The Norris Group Real Estate Podcast

The Business of Multifamily: Strategy, Growth, & Balance with Kent Ritter | Part 2 # 928

• The Norris Group, Craig Evans

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In Part 2 of the episode, Kent Ritter, Founder and CEO of Hudson Investing, continues the conversation by sharing how he navigated the challenges of the pandemic while scaling his multifamily business. He breaks down his value-add investment strategy, how he finds deals through strong relationships, and the role technology and AI play in staying competitive. Kent also offers practical advice for new investors looking to enter the multifamily space with confidence and clarity. 



Kent Ritter is a former management consultant and corporate executive turned full-time real estate investor on a mission to help others achieve financial freedom through multifamily investing. As the host of the Ritter on Real Estate podcast and YouTube channel, Kent shares impactful interviews and actionable strategies to help people “Invest like a Pro.” He also leads the Indianapolis Multifamily Investing Meetup, creating space for new and seasoned investors to grow together. In this episode, Kent talks about his journey, why family was the driving force behind his success, and how smart investing can change your life.



In this episode:

  • Investment Strategy & Market Focus: Choosing the right markets and aligning strategy with long-term goals.
  • Navigating the Pandemic & Growing the Business
  • Value-Add & Investment Strategy: Identifying and enhancing underperforming assets for strong returns.
  • The importance of networking and cultivating trusted industry connections.
  • Leveraging Technology & AI: tech tools and AI to streamline operations and gain a competitive edge.
  • Actionable insights and tips for those looking to break into the real estate investing space.




The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669.  For more information on hard money lending, go www.thenorrisgroup.com and click the Hard Money tab.


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Narrator:

Welcome to The Norris Group real estate podcast, a show committed to bringing you insights from thought leaders shaping the real estate industry. In each episode, we'll dive into conversations with industry experts and local insiders, all aimed at helping you thrive in an ever-changing real estate market. continuing the legacy that Bruce Norris created, sharing valuable knowledge, and empowering you on your real estate journey. Whether you're a seasoned pro or a newcomer, this is your go-to source for insider tips, market trends and success strategies. Here's your host, Craig Evans.

Craig Evans:

Hey, welcome back everybody for part two with Kent Ritter. Let's get to it. So you started locally. Where all do you guys invest now from a multifamily perspective?

Kent Ritter:

Yeah, good question. So we've, you know, I told you had a foray down in Atlanta with some partners, right? Sold those that went really well. But then I said, you know, I don't really want to be partnering all the time. I want to really bring this in and build my own, my own business. That was 2019 when founded Hudson Investing. And you know, since then, we've really been primarily Midwestern focused. Now we did, you know, have really visions of expanding into the southeast, because the demographics and the metrics in the southeast were great. We bought a property in South Carolina, but it was upstate South Carolina, which has a lot of similarities to the Midwest, a lot of manufacturing, you know, solid blue collar area with great jobs and stability. And those are things I really like. I mean, I look for markets, and that just happens to be in the Midwest. I happen to be from here, which is a benefit. But I'm looking for solid jobs, solid growth. I don't like the cyclicality of some of these, like Western markets or southern markets, where you're having these kind of boom busts occur, and we're seeing that right now in places where interest rates are down. If it's a Dallas, a Phoenix and Austin now, they'll come back up, they'll go up and back, and they'll do this. But I like Steady Eddie Growth, right? So Midwest, I mean, historically, you're seeing 3% rent growth in the past five years, it's been more like five, seven, even 9% rent growth, because we didn't have those major run ups and then down. So just kind of steadily growing. But good jobs, good job diversity, good economic development. So that's why we've kind of come back to focus on the Midwest, especially as we brought all of our property manager in house over the last year to really focus on our backyard, because there's a lot of good things going on our backyard. Didn't really feel the need to have to get on a plane and fly anymore. There's enough good opportunities here. So we're in right now like Indiana, Kentucky, Ohio and then South Carolina.

Craig Evans:

Okay, now, where in Ohio Are you?

Kent Ritter:

Cincinnati and Dayton.

Craig Evans:

Good markets. Good market. So, how did you coming through these times? How did you guys navigate the pandemic and the economy of that, you know, through growing this business for yourselves?

Kent Ritter:

I mean, apartments did fantastic during the pandemic. I mean, you know, I mean, every everybody was, I remember 2020, being like, "Oh, God, what's gonna happen", you know, and the other shoe, the shoe never dropped. And honestly, rents went through the roof. Because, you know, everybody needed housing. And you know, there were a lot of programs to help, even help people stay in and so, I mean apartments, here's one of the reasons I like multifamily. If you go back to whether you're looking at, you know, the great financial crisis, whether you're looking at COVID, you know, whether or whether you're looking at kind of this run up we've had in inflation over the past several years, apartments have performed well in every one of those events. And so when you look at, you know, think about great financial crisis, single family homes did not perform well during the GFC. Now, some of that was market percent specific, but generally prices went down, right. Multifamily prices hardly did. Multifamily delinquencies hardly increased. And you know, you look at COVID again, multifamily did really well coming out of that, because we're in a housing shortage. And you know, as people stop building, which happens, GFC, COVID, interest rates, now, what happens is occupancies increase and rents increase, it's just supply demand, right? The worse the supply gap gets, the more that we're able to, you know, to move rents and have positive growth. And so multifamily has done really well in all those situations. And so fortunately, we've been in a position where we've been nimble enough to take advantage of some of those, you know, some of those times that we've been able to grow into that. And even as interest rates have run up and deals have been hard to come by, we've been nimble enough to get creative. And we started, we said, well, if we can't find anything to buy, we're going to build them ourselves. And so we've started development now, and we're on now our third new development project, and we're doing some cool Public-Private Partnership things with the towns and cities that want growth to, you know, where they help contribute and they help chip in, and it makes it better for all of our investors. And so, you know, we've been able to be nimble and kind of move around these things, but to be able to continue to grow in a time where, you know, a lot of people have contracted.

Craig Evans:

Affordability. That's one of the biggest things. You know, I've got a private equity fund that we do everything is in real estate as well, and our main focus is affordability, right? We're looking at affordable workforce housing, trying to tackle that crisis. As you guys look for what you buy, what you're buying, are you looking at at primarily all class A's? Do you look at affordable? What? You know? What are you guys looking for when you guys buy?

Kent Ritter:

Yeah, the majority of our portfolio is workforce housing is, you know, it's not affordable from a tax credit standpoint, but it's affordable, and that the rents are just generally affordable, right?

Craig Evans:

Yep.

Kent Ritter:

So most of that's most of what we own now, as we've kind of pivoted and seen opportunities, we have bought some class A because we've been able to get good deals. And I mean really what, what happened was, you know, this workforce kind of class C housing became all the rage, right? And it was what everybody was going after. And so prices got bid up to the point where I'm looking and saying, Okay, well, I'm gonna pay five cap for a class C property, or to pay a five cap for a brand new class a property. Which one would I rather own? Well, I'd rather own the one that's brand new. I'd have to put any money into the one. I have to put 10 to $15,000 per unit into, you know. And so as things shifted, we did again, follow, you know, follow the signs. And so we have bought some class A assets. We've bought them in unique ways, from, for example, from developers, you know, that are still in lease up. And so we've gotten some good values because we've taken on that risk to get them full of people, um, but, yeah, we found some. There's, you can find opportunities in both. It's more as you compare the assets, where is the relative deal, you know, compared to, like, the comparison I just gave you, right? It's like, you don't want to overpay for a C Class asset when you get an A class asset for about the same, not same price, but let's say multiple, right?

Craig Evans:

So I've heard you guys talk about something. Tell me about the 8-hour occupied rehab.

Kent Ritter:

Yeah, yeah, it's pretty cool. We can renovate an entire apartment unit in one day. It's an occupied rehab. So the people, basically, I mean, we're actually, we just kicked off a new project yesterday where we're going through a 55 plus community that we own, and we're renovating every single unit. Because the great thing about those is people stay a really long time. So the only way you renovate the units is with them in it. And so we are, yeah, basically, will folks will leave in the morning, or, in the case of this community, kind of funny, sit in the driveway and a launcher and watch you while you renovate their unit. We'll have a team of, team of people go in where everybody's got a job assigned, right? One guy goes in, he pulls the countertop. Next guy comes in, pulls cabinets, guy comes in, pulls the floors, um, one guy takes care of the bathroom, and in eight hours they can completely renovate from, you know, new flooring, new cabinets, new countertops, new plumbing fixtures, new light fixtures. Those are probably the main things, you know, we're not painting. We'll do the paint on turns, and we'll also do mainly the carpets in the bedrooms on turns, because we haven't put their stuff in their bedrooms.

Craig Evans:

Okay.

Kent Ritter:

But it, you know, we get most of the unit done, and it allows us to reduce our turn time to about two days, because all we're doing is going in, is painting and putting carpet down, so.

Craig Evans:

Okay.

Kent Ritter:

It's a great process. We find the residents like it because we do it Middle East, so they get to live in that new unit at the same price they were paying. And we found that it does incentivize people to want to renew, because they get used to something nice, you know? And so when we, the new lease forward, even though it's at an increased rate, people recognize we provided the value for that increased rate. We're not just pushing rents on them, right? We're getting we gave them a $15,000 remodel in their apartment.

Craig Evans:

Yep. Well, and see, that's the thing that we always try to talk to our listeners about, is like you. You've got to find niches and nuances of how do you set yourselves apart? I mean, let's face it, the mantra, especially in multifamily SFR anything, is, we'll fix it up on the turn, right, everybody just, let's keep a long term tenant. Let's just fix it on the terms. I love the idea that you guys are getting ahead of that and saying, yeah, no, we want to keep our turns on a consistent rate, as far as when we're rehabbing a product, to keep it in, keep our I mean, let's face it, you start doing that. I would imagine you've probably done studies that you're going to see your capex rates are actually going to start to drop, because now you're going to catch things before they become major problems, stuff like that. So those are the things Kent that I love getting out to our listeners to be able to hear like you guys have found a way to come in, and it's a great niche that sells to the people that, hey, we're going to do this, we're gonna do it one day, and you're gonna walk back in after work, and your place is gonna be done, right? And that's just a fantastic concept. I can't wait for our people to hear this, so.

Kent Ritter:

It's been fun to figure it out. And you know, I think it is a big value add. I think it's a big value add for our investors as well, because if you're going to renovate, let's say 200 units. I mean, I get well, I'll give you a good case study, right? We did. We renovated 158 unit property. We did what's probably 140 of those units in three months. So we were doing, you know, we got up to a clip where we're doing about three units a day, and that's what we're doing on this new propert we just started. We're going to do three units a day, and you know, if you think about that, to do, let's just say 140 units, right? That might take two to three years on a normal turn cycle right, where people are moving in and out, I see if people, on average, living there a couple of years, right? And so it takes a long time to realize that value, to get those renovated rents, whereas we do it all at once, and so that first turn of that rent, whether they're renewing or they're someone new moving in, I mean, we're able to capture that value right in that first year. And that's very meaningful from an investment standpoint. We're also able to, it's a tenant satisfier, because we're not there for two years doing construction. We're in and out, which is painful for a smaller period of time, but then we're gone, right? And they're not having to deal with construction people in the parking lot, you know, those pods, you know, in the corner, all that stuff, we're storing materials. And so there's a great aspect of that too. Also, we're able to buy in bulk all at once, and we're able to to control our price by doing. Because we're, you know, we're buying 1000s, 10s of 1000s of square foot of flooring at a time, you know, we're buying hundreds of toilets, or, you know, all these things versus just going to Home Depot and buying one off, right?

Craig Evans:

Yep.

Kent Ritter:

So we're able to, you know, there's some economies there as well. We get back to scale and why that's important.

Craig Evans:

So I want to backtrack one second, because, you know, I think probably the biggest question that I get asked most frequently is when you know, because, like you and I talked about to scale, especially when you're, you know, like, I own a construction company, so part of ours is we build our product, right? But that still says, Okay, we've got to find land, right? We have to find develop, and so there's a process for that, you know, whether it's you're looking at land, whether you're looking at buildings, single, families, multifamily, whatever it is that there's that scale process that you got to do. One of the biggest things I get asked when people are coming from single family into multifamily, is, how are you finding the deals, to, I'm not talking about to, how are you vetting the deals? How are you finding that volume of product in a multifamily right? Because there's so many people that don't understand that world, and so we've talked about that a lot, but you know, I'd love for you to talk to our listeners about how you guys walk through that processand and I don't know how you guys are, can't I know for us, I mean, we always look as like we love talking about these things is like, there's so much product out there. It's always like, I want people to take what we do and cheat off that, right? You know, and I know you've got a desire of seeing people who do that, so I didn't feel uncomfortable asking that question. I hope I'm not putting you on the spot with that. But I'd love for you to, you know, for people to hear how different companies find their deals, right?

Kent Ritter:

Yeah, you're not putting me on the spot. I mean, there's enough out there for everybody, and nothing is doing is necessarily a secret sauce. But there are, I think, some ways to understand and approach it. So I again, it matters. It matters. I think the easiest way to boil it down is the size of the property that you're going after, because, you know, we've had success at the 29 unit level, the 40 unit level, honestly even up to the 96 unit level. But it was, it was a fluke kind of relationship thing that came together of going directly to seller, or whether it's through mailers or through a relationship, and securing those properties off market. Now, you know, there's a lot of groups that will do mailers and things. A lot of single family folks do mailers, right? I think that can work up to probably around a 50 unit property, because you're going to get folks that aren't groups like us, that have investors. It might be a single owner, and you can like, we've done catch somebody on a bad day, and they're like, yeah, you know what? I'm dealt with it. I'm going to sell this thing. We've done that several times, and it's worked. Well, I find as you go to larger properties, and you have groups like us that have investors that we have to answer to, and, you know, and we're really looking to maximize the value those transactions are much more largely controlled by brokers, you know. So because, you know, I know, by and large, the way I'm going to get the most value is by going out to the market through a broker and getting people interested in and having people bid on it, and hopefully bid my price up, right? And so the I don't, I don't want to say more sophisticated, just larger groups, especially if they have investors to answer to, are going to try to really maximize, that value in that way. And so it's important to build relationships with those brokers. Because, you know, like you talk about deal, like deals kind of go through a life cycle. If you if you want to sell your deal, it starts as just an idea to sell it, right? And you're going to go talk to the broker, and you're gonna say, hey, I want to sell this property. And you're going to get under contract with them, but there's probably a two to three week period where they're going to kind of soft shop that property with maybe just a rent roll and a T12, just the financials to their small group of like five to 10 folks that they know will close on deals, and they've closed on deals before. Those are those pre market deals. So while I don't think at the 50 plus unit, there's really true off market by and large, there's always exceptions. I think there is a pre market that you want to make sure you are apart, because by the time they get that pretty PowerPoint together and it goes out on that huge blast to their email list of 1000s of people, well, you're fighting against a lot more people at that point, right? If you can get it before then, then you might be only competing against 5,10, people. And then, after that whole marketing process, stuff kind of ends up on LoopNet. So like I often recommend people, if you're finding stuff on LoopNet, it's been looked at by everybody that knows what they're doing, and nobody knows what they're doing has said they want it. And so just be careful if you're gonna pick it up off there. Not to say you can't find a great value once in a while, but it's been picked through. And so the important thing of saying all this is, I think, on the smaller scale, especially if you're going after 4, 8, 10, 12 unit properties, you know, I think reaching directly to sellers and getting lists. I think that can be a great strategy. As you get larger, it's more going to be controlled by brokers. And I think the thing that I had a realization of and others will too, is, you know, your goal is to be a friend with a broker so you can be on their short list if they find out you're sending out mailers and cold calling, you're their competition, and they're not going to view you as friendly. And so, one thing that we will do to be proactive is we will send lists to brokers and say, Hey, these are deals that we like. Go see if you can get the seller to sell, but we work with them instead of trying to compete against that, and I think that that's an important point in the strategy.

Craig Evans:

How much have you started leveraging technology, AI, things like that within your business?

Kent Ritter:

Yeah. I mean, everywhere that we can, everywhere that we can, I'm sure there's ways that we can improve. I mean, AI is coming so fast that every quarter, right, there's these new things. The tool that was good is no longer good. There's a new one. But, yeah, I mean, in every aspect of our business and so I believe that, and my philosophy has always been, you know, I want to view my team like the Navy SEALs. And we have like 30 people now that, you know, a lot of them are property management and maintenance folks. If you view like the core team of the people who are finding deals and analyzing deals, I view that like the Navy SEALs. It's like you want a small group of highly talented people that can achieve a lot more than a big group of moderately talented people, right? And so I want a small group of eight players. Even on the property manager. I mean, it's all A players. It's just, you know, you just need a lot more people. But the way that you get leverage out of that small group, and the way you keep the group small is by giving them great tools and software and software and AI, I think those are all great tools for people to be able to use to, you know, get more leverage and to do more. And so, you know, we use it from, I actually made a little list here because it's hard to remember all the stuff that we use. But like from, from underwriting, we have an AI enabled underwriting tool that allows us, it kind of, it's able to look across our different deals and everything that we've underwritten. So every time we underwrite, we're building up our database, you know? So that's been pull comps and do things that are just help save time. You know, we have an AI kind of enabled dashboard that sits over our property management system so that I can easily visualize what's going on in our portfolio, right? And then it has a little AI component that will say, Hey, we've noticed a trend here where utility costs at this property are up, you know, 15% over the past two quarters. You should look into that, stuff like that, so to start to pull out insights, which is pretty cool. But then, like, just, we're a Microsoft shop, so like, everything's on Microsoft, and Microsoft has copilot, which allows you to actually talk to it about things that are like in your SharePoint or in your email, and say, Hey, find me that email from three weeks ago from this guy that was about this. And it's much more efficient than using the like, search and Outlook, or, you know, another great example of AI, whether you use like a copilot or like Adobe has a pretty cool AI agent in it, the PDF viewer, I use that for contract review all the time. I mean, it's actually fantastic. And recognizing what kind of contract it is, and pulling out the key points, and I can ask it questions on things, but, you know, a lot of our contracts have the same type of things I'm looking for, and so I'm able to quickly pull those out without having to read through the whole contract. And so that's been a big time saver. We use Grammarly just for editing, right? I mean, everybody's moving fast, but I want our people to come off and be really professional. And so it's kind of that spell check, grammar check that goes over everything as you're typing emails and writing documents. And so just making sure that we're keeping a high level of output out to our investors, brokers, everybody that we work with, we're coming off as professionally as we can. And then I think another one is great for all the video calls we do these days. We use an AI note taker on all of our video calls that takes notes, transcribes, pulls out to do's by name, like, like, so I will get an email after I do a call with my team, and it'll have in it, here's kind of made summary, and here are to do's by person that were discussed, and it's 80 to 90% right? I can usually make a couple tweaks and then send out that follow up, and I've got a great follow up email to help everybody stay accountable. So I mean, those are some ways that we're using it. Things are on the horizon are really all related to property management, on how we can use it to better engage with our residents. You know, for example, I think a great application is on, collections, you know, rather than having to reach out to all residents that are delinquent, the AI can know that, and it can send 1000 emails in a second, you know, to everybody that's delinquent, send out letters and different things. So just, I think, a huge time saver there for admin tasks on the property management side.

Craig Evans:

Well, and that's what I'm loving. It was, obviously, everybody's willing to talk about it and, and I love being able to get back to our people, just the aspect of, you know, how do you physically put it into play, right? And and not just use AI as a game to ask some goofy question and see what kind of crazy response it comes up with, right? How do you physically use it and make our lives better? So, yeah, well, Kent Listen, man, I can't thank you enough for the time we've had today. But as we kind of wrap up, I think the one last question say is, as you're pouring into people in life and you're teaching about what you do, what do you think is the, for the new investor that's out there? What do you think is the biggest piece of advice you would give new investors today?

Kent Ritter:

You just got to get started. I think so many people just never start. I think they listen to podcasts. Podcasts are great.Love Podcasts, have my own. It's called Ritter on Real Estate. You should also listen. You should listen to all the podcasts. They read books, they do all this, they underwrite deals, even, but they never pull the trigger. And actually go buy a deal. And you think, you know, I think if more people did that, I think more people would be able to reach their financial freedom, independence, whatever they want to call it by becoming one, a great way to do that is by becoming a real estate owner. But I think people never kind of get off the couch in that way. So I'd say you just have to, at a certain point, take a leap of faith. You got to educate yourself. You need to have a safety net. So I, you know, had training programs. I had mentors, some paid some unpaid, coaches, and different things early on, real estate specific coaches, because I wanted to have a backstop, you know, or a parachute when I took that leap, right? So I think that's a really good way to do it, but you have to take a leap eventually. The other thing I would say is, if you're going to raise money from other people, it's difficult. It's harder than you think it's going to be. You're going to raise less your first time than you think you're going to raise everyone does. I did myself, and you need to start six months to a year before you think you're going to need that money, because you really have to change people's perception of you. You're not their bowling buddy, you're not their coworker, you're not the guy who's in their fraternity. You are a real estate expert who they're going to trust you with a significant amount of money, and you really have to change people's perception on that. And it takes, it takes time. And I think, you know, building yourself up as an expert, talking about all the time, and showing them that, you're approaching in a professional way, I think, is the right way to do that. But it takes time to change people's perception. So those are my tips.

Craig Evans:

Kent, if we can, before we jump off and, you know, we've been through a ton of stuff today, I want to make sure we give people an opportunity to really kind of learn about you, know about you and your business and what you do, and follow you to continue learning from you. So how can our listeners reach out, find out about you?

Kent Ritter:

Yeah, I think the easiest way is to go to hudsoninvesting.com and that's our home base, right? You can check out our portfolio. You can check out, we've got some educational content on there to help new investors out big you know, FAQs and glossaries, because there's a lot of jargon and terms that you're going to see. You can check out, you know, a couple of the deals that we're doing right now and actually raising money for that's a great place to check us out. You can also check out my podcast, which is called Ritter on Real Estate. Really similar format. We're interviewing really smart real estate people and learn from them. And then lastly, I would say, if you want to reach out to me directly, LinkedIn is, I think, the best way to do that. You know, I pretty active there, and it's just Kent Ritter on LinkedIn easy to find. And yeah, with that, I hope everybody reaches out, happy to answer any questions.

Craig Evans:

Awesome. Kent it has been a pleasure having you on getting to know you. I look forward to maybe doing some more stuff with you in the future. Guys, thank you so much for jumping on today, listening. Super excited about having Kent and we can't wait to see you get in the future. Have a great day.

Kent Ritter:

Yeah. Thanks so much

Narrator:

For more information on hard money loans, trust deed investing, and upcoming events with The Norris group. Check out thenorrisgroup.com. For more information on passive investing through the DBL Capital Real Estate Investment Fund, please visit dblapital.com.

Joey Romero:

The Norris Group originates and services loans in California and Florida under California DRE license 01219911. Florida mortgage lender license 1577 and NMLS license 1623669. For more information on hard money lending go to thenorrisgroup.com and click the hard money tab.