Positive resident experiences increase the value of the property. Here to talk about how they are uplifting communities are Ken and Rachael Wick.
Ken and Rachael, founders of Higher Point Investing, are educators turned real estate investors. Their purpose is to bring a sense of home and belongingness to their tenants and, in this episode, they share their unique way of doing that. They also discuss the value of partnering, education, and networking, and how these helped them along the way.
[00:01 - 04:37] From Education to Real Estate
- Ken and Rachael talk about how they got into multifamily
- Doing deals with like-minded partners
- The projects they are working on right now
[04:38 - 12:29] Lessons Learned Along the Journey
- Reflecting on their real estate experiences
- Why they want to adjust their preferred returns
- Being more conservative in the underwriting
- The importance of getting educated and trained
- Finding the right property manager
- Networking and making connections with people
[12:30 - 17:45] Creating Places That People Want to Live In
- Ken and Rachael’s goals for the future
- The benefits of having a sense of community in the property
- Creative marketing through Apartment Life
- Increasing stickiness and NOI while providing added value to the residents
[17:46 - 18:55] Closing Segment
- Reach out to Ken and Rachael!
- Links Below
- Final Words
Tweetable Quotes
“Get education and training from some kind of reputable entity that will train you from start to finish on multifamily syndication.” - Ken Wick
“You got to come in with this eyes wide open and really know it's not, you know, a simple cakewalk. There are steps that you have to continually do in your life every single day.” - Rachael Wick
“The people that live in these apartments are people. These are their homes… We want to create a community where people feel safe, comfortable, have friends in that apartment complex.” - Ken Wick
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Connect with Ken and Rachael at HigherpointInvesting.com!
Resources Mentioned
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Want to read the full show notes of the episode? Check it out below:
[00:00:00] Rachael Wick: So for us, I think a goal would be whoever we are partnering up with in various different properties that that would be a sole focus, not only, you know, complete the business plan, creating income for our passive investors, but also build up the residents that live there and make it a place they don't want to move out of.
[00:00:30] Sam Wilson: Ken and Rachael Wick are former educators. They are co-founders of Higher Point Investing and they invest in multifamily properties in different parts of the country. They focus on acquisition and asset management and are keenly interested in giving back. Ken, Rachael, welcome to the show.
[00:00:46] Rachael Wick, Ken Wick: Thank you. Nice to be here.
[00:00:47] Sam Wilson: Pleasure's mine. There are three questions I ask every guest who comes to the show, either one of you can take this for us, but it goes like this: in 90 seconds or less, can you tell me, where did you start? Where are you now? And how did you get there?
[00:00:58] Ken Wick: We started 17 years ago, a small multifamily in our hometown. We started with a duplex, a triplex, a single-family home, then acquired a second single family home. We had 6 children and managed those through two educational careers and most of the last 17 years until about two and a half years ago. And then I had exited teaching in Rachael. I exited in 2019 and we decided, Hey, why not look into large multifamily? It's maybe a little bit more work, but the scalability is so much greater. So we jumped in, took an education program, had a whole bunch of people made great connections, did some investments and here we are.
[00:01:37] Sam Wilson: And then here you are. That's a lot of moving pieces. So you were educators for the bulk of your career and, you know, but also had some real estate experience. And then in 2019, you had the opportunity to say, Hey, let's go long in multifamily.
[00:01:53] Rachael Wick: Yeah.
[00:01:53] Ken Wick: Exactly.
[00:01:54] Sam Wilson: That's absolutely great. I love that. Tell me about the first deal you got done. How did you do it?
[00:01:59] Rachael Wick: Sure. Well, we are on our fourth deal right now. And the first three we did with partners, we're actually still partners in the fourth deal as well, but they live out in Henderson, Nevada, right next to Las Vegas, an amazing market, as you know, and they picked up, they started probably a year ahead of us, I would say. So we met them actually through our educational program and they were very like-minded in how they wanted to build community in their properties. And so we ended up partnering up with them.
[00:02:31] Ken Wick: Now, our first deal, it was a 24-unit class E rehab apartment complex about four blocks from the convention center and not the greatest neighborhood in Las Vegas, but our partners did a great job bringing us into the deal, teaching us a lot about how to go through the asset management process, taking care of the backend bookkeeping, and so forth. And as it turns out, we ended up selling a complex before, or they were even finished renovating it for a 15% profit within 15 months, I think.
[00:03:04] Rachael Wick: Yeah. Yep. During COVID.
[00:03:06] Sam Wilson: Oh, that's awesome. That's absolutely awesome. Cool. I love that. So tell me, tell me this. You said this is the fourth deal that you guys are doing together with your partners and is everything you're doing out in Nevada?
[00:03:18] Rachael Wick: No, we, so we actually live in Minnesota and we wanted to do some stuff a little closer to us. They've got their hands full with all the stuff they're asset managing out there. They've even started to get into development and affordable housing, which we love as well, but we wanted to pick up some stuff that we could asset manage back here. So we have found that the Des Moines market in Iowa is amazing. And right now we picked up a 48 about 8 or nine months ago down in Ankeny, Iowa, which is just a few miles north of Des Moines about three hours from our house. And so that has been our most recent deal.
[00:03:57] Sam Wilson: That's cool. I love that 48 units. And this is a deal you took down all by yourself?
[00:04:01] Ken Wick: We did our biggest partners came in and helped us with some of the cap and Rachael and I did the bulk of it.
[00:04:08] Rachael Wick: And we have other, yeah, we have a few other partners.
[00:04:11] Ken Wick: We put this indication together, did all the groundwork and we're kind of still doing all of your groundwork, that's okay.
[00:04:16] Rachael Wick: We still have some of our hair left.
[00:04:18] Ken Wick: Yeah.
[00:04:19] Sam Wilson: Hey, now you're getting close to home. You know, I can't grow any of that. So that's, you almost hurt my feeling there. But I think this is important here to point this out because, you know, it sounds like this is the first deal that you have taken down, a larger deal where you're the lead sponsor.
[00:04:37] Rachael Wick: Yep.
[00:04:37] Sam Wilson: What are some of the things for those that are listening that want to be in the shoe, you know, in your position? Oh gosh. I'd love to be the lead sponsor on a deal someday. 'Cause that's the name of the show is how to scale. What are some of the things you feel like that you could go back, if you could rewind 12, 16, 18 months and tell yourself what would you tell yourself to do differently or to do the same?
[00:04:57] Rachael Wick: Do you want to start?
[00:04:58] Ken Wick: Go ahead. I'm sure.
[00:04:59] Rachael Wick: The list is relatively long.
[00:05:00] Ken Wick: You can fill up the whole podcast.
[00:05:02] Rachael Wick: And honestly, you know, just to tell the people that are listening, you're going to, you know, always wish you did something as part of the learning process. So you'll always kind of wish you improved something. But I think probably, you know, we did a good job, I would say, with the underwriting, being very conservative on your underwriting, number one and your business plan. And then after you thought you'd been conservative, be more conservative, like to the point where the numbers barely work, and then, you know, so be realistic.
[00:05:33] Rachael Wick: If we had to go back, I would probably do more like a 6 pref to investors because we're going through this little economic storm. Prices are going up. Labor shortages. And, you know, we choose to do class C value-adds most of the time. So I guess right off the bat, that would be something, I guess, we would also, you know, kind of think about maybe do fixed rates right off the bat, especially if you saw this coming. I mean, we have a pretty good set long loan bridge, but, you know, bridges can always be a little, in this kind of timeframe, you know, what's going on out there.
[00:06:08] Sam Wilson: Question on the fixed rate, that comment. Did you buy an interest rate cap?
[00:06:11] Ken Wick: At that time? There were really offering interest rate caps.
[00:06:14] Rachael Wick: Well, we have.
[00:06:15] Ken Wick: For long-term debt.
[00:06:16] Rachael Wick: We do have a fixed bridge.
[00:06:17] Ken Wick: We do have a fixed bridge.
[00:06:18] Rachael Wick: Yeah. It's just that it's a bridge.
[00:06:20] Sam Wilson: Right, right.
[00:06:21] Ken Wick: Now you hear about that almost on a daily basis or by deal basis, you can purchase that cap. That wasn't a thing 9 months ago or 10 months ago.
[00:06:30] Sam Wilson: Right, right. Yeah. Very, very interesting. And I'm, and I'm wondering, you know, on your comment there about, you know, dropping that 6 pref down, would you have dropped or, it should be, you would maybe drop it to a 6 pref.
[00:06:41] Rachael Wick: We not like a crazy difference, but you know, we have found, we're in a group of other syndicators and, you know, just kinda listening to the very high level experienced syndicators. They pretty much all do a 6 pref because that gives you a little wiggle room for additional reserves, or additional repairs, or renovations, or additions to some new amenities in the future. So I think that would be a nice cushion to also have if, for our next one.
[00:07:10] Sam Wilson: Right, right. Just because, is there, I might be getting too personal here, but is there like something inside of you that says that, Hey, I have to pay out the 6 pref or that you feel compelled to pay the 6 pref and you know, if you don't hit it?
[00:07:24] Rachael Wick: I think we're people pleasers. I mean, who doesn't want, you know, we want our investors to continually return. We love to see smiles instead of hesitation. So of course we want, you know, the business plan we wanted to run with no hitches, but you know.
[00:07:38] Ken Wick: So a little, a little history. At first, you know, we were in Las Vegas, didn't pay anything the first year. And between that time and the time that we took on the Iowa deal, things had changed. People were giving 6 prefs, or 8 prefs. So we aim for a conservative 7 and we thought at the time we could, we could meet and it's okay.
[00:08:00] Sam Wilson: Right, right. And you had mentioned that, that you said underwriting, you would be conservative and then you'd be even more conservative. What would be a tweak you would've made on the underwriting side of things when you review this deal?
[00:08:11] Rachael Wick: I would just recommend to listeners that are underwriters to maybe keep in mind, now this is current, so it could definitely change with, you know, the rest of the economy, but I would say for when doing a value-add and doing most things in a, an apartment for renovating, I don't think it's crazy to put 10 to 12,000 per unit. So many times as we are learning, we are told 6,000, you can redo an entire unit for $6,000. Right now that's not...
[00:08:38] Ken Wick: That's not true.
[00:08:39] Rachael Wick: Not feasible. We got to pay higher wages. There's definitely a labor shortage. So you're kind of at the mercy of time, you don't want vacancy too long. And then of course supplies are more expensive.
[00:08:49] Sam Wilson: Right, right. Yeah. What's not more expensive? I hadn't purchased paint in years and I had to go buy two gallons of paint yesterday and it was like, it was, oh, I can't remember the, the price was up 50%.
[00:09:04] Rachael Wick: Yes.
[00:09:05] Ken Wick: My son just bought his first house. And it's in Minneapolis. And so last weekend we were up helping him paint and he went to Sherwin Williams on our recommendation, bought the paint and I said, Hey how much did that cost you? $60 a gallon in Sherwin Williams.
[00:09:21] Rachael Wick: Yeah.
[00:09:22] Sam Wilson: Right, right. Yeah. Yeah, absolutely. I was picking up some paint for some contractors yesterday. They're working on a project for us and, yeah, it was just like, oh my gosh.
[00:09:31] Rachael Wick: And there's a shortage. So, like, sometimes you got to go with whatever's available.
[00:09:34] Ken Wick: Whatever color they have.
[00:09:35] Sam Wilson: Right, right. Yeah. Well, luckily we didn't have that problem. We still got to pick the colors that we still need.
[00:09:40] Sam Wilson: Good for
[00:09:41] Rachael Wick: you.
[00:09:41] Sam Wilson: Yeah, absolutely. Absolutely. So, so those are some things you would do differently, but tell me about some things that you would do, you would say, Hey, these are things we really did right that I feel like other people should emulate.
[00:09:51] Ken Wick: The number one thing is get education and some kind of training from some kind of reputable entity that will take you, that will train you from start to finish on how to put the multifamily syndication if you're interested in doing multifamily syndication.
[00:10:07] Rachael Wick: And being an operator, I mean, you got to come in with this eyes wide open and really know it's not, you know, a simple cakewalk. There are steps that you have to continually do in your life every single day. So if you're planning on operating, know that, you know, it's pretty hard to work a full-time job and asset manage a property, which is really running a business.
[00:10:28] Sam Wilson: Right. Yeah. It absolutely is. Do you guys have a property manager in place or do you self-manage this property?
[00:10:33] Ken Wick: We do. We have a property manager in Des Moines.
[00:10:37] Sam Wilson: How did you find a good property manager for a smaller property. I mean, 48 units, it's tough to find a good PM for that.
[00:10:44] Ken Wick: That's a great question. And hit the nail on the head. Sometimes property managers don't want to take out 48 units, right? Like the bigger, the bigger size is then they can put somebody on payroll, staff on site. We just happen to meet our current property manager back in 2019 when we were doing a different property in Des Moines. And when this one came up, we, you know, we exchanged business cards back then, and this one came up, we called 'em up and said, Hey, would you like to look at this property with us? Because of that relationship, we just continue to, we hired them.
[00:11:19] Rachael Wick: And that's something I'd like to recommend to listeners too. Before you even find a property, if you are having a specific market that you want to stay in, go interview property managers, narrow down to who you might like, and take them from the get-go to the property for the initial tour, get that information. They're the ones that know the vendors that you're going to be using. I mean, you need those connections as soon as you close.
[00:11:43] Sam Wilson: Right. Yeah. Yeah.
[00:11:44] Ken Wick: The other thing, Sam, that I was going to mention, you asked the question, what are some things you felt you did correctly? And Rachael just touched on it. It's that connection piece, the networking piece, we had to talk to lots and lots of people, had lots of phone calls, went to a whole bunch of different conferences, landed in our Kingdom REI group, the group of Christian investors who have been just great, great contacts and great, great friends to bounce ideas off of and make connections with. So the two things in our opinion are education and networking with people and making those connections. And, and it's really, actually, it's really fun. You meet some very interesting people in different parts of the country, not focused on your own area. It's fun to talk to lots of different people.
[00:12:29] Sam Wilson: Absolutely, absolutely. Fast forward this business five years, where do you want it to be?
[00:12:34] Rachael Wick: So far we have a focus on building community in the properties that we are a part of. So for us, I think, a goal would be whoever we are partnering up with in various different properties that that would be a sole focus, not only, you know, complete the business plan, creating income for our passive investors, but also build up the residents that live there and make it a place they don't want to move out of. And of course scale.
[00:13:00] Ken Wick: Yeah, sure. Short term, we want a 200 plus units in the same market in Iowa. We started to reach out to some local people in our town her in Southern Minneapolis and we made connections with people up in the Twin Cities, Minneapolis and St. Paul, to start looking for properties and deals around here.
[00:13:19] Sam Wilson: Got it. Got it. I think that's great. I want to circle back on the comment you made of building community. What does that mean?
[00:13:26] Ken Wick: We realize and, and hopefully most listeners do, too, that people that live in these apartments are people. These are their homes. We are blessed enough to live in a house. Some people are blessed enough to live in an apartment. We want to create a community where people feel safe, comfortable, have friends in that apartment complex. And that creates what, what is known as sticky tenants. They tend to stay the more community they feel in an apartment complex. They tend to stay there. We also, because we're Christians, we also want to spread that love through the things that we do. For example, last Thanksgiving we decided, Hey, why don't we, Rachael and I just decided, why don't we go get some apple pies and pumpkin pies and knock at everybody's door and hand out, hand, 'em a pie for Thanksgiving. Just something, just a little thing to try and make them feel welcome and that they're cared for. And that's really what we mean by building a sense of community.
[00:14:18] Rachael Wick: We'd also like to build up enough units in one market so we could bring in a company called Apartment Life where we actually plant a couple or two people in one apartment and they are specifically there to help build community. And not only does it help with, you know, resident retention, it overall helps the NOI because it's about $2,500 on average for a turnover so people staying and enjoying the place also helps the bottom line. And then usually they'll start telling others to come and live there, so they will actually help build like a list for the property.
[00:14:54] Sam Wilson: Right. That's your cheapest form of advertising is certainly word of mouth. When you say Apartment Life, is this like a third-party organization? I've never heard of it.
[00:15:04] Ken Wick: It's apartmentlife.org. And it's an organization that, they have at least 10, between 10 and 20,000 units across the country. They operate in large markets and they do exactly what Rachael said. They plant people in apartment complexes to create community. They bring in outside resources. Let's say, there's a single mom that doesn't know how to change a tire and she needs her tire changed. Well, that couple will find somebody either within or outside the complex to come in. And help that mom out, or they sometimes offer classes and seminars on, you know, good banking practices and...
[00:15:39] Rachael Wick: Building your credit.
[00:15:40] Ken Wick: Building your credit.
[00:15:41] Rachael Wick: They'll have events once a month to bring people together. They will...
[00:15:44] Ken Wick: Like pop-ups.
[00:15:45] Rachael Wick: They'll be like the welcome wagon when a new tenant comes in and then they'll check with them four months before they go to leave and be like, would you like to think about staying and what do you need? You know, what are you missing, blah, blah. You know, just lots of different connections.
[00:15:58] Sam Wilson: That's really cool. I think that's a great way, a great way to build community. What, and I know you're not, you didn't come on this podcast to market Apartment Life.
[00:16:07] Rachael Wick: We could be their cheerleader though.
[00:16:08] Sam Wilson: Yeah, I mean gosh, we're at, I don't know when this will go live, but it'll be somewhere close to 600 episodes. I've not heard anyone talk about this yet.
[00:16:16] Ken Wick: You're kidding.
[00:16:17] Sam Wilson: No, I'm not. And so this is, this is why I want kind of spend a couple of minutes here and kind of highlight this. What do you, you know, if you were to move forward, I'm sure you've done the research on this, what do you as operators have to give? I mean, do you give 'em a budget? Do you then give 'em a place to stay? Do you, what does that look like to bring these people on board?
[00:16:36] Ken Wick: So the typical complex size is 200 units or a combination of some nearby complex is a total 200 units. The owners typically allow the Apartment Life couple to do live in an apartment, either run for here at a greatly reduced rate. The apartment owners include in our marketing a budget for the things that Rachael was talking about like offering potlucks or bringing in other outside people to teach a class, that kind of thing. And they have proven, and if you go to their website, they have proven statistically that the apartment complexes that are successful doing this, it's actually increasing their NOI way past the cost of supporting a couple in one of those apartments.
[00:17:21] Sam Wilson: Right, right. Yeah. That's really, really cool. That's creative marketing. I'm going to, I'm going to call it a marketing tactic though it's more than that, so I don't want to downplay it, but it's certainly, it certainly is providing incredible value to the people who are living there. And then yet you as the building owners and landlords get to reap the benefits of providing that value. It sounds like a really cool and true win-win. This is awesome. I've loved your growth thus far, loved how you guys have taken down some larger assets, you partner with some other people, and then also use those same partners that then help you take down your first 48 unit.
[00:17:57] Sam Wilson: You've given us some great things to think about on the underwriting side. Maybe even how you would adjust your preferred returns just to protect more cash in this environment. And then really talk about what success looks like for you in the future. So thank you for taking the time to come on today. Ken, Rachael, certainly appreciate it. If our listeners want to get in touch with you, what's the best way to do that?
[00:18:16] Ken Wick: higherpointinvesting.com, higherpointinvesting.com.
[00:18:20] Rachael Wick: Yep.
[00:18:21] Sam Wilson: Fantastic. I will make sure I put that there in the notes. higherpointinvesting.com. Thank you so much. I appreciate it.
[00:18:27] Rachael Wick: Thank you for having us. Take care.
