Should You Invest in Real Estate?
ZD: Imagine I know nothing about real estate. (Not far from the truth). What are some basics?
KC: We raise equity from accredited investors to purchase large apartment complexes. I don’t do houses—houses are a different world. They’re emotional. Commercial real estate, it’s all linear. What are the numbers doing? What is the market doing? In multifamily real estate, it’s all about in-migration, population growth, and job growth. A market in which the population or jobs are declining? Don’t buy. I don’t care what the price is.
So it’s a realm for the rational.
You don’t watch HGTV and think you’re going to do Flip or Flop. The location and the market are almost more important than the building itself. We’re in places like Raleigh—good lord, the job growth, the education growth, it’s unbelievable. Portland—we have the urban growth boundary, which constrains sprawl, and we have migration. We’ve been in Seattle. We just closed a deal in Charlotte.
What have you learned from those bigger deals that’s applicable to small, rookie-level deals?
It’s never too late or too early to buy real estate. And every professional will tell you that if you hold something long enough, you’re going to look like a genius. People who bought in 2007 or 2008, at the peak of the market—
They looked like idiots for a while.
They looked like total morons. In 2009, people were saying, “oh my god, I’m so underwater, I think I’ll give it back to the bank.” No! Hold it. Your loan isn’t getting called. Just hold it. If you have the right basic factors in the market, you will come out alright on the other side.
That’s both reassuring and daunting.
You could think, like I did, hmm, I’m going to buy that duplex. A few years later: I think I’ll buy that fourplex. Every time I bought something, it hurt. It feels risky. You just have to say, I’m going to do this. It pays off. One thing about commercial real estate: love your home. Love your children. Even love your jewelry. Don’t love your real estate investments. It’s a way to build capital and wealth. You don’t love it.