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Global Investors Podcast
GI80: Transitioning from Wall Street Portfolio Manager to Multifamily Investor with Kristina Knight
December 31, 2020
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Kristina previously worked as a senior investment analyst; running a $1 billion+ Agency Mortgage Portfolio. Since 2017, she has been a fulltime in real estate investor and her firm syndicates apartment complexes with over $60 million in assets under management.

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Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast. I’m your host Charles Carillo. Today we have Kristina Knight. Kristina previously worked as a senior investment analyst; running a $1 billion+ Agency Mortgage Portfolio. Since 2017, she has been a fulltime in real estate investor and her firm syndicates apartment complexes with over $60 million in assets under management. Thanks so much for being on the show, Kristina,

Kristina:
Thanks for having me.

Charles:
So I briefly touched on your background. Can you go and give us a little bit more on your professional experience prior to starting your current real estate company?

Kristina:
Yeah, so I worked in investment management for a little over a decade and largely was focused that entire time on, in the fixed income world, but in housing and as a mortgage portfolio manager and investment analyst and you know, then later moved on to portfolio management and was responsible for managing different client accounts and our firm’s intermediate strategy. So had a lot of technical experience, a lot of experience looking at deals, not real estate deals, but mortgage investments, housing investments, and you know, kind of managing portfolios and you know, looking at how things should be structured and put together and a lot of work with clients and investors. So you know, that background kind of set me up for what we’re doing today. Because there’s a lot of similarities, even though it’s a different asset class.

Charles:
Right, right. So you’re on the other side of it instead of mortgage side of it, you’re actually utilizing those loans.

Kristina:
Yeah, yeah, exactly. Buying the real estate ourselves. So

Charles:
Why did you choose real estate as your investment vehicle?

Kristina:
It kind of happened accidentally. I was working in finance and I had bought a condo in Boston at the time that I knew I would eventually want it to be an investment property. I bought it actually with you know, if I was ever going to rent this out and move out of Boston you know, would I be able to cover my mortgage and still cashflow? So I kind of always already had looked at it like that. And then I took a, you know, a year off actually from the corporate world to travel. And I left the investment management. I just wasn’t feeling fulfilled and I knew I wanted to do something different. I wasn’t sure exactly what it was. And then kind of like, while I was traveling, you know, my husband and I were out our condo and we were making a lot of extra money from doing that. And we kind of had this like, aha moment, like, you know, are we doing more of this? Like, this has been so great. So that was kind of what started this whole crazy journey over the last several years. You know, I guess I had always planned for it to be an investment, but never really saw this course. And you know, what would happen down the road.

Charles:
You got used to that residual income and really like,

Kristina:
Yeah, it was really, so it was like, if I know this 10 more times, it wouldn’t have to go back to the corporate world.

Charles:
There you go. So that was your first real estate investment. What was your next one after that?

Kristina:
Yeah, so our next one after that was a fourplex that we bought out of state, we bought it in actually Washington state. And it was a really interesting deal because it was a fourplex, but it also came with a single family home and we purchased it from a wholesaler. So we were able to negotiate seller financing. So we kind of did our first fourplex. We did a fix and flip, we did seller financing and ended up being a bird deal all in one. So that was kind of fun. And we learned a ton and we recently just sold that first property and, you know, had some pretty significant gains from that investment. So,

Charles:
So from that quad Plex, what did you, what went right? What went wrong with that since that’s really your, your first multi-family investment?

Kristina:
Yeah, so it was a pretty big overtaking, the you know, taking over a fix and flip single family home and the fourplex at the same time, you know, it was a lot to kind of coordinate and figure out. I think the things that went right where we had really thought through the business plan and what we wanted to do, and we had the right team in terms of like the contractor and everyone property manager in place to work with you know, some things that went wrong, where on the fix and flip, we went way over budget because it was a 19 hundreds building and everything under the sun that could have, you know, happened and needed fixing happened from the roof to the foundation and electrical, not passing inspection and all of those things. So that was a really fun learning experience. We also had on that deal, we had to separate they were two separate parcels, but they had actually never been separated from natural gas. So we had to, you know, work with the city and excavate the natural gas and separate the lines. And the city actually caused a natural gas explosion and then they tried to Sue us for it. But, you know, we ended up fighting and pushing back that and everything worked out, but there were a lot of things on that first, first deal that went wrong, but also a lot of things that went right, you know, our business plan worked out and we hit our monetary targets and learned a lot. So

Charles:
Yeah, I had I’ve separated natural gas before in properties and that’s been a nightmare. So I can’t imagine outside and separating. It was just because it’s one of those things where we get rid of old oil, right. Furnaces. So you’re putting in new ones, so you have to work with the contractor and you have to, it has to be, you know, you’re in the middle of the winter. You can have somebody without heat and you’re trying to, you know, they’re putting in, you know, they hang the new meter and everything, and it’s just, I don’t wish it on anyone. It’s something that, what has, if I ever did, did it again, it has to be like, if everything was vacant, that’s when you could go through and do it and you could do everything right away. And but it’s, I mean, it’s it’s, that’s an undertaking I can,

Kristina:
And I don’t think, you know, you talk about your, your first big deal or whatever. We, I definitely didn’t realize like what we were getting into with that. And it was, you know, it was kind of like, Oh no, one’s done this before. We can figure this out. You know, we got it done. And we had the right people to get it done, but it was definitely a lot at first to figure it out.

Charles:
The one last thing before we move on is just to highlight you had issues with passing inspection and that’s one of the biggest issues with fixing and flipping. And it’s like, it can be the smallest stuff I’ve ever had, holdup deals and you know, the an outlets wired the wrong way, or one way, you know, we have to put extra insulation in a non-attached garage or something. It’s something so minimal and you’re pushing it back. And now it’s pushing back a couple of weeks and want to push back a couple of weeks. It’s all coming out of our pocket. And that’s something too that why I passed on doing flips is much years ago, because it was just a, it’s just a lot of stuff that has to go right. To make money.

Kristina:
Totally. Yeah, definitely. It was a good experience to do, do one of them, but, you know, definitely not our long-term business.

Charles:
So currently what’s your company’s investment strategy.

Kristina:
Yeah. So we are now looking to do larger investment deals, anything kind of 60 units and up and we are focused on the Phoenix market. So we’ve been you know, I just got back from Phoenix. I was down there for two weeks on a due diligence trip and looking at a ton of different properties for potential investment. So we’re kind of looking to find some value, add multifamily deals there that makes sense. And you know, looking to take those down. Right.

Charles:
So what are your main factors your team’s looking for when they’re underwriting a deal?

Kristina:
Yeah, so for us being value, add focused, want there to be some kind of way that we can go in and increase rents whether that’s through renovation or from, you know, the asset is kind of under our mismanaged there’s operational efficiencies, or it’s kind of, you know, been owned by the same people for a long time and they have understood like what’s going on in the market and, you know, really looking to get in and add value there for our investors and increase the NOI. You know, in terms of building class, I would say we’re focused on anything 1970s and later from a vintage perspective. And then you know, solid C plus B buildings you know, not looking at anything kind of classy or new build. And then, you know, in terms of location, that’s definitely our most important factor. And then location has to be, you know, a solid C plus B location, you know, C plus becoming a, B or B minus, you know, trending towards B plus a territory so heavily focused on having like the right demographics and location for our investments as well.

Charles:
Yeah. I can say I’m pretty much in that same class, the C plus and above is definitely, I wouldn’t really go any lower than that and I want to see the gentrification coming through. So I definitely agree with that strategy. So if you’re out, looking at properties, is your main role at your firm in acquisitions, or do you take other hats as well?

Kristina:
Yeah, so I’m actually focused on asset management. So I, you know, given, you know, my portfolio management experience that kind of translates into managing a portfolio of assets. So I kind of help figure out the business plan and the strategy, and then managing the asset and then also working with the property managers on a pretty you know, involved basis to make sure that we’re hitting our goals and targets. And that, you know, the property manager is working out.

Charles:
So you guys have about $60 million in assets. What kind of systems has your company introduced to assist in asset management and scaling?

Kristina:
Yeah, so you know, I’d like to say that it’s, you know, there’s some fancy tool use, but we use spreadsheets. We have like different trackers that we’ve built out from an asset management perspective that look at kind of the portfolio aggregated and then the assets individually. So we can compare and contrast the performance against one another. And then, you know, working with we have some specialized reports that we work with on the property, with the property manager on and having them fill out certain information for us that we like to see on a weekly basis.

Charles:
So you’re coming from another side, you’re coming from the mortgage, you’re coming from a different asset class and you’re coming over to real estate and syndication. Why do you feel that real estate syndication is such a powerful investing technique?

Kristina:
You know, I, So coming from fixed income and the investment world, I feel like there’s so few investments that give you like such a bang for your buck, right? Like there are, you know, real estate is so powerful in terms of what you’re able to create wealth wise you know, in such a short period of time that when you look at across the investment spectrum, there isn’t a lot of other things, other asset classes out there that have the same, like level of risk, which I would say real estate has pretty low risk compared to other asset classes that can generate similar returns. You know, some people like cryptocurrency, but I think that’s pretty risky. And so, you know, I, I just love it. I love what it can do for people. I love how dynamic it is and how there’s always something to figure out and a problem to solve and, you know, a way to get from place a, to place B. So, yeah,

Charles:
It’s also easy. I think it’s easier to underwrite because you’re looking at us. It’s, if you’re looking at a company and you don’t have all the information, and that’s my thinking towards stocks, it’s, it’s much different because I’m looking at a property. I can tell everything about the area. Everything is public record. I know what stuff’s renting for. Can easily pull it up. I can walk those other assets and see exactly what they are and make sure you’re. So you, you really can limit your risks if you do the right. I think that’s, you know, people aren’t doing the right due diligence. That’s where it becomes risky if you’re doing your correct due diligence. And like you said, you’re tracking everything through your programs and spreadsheets, and you have a huge checklist when you’re looking at a property, what you’re doing to make sure. And obviously you’re very well honed in on your target market. So it’s not as much now it’s easier to pull a trigger, but for a new investor, you’re going to be looking through and making sure that everything lines up. And if you do it, you can really minimize your risks. So you’re right. I mean, it’s completely night and day from other investments.

Kristina:
Yeah. And it’s, it’s tangible, right? Like you can see it and you can, like you said, you can go there and walk the property and you can create a business plan and you can look at comparables and tell if you’re in the right ballpark. And like, you know, it’s very much, if you put in the work, you can, you know, pretty much get close to where you’re going to be. From an investment perspective, whereas stocks, it’s just, you have no transparency with the company. You don’t know what’s going on. You have to go through these very complicated reports. So

Charles:
You’ve spoken to people in your previous professional career. And I imagine you’ve spoken to them about investing with you. And some of them probably have invested with you. What are the pushbacks from someone coming with that mindset versus someone that you might meet at a real estate conference that’s already is set on investing in real estate and using that as their investment vehicle.

Kristina:
Yeah. You know, that’s so interesting. Because coming from a finance and investment background, I think people are naturally pretty risk, right? And they’ve been trained in this psychology that like stocks are not risky and that, you know, these companies, you can invest your 401k and stocks, but you can’t make other investments with them. And so it’s a very much an educational conversation teaching those people like, no, really like this, these are what the risks in the stock market are. And this is what the risks in real estate are. And, you know, this is why, like, this is a great tool for you to be diversified with, you know, and with those people, I generally don’t say like, you know, take all your money and throw it and they’ll say, right, it would be irresponsible, but it’s like, no, this is a great tool for you to diversify your portfolio. And, you know, that can help you add to your wealth and you know, have other alternatives for income.

Charles:
Yeah. The main thing I hear from people is whenever you mentioned to them, they might not be well-versed on syndication. And like, Oh, I don’t want to get a call, you know, the, the toilet call or something that really ever happens. But it’s one of the things is that they’re not used to the syndication model where it’s like, Oh, okay. So it’s much more like a, like a read or like, like, you know, more, more passive and it is passive. And it’s, it’s great that you know, these, the syndication technique and be open to all types of people.

Kristina:
Yeah, for sure. And I think when you talk to people that have already invested in real estate, right. Like that own, you know, maybe a duplex themselves or their house hacking, or they have a single family home rental, like they get it right. Like they get it right away. And it’s a much easier conversation than someone that’s kind of coming from like a finance stock investment background, you know, that can be a harder conversation. Yeah.

Charles:
Yeah. And it’s also, I think if you come from a smaller, multi-family where they might’ve been managing and they’d be like, wow, this would be a great investment if I didn’t have to manage. And you’re like, Oh, syndication. So what notable mistakes have you made as a real estate investor or entrepreneur?

Kristina:
Yeah. So I think I dunno about mistakes, right? There’s always like little, little mistakes that you make. But I think getting into this, I kind of underestimated him like how hard it was going to be in terms of like, just getting started and getting your first deals underway and like, you know, building a track record, like it’s been, I think more challenging. There’s a lot of people out there on podcast and real estate shows that like, it’s so easy, everyone’s doing it, you know, and then there’s this like, you know, thought process where you’re going into it and you’re like, yeah, I can do this. And it really is at sometimes it’s a grind, you know, it’s hard to find deals right now. It’s hard to you know, make sense of kind of some of the pricing in certain markets. And so I would say like, not, not that that’s a mistake or maybe just, you know, reconditioning your mindset to like realize the difficulties. Yeah.

Charles:
Like a misconception of what it is. And that’s the thing I think with every other person being a guru out there after doing something, it’s it, well, this looks so easy. And I, I talked to people that have, you know joined classes or they call, you know, we set up a 30 minute call with them or something. And and they’re like, Oh yeah, I just, in the, you know, you’re telling, well, I mean, you need to have a lot of units if you’re really going to take out some other income that you have, that’s active. You can’t just, Hey, one deal and everything’s fine. Yeah.

Kristina:
Yeah. We, you know, our original business plan was to buy like a four unit at a time. Right. And just for it and then grow it. And very quickly realized that, you know, in there in your first year, when you generally don’t make money on the cashflow, because you’re kind of re stabilizing the building to kind of, you know, especially if you’re doing renovations to make money there. These are the things that people don’t tell you always, you know, they’re like, Oh wow. If we actually want this to be like our business and, you know, the way that we live, we’re going to have to scale and go bigger. So

Charles:
The other thing too, is like you hear from, or you don’t hear on podcasts and gurus, and they’re telling you, it’s all about the value add, which obviously most people’s value add this year with COVID has been paused. Right. Or it’s definitely been changed when their whole period’s been lengthened. And you know, you’re not looking for, I think, any kind of market, if you’re looking for mismanaged properties, that’s a much more advantageous approach to finding properties because you can find these properties that are aren’t managed and in any market if I’m cutting expenses, putting more people in there, minimizing turnover, you’re gonna increase you’re gonna increase your, your NOI. So

Kristina:
Yeah, yeah, yeah, totally. In this kind of market, you have to get really creative and look at, try to try looking at what people are missing. Right? Like what is someone not seeing here that could be potential value. So,

Charles:
So what common mistakes, since you work with a lot of real estate investors, do you see other real estate investors make whether they’re starting out or even if they’re you know, if they’ve been doing it for several years?

Kristina:
Yeah. I think number one is they don’t have like the proper team in place. Right. So they might not have like your, they might be looking at properties, but they don’t know yet what property manager they’re going to be working with, or they don’t know. You know, the market’s really well in terms of like the sub-markets and the rent that they can get. And so they’re a little bit aggressive on their business plans and like the rents that are achievable or they might not have done due diligence on like the comparable properties around and calling those properties up and seeing like, what, Hey, what are you renting for right now? Like those are some pretty classic mistakes and, you know, other mistakes involve just kind of maybe over renovating, right? Like some spending way more money than you actually need to in order to get the rent that you want to achieve. We see that a lot, you know, especially like doing property tours. I was looking at pretty large building the other day and someone, you know, the guy that was doing the tour was like, Oh, this group spent 15 grand renovating this apartment. And I was like, you know, I was like, what? Like just totally blown away. I’m like on what, you know, they put in like granite countertops and like brand new, like cabinets into kind of like a class, you know, S B thing. Like it was like way over done for the rents that you can get in that neighborhood. So just things like that, but you see mistakes that people make.

Charles:
Yeah, no, they’re, they’re doing it. Like they’re flipping it and not like they’re renting it, which is a whole different mindset. And especially now another great thing about multifamily is that when you’re flipping, you always have to flip to a certain grade really of that property. But when you’re finishing it for multifamily now properties that we’re looking at, we might say, you know what, we’re, we’re gonna pause on. You know, we’re just do half as much value add right now that we’re working on. And we’ll just put, we’ll just paint this and we’ll clean this and we’ll re rent it for, you know, whatever $30 more a month or whatever it might be, or keep it at the same, just to keep the occupancy as we’re going through this period with everything that’s happening. But with when you start putting money in like that, then you have to, now you got to find a tenant. It’s going to pay you $300 more than the last person, right. Is not the time when you want to be trying that out. What do you think are your main factors that have contributed to your success, Christina?

Kristina:
Yeah, definitely like, you know, having a super strong why, right. Like my, why is, has, is not having to go back to the corporate world and to really like, be creating my own life and being in charge of kind of my own destiny and what happens and you know, having ultimate freedom financially and, you know, with where I live and the things that I’m able to do. So for me, that’s such a driving force so that whenever you hit kind of a bump in a road or things don’t work out and you know, it’s like, you can’t give up, you just have to keep going and figure out how to make it work because real estate for people just getting involved, like, that’s the other thing people don’t tell you, it’s like high highs, low lows, you know, it’s definitely like a roller coaster and you get used to it. But you know, if you don’t have a strong driving force behind you, it’s easy to just get disenchanted and give up.

Charles:
Yeah. You got to know why you’re doing it every day and why you’re consistently doing it. And yeah, that’s very important. So you found it a nationwide female focus, investment community. Can you talk about it?

Kristina:
Yeah. So I am super passionate about supporting women and teaching them how to take charge of their financial future and start investing in real estate. So I run one Tuesday a month, a women real estate networking, happy hour, it’s on meetup.com and we do it through zoom and it’s really fun and we just kind of tackle issues that women are dealing with. And then I also have a mastermind that we’re I launched about five weeks ago and that teaches women how to get in, started in real estate or how to scale and go bigger. So whether, you know, they don’t have any real estate or they have, you know, a couple of units and they want to scale up, but not sure how you know, we have a few women in that program right now.

Charles:
Okay. And how can people learn more about you and your business?

Kristina:
Yeah, they can go to our website. It’s You know, I,AkrasCapital.com a K R a S capital.com. Or you can email me personally. My email is [email protected]

Charles:
Okay, awesome. And I’ll put all those links into the show notes. So thank you so much for being on today and looking forward to connecting with you in the future.

Kristina:
Yeah. Thanks for having me.

Charles:
Bye bye.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

Announcer:
Thank you for listening to the Global Investors Podcast. If you’d like to show, be sure to subscribe on iTunes or Google play to get new weekly episodes. For more resources and to receive our newsletter, please visit global investor podcast.com and don’t forget to join us next week for another episode.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.

Links and Contact Information Mentioned In The Episode:

About Kristina Knight

Kristina is Founder and CFO at Akras Capital. Her mission is to help people achieve freedom, breaking free from the constraints of money, time and unfulfilling jobs.

Before transitioning to full-time real estate investing in 2017, Kristina spent over a decade in the investment management industry, focused on the housing sector. She managed a $2 Billion portfolio and strategy for high profile institutional clients. Her real estate investment career began when she took a year to travel the world and rented her home in Boston, generating passive income. She realized that if she could turn this side hustle into a real business, she could be free to travel, spend time with family and live life to the fullest. After founding Akras Capital, she’s directed it to produce this same freedom for others.

Kristina is also passionate about teaching other women how to make smart investment decisions and create freedom in life through real estate. She founded the Women Investing in Real Estate group, a female-focused investment community that is growing nationwide.

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