 20 years ago.

  Kristen (00:13)
  Mm, yep.

  Roman (00:13)
  20-25

  years ago. I mean, multi-families. ⁓ It’s never late, it’s never too late, but instead of developing business for 20 years and getting to the point when you satisfy, I have certain goals. I squeezed that goal to five years. So one year of my life is for four years of experience. That’s all the regret that I have. It’s never too late, but you can start now.

  Kristen (00:37)
  Yeah.

  Welcome back to the Real Estate Pros podcast. I’m Kristen and I’m here with Roman Kirzhner who is a real estate investor in multifamily syndication. So thank you so much for being here, Roman.

  Roman (02:20)
  Thank you very much for inviting me.

  Kristen (02:22)
  I’m excited to get into all this. You’ve built such an impressive business around you. How did you get into real estate to begin with?

  Roman (02:30)
  ⁓ I started doing real estate when I just came to this country 36 years ago. was, by my background, mechanical engineering. And I was working as a mechanical engineer for quite a few years, for 10 years for Japanese company. Then that business was moved to Mexico. And I became a computer programmer. And I was working as a computer programmer for Bank of America for five years. And that business moved to India. So I decided that I will hold something that cannot be moved. And real estate, obviously, the choice that I

  like. And my first investment was in 1995 anyway, in New York, that’s where I lived for the last 36 years. And I developed that business from single families all the way to elevated to multi-family syndications. And that’s what I do for the last eight years. And that’s what I like to do. That’s all. I basically, I changed my nine to five job to 24-seven.

  Kristen (03:21)
  That’s amazing.

  Yeah, exactly. You think you’ll have more freedom and then you’re just working all the time. So when you started out,

  Roman (03:30)
  Absolutely.

  Kristen (03:34)
  how did you go about, you know, being in a new country? How did you go about building this new career for yourself?

  Roman (03:41)
  out of love of real estate and opportunity that I can see because I was living in New York and I saw opportunity in Philadelphia where you can still buy houses back then for 30, 40, 50 thousand dollars and you can renovate it for a few thousand, you can rent it out for eight hundred dollars and you can refinance, take the money out and move to the next one. So that was the obvious schedule. So I was able to grow that business and manage property

  for

  myself and my partners and other people. So and I reached 50, probably 50, 55 doors that I was managing myself and after that I realized that it’s not a business, it’s a job.

  Kristen (04:25)
  Yeah, exactly. So how do you go about, you know, you have that job, how do you go about building it out so it feels like a business?

  Roman (04:33)
  Yeah. Based on management skills, I established management companies that create the foundation of my income. So I would never look for another job in corporate world. But it’s still.

  driving back and forth between New York and Philly at least two times a week. It’s exhausting and every car that I have and I had has more than 300,000 miles in it. So I decided that it’s not scalable and that’s why I switched with my partners. We switched from single families to multi families in 2018. And that’s when it all started and I love what I do. That’s exciting. It is a business right now.

  Kristen (06:05)
  Yeah, no, that’s very exciting. Talk about that switch from single family to multi-family and kind of what that switch meant for you.

  Roman (06:14)
  I thought by doing real estate for quite a few years before that, I thought that I knew everything about real estate and I was mistaken because multifamily investment is completely different asset type, a completely different business. And if you can do single families by yourself, you definitely cannot do it on multifamily level. It’s one of my friends saying it’s a contact sport. You have to make a contact. And that’s the key point.

  about properties, it’s not about even the projects, it’s about trust and developing network between people who will trust you to put money into you, not into the property, but actually people putting money into you. I’m always asking myself, who am I for you to put $50,000 in my deal? So that’s based on trust. That’s the biggest difference between single families and multifamilies, developing trust.

  Kristen (07:04)
  Mm-hmm.

  Absolutely.

  How did you go about building your network and you know even being around these people that you could build trust with?

  Roman (07:20)
  was ⁓ I’m actually introvert. That was a hard part of it. But I joined a lot of different meetup groups, lot of investors group, a lot of investors who looking for multifamily assets.

  And that’s where you meet quite a few people and you start doing it little by little. I grew up from owning like my first multifamily was six units. And right now I can, ⁓ I’m sponsoring 60 units properties. So it’s all in development and people, and you have to show up everywhere because it’s not about how many people you know as much as how many people knows you.

  Kristen (08:06)
  Absolutely. Yeah, no, that’s a really good point. I mean, networking is such an important part about this business, as you mentioned. What are your best tips? Because I think a lot of people have maybe anxiety going to these meetup groups and networking and putting themselves out there. What would be some of your tips?

  Roman (08:06)
  That’s exactly what it is.

  First

  of all, do not get ⁓ discouraged.

  when you started and do not get too optimistic when you started because people always think that they can make a lot of money from one deal. I can tell you it’s not the case. It’s long-term investment. It’s long-term career. It’s not long-term business. You cannot be rich by doing just one deal. You have to create so-called like a conveyor belt. You have to go through full cycle before you can see real money. And that takes time.

  and

  if you will analyze, or in this case, if you’re doing underwriting on 100 deals and two of them are materializing in actual project, it’s a good outcome. But people get discouraged very fast and they keep telling me that we did like five or six underwriting, nothing pencils out, and I always say, and you have 95 to go.

  95 more to go before something will show up. Patient, patient, patient. And it with experience. And for people who just started, I would recommend just team up with someone who does it full time and who does it least succeeded. And successful, it’s all relative terms anyway.

  Kristen (09:27)
  Yeah.

  Yeah, can you talk about those early days and when maybe things didn’t work out as planned or there was a mistake that you learned from?

  Roman (09:48)
  ⁓ Usually when I’m starting to team up with people and we are getting excited about project that we’re working on, I’m always saying it’s all good when we start counting income. Let’s just talk about what will happen if everything goes wrong.

  So you’re testing your partners and you’re testing the level of risk that they can take in any particular deal. And risk-taking is big part of this business because you cannot predict anything

  what will happen in two years, in one year, in five years, for that matter. You have to look at the property, look at the project from the standpoint of all other options. What is your exit strategy? How you can structure your business to be sustainable in any possible economic conditions.

  Kristen (11:12)
  Absolutely. What are your tips for finding partners that are aligned with you?

  Roman (11:18)
  ⁓ You have to talk about your business all the time You have to be everywhere you have to talk to in restaurants in airports on the plane and the train you have to you have to market yourself a lot and By doing that you can probably establish you few connections with the people

  and probably you can develop from there. So you have to start somewhere. You have to team up with people, preferably with the money, or if you’re looking for the property in that particular state that you’re not having any idea what it is, you have to have so-called boots on the ground, the people who can help you to evaluate the area, evaluate the property, and basically be your team members based on just presence in area. That’s what you can start with.

  Kristen (12:09)
  Yeah, and what about that culture fit and that value fit? Where does that come into play? And what if you team up with somebody where it’s just not a fit?

  Roman (12:18)
  That’s the most important, most difficult part. ⁓ If you’re looking for the partners, my strategy basically, you have to get connections with as much as two times more people than you basically want to because half of them will fall apart.

  as well as that when it comes to money with capital raising if you need to raise one million dollars your goal is to raise two million dollars because everything will happen and I can most almost guarantee that half of the people that tells you that they will put money or they will put effort will never do that. So just be patient and work and work and work and work. It’s 24-7 like I said.

  Kristen (13:02)
  Absolutely. And I think it’s good advice to be talking about your business all the time. Some people are kind of shy to do that.

  Roman (13:05)
  You

  Yeah, as you can, as you noticed my English is not, it didn’t come from Native Americans, but I overcome that obstacles. So I can talk to anyone. If I can do it, anyone else can do it. That’s not a big deal. It’s not a big deal. And you have to know how to talk to brokers. You have to know how to talk to mortgage brokers, real estate brokers, and that’s a specific skills that you will develop.

  Kristen (13:35)
  Yeah, kind of being on the job and doing it a lot and refining your pitch. I’m sure you’ve gone through that where you kind of iterate your pitch a little bit. Can you talk about that? Where, you know, how to communicate what you’re doing in almost like a sales way, like to get people interested.

  Roman (13:54)
  You can do like 30 seconds. It’s called like elevator speech, right?

  So in 30 seconds, you have to tell people what you’re doing, why what you’re doing is good and why you’re passionate about it. Basically, if people asking me what I’m doing, I’m saying that I’m investing in multifamily residential ⁓ real estate and my average return is better than average. And if you basically if you’re interested in hearing more details, we can we can connect, we can have a of coffee, we can sit together somewhere. And in this case, you

  First of all, you’re basically introducing yourself. Second, you’re not violating any FCC laws. You cannot pitch, you cannot solicit your deal when you’re meeting just people first time. You cannot do it. Otherwise, you… I can tell you, orange looks bad on me.

  Kristen (14:40)
  Mm-hmm.

  Yeah,

  what are those regulations?

  Roman (14:51)
  Regulations, it depends on ⁓ what is the difference between accredited investors, accredited investors who have net worth of more than $1 million or income of more than 200 combined per year, and sophisticated people who have experience and knowledge of real estate.

  So you cannot solicit anything to the people, ⁓ sophisticated investors.

  Kristen (16:02)
  Mm-hmm.

  Roman (16:02)
  you might

  pitch your deal to accredited investors. It’s called as FCC regulation ⁓ 506C or 506B. If anyone will be interested, you guys can take a look on that. And it’s boring, but it’s important document.

  Kristen (16:18)
  Yeah, hey, I mean, that’s saving a lot of people a lot of trouble. ⁓ So talk about now that you’re in multifamily syndications, it seems like you guys are doing great business. How have you been able to build out the business around you? What kind of, are you vertically integrated? Do you work with partners? What does that look like?

  Roman (16:22)
  Yep.

  The latest deal that we did is in Texas, in Texarkana, small town. It’s not primary, not secondary. It’s treasury market. It’s northeast of Texas, right on the border with Arkansas. That’s the name. That’s where the name came from, Texarkana, Texas and Arkansas. The only famous thing about that city is a post office serving two zip codes. That’s only one post office in the United States. And by doing that, by

  Finding that property, I created a team of local people in Texas, plus another gentleman who is also full-time realtor, one of my brokers that I’m partnering with. Another person who is doing construction and he has experience in construction and I’m good at finding deals and doing underwriting.

  Kristen (17:12)
  Mm-hmm.

  Yeah, yeah, talk more about underwriting. of, you know, your, that seems like a great skill set of yours. How to have you developed that and what are your best tips for doing that successfully?

  Roman (17:41)
  ⁓ The underwriting, you can use any tool on the market that you can find and a lot of those tools are free tools like Michael Blank, one of them that he’s basically giving it away. If you’re part of any Arimantr community, they have special specific tools. I do have my tools that I’m using. It doesn’t really matter. They all should coexist.

  But you have to know what you’re doing in terms of what you can offer your investors. Investors always come first. So if you can provide investor with at least certain level of return and they’re happy and you have to compete with the bank at this point, so something has to be excited to put money into the deal in comparison to put money in CDs in the bank. So, but if you put in investors first, that’s how you’re looking at the other.

  Kristen (18:32)
  All

  Roman (18:36)
  So if you let’s say if you’re offering them 7 % cash on cash return that should pencils out in your price and expenses and you as a GP general partners you’re not working for free obviously so overall that any property should produce more than 8 % at day one if it’s if it is stabilized property I can go on and on you should stop me

  Kristen (19:02)
  No,

  please. We want to listen to every…

  Roman (19:05)
  Yeah, so

  underwriting is important skills, but it’s just the beginning of ⁓ all work. Responsibility also, let’s say that you found a deal and you talk it out with your brokers and you send so-called LOI, letter of intent, and the worst case, and that’s what I keep telling everyone who is scared to talk about $5-10 million deal, what’s the worst case that can happen to you? And people getting scared because

  they’re not talking to broker and they’re not sending that letter of intent LOI. And I said, look, if you, the worst case, what can happen to you, your LOI will be accepted. That’s the worst case.

  So now, if it is accepted, now you have to worry because if you’re working on that, you have to understand that you have five days to sign PSA, Purchase and Sales Agreement, and you have to come up with so-called earnest money deposit, EMD. If let’s say a $5 million deal, it might cost you to buy a piece of paper between 1 to 2%. So you’re talking about between $50,000 to $100,000 that you cannot raise.

  You have to use your own money or you have to use money of your partners as a general partnership So and that money at risk and that’s most important the most frightening

  But before that, many steps before that, you have to do underwriting, have to negotiate, you have to do a lot of steps. And that’s why I would recommend to partner with someone who’s at least know what they’re doing, at least have full-time business like that, and at least have some kind of level of success. But success, again, it’s relative. If I would say that someone that I know have 5,000 units without asking person how much you’re making per unit, doesn’t make any sense because 5,000

  doesn’t mean anything, it’s just a number. You might be better off having two or three family houses than 5,000 units. Yeah. So, and from my experience, if you’re making, let’s say, $50 per unit as a GP, General Partners, you’re good, you’re good. Now, you can put numbers units to a number of dollars, and that will make a little bit more sense to talk about.

  Kristen (21:02)
  Right.

  Totally.

  Yeah

  Absolutely, thought of going deep rather than wide, because if you go too wide you can over, you know, extend yourself and bottom can fall out.

  Roman (21:35)
  ⁓

  And I’m always making bad jokes that in this business size doesn’t matter.

  Kristen (21:41)
  Yeah,

  that’s amazing. Well, sorry. ⁓ So to kind of wrap this up, you’ve given such good information about scaling a business in the investing field. What would be something that you wish you learned earlier in your career that you can share with people today?

  Roman (21:45)
  No.

  Only regrets that I have right now at my age and I never use my age as an excuse that I should have done that business and I should have started like 20 years ago.

  Kristen (22:13)
  Mm, yep.

  Roman (22:14)
  20-25

  years ago. I mean, multi-families. ⁓ It’s never late, it’s never too late, but instead of developing business for 20 years and getting to the point when you satisfy, I have certain goals. I squeezed that goal to five years. So one year of my life is for four years of experience. That’s all the regret that I have. It’s never too late, but you can start now.

  Kristen (22:38)
  Yeah.

  Yeah, just get started and do the thing. Well, this has been wonderful. Thank you so much for all of the inspiration and insights you gave. Can you tell people where to find you and how to work with you?

  Roman (22:52)
  Absolutely,

  they can either find me on my phone number is 917-601-7768 or you can find me like a branding company, it’s velesholdings.com and you will find all information about me and my business and everything else that we’re doing. velesholdings.com.

  Kristen (23:17)
  Amazing and you do mentorship as well.

  Roman (23:20)
  I’m doing mentorship as well. And I love it. And I love it. ⁓

  Kristen (23:22)
  Awesome, well thank you so much. Yeah,

  I know that must be great to get back.

  Thank you so much and thank you everyone for listening. Hope you got some good inspiration for your own business or maybe just inspiration to start. Please reach out to Roman. It seems like he has a lot to offer and he’s very willing to offer some mentorship.

  Roman (23:41)
  Thanks a lot.