The Insider's Edge to Real Estate Investing with Moses Kagan

Hi, everyone. Thrilled to have with us today Moses Kagan, who is co founder and partner at Adaptive Realty and also co founder of Reseed. Moses, welcome.

Thank you for having me. Glad to be here, James.

Awesome. And really great that our mutual friend Michael Rutter can make the introduction. I know. After this, we're going over to the Real Estate Board's sales brokers luncheon. I know you got in late from LA last night, so just really appreciate your showing up and, and everything you do for the real estate community.

Happy to do it. And you know, as you can probably tell, I like the sound of my own voice. So, you know, we'll just, we'll go as as much as we can.

That's awesome. So, Moses, you, you, you're involved in so many different things and I'm sure the answer is going to be James, there's no typical day. But just give the audience a sense of what your business looks like now. Maybe touch a little bit on Re Seed, but I want to certainly cover that and get to that. But just talk about what like a typical week looks like. What does your company look like? Just give a little more background.

Yeah, so a typical day looks a lot different now than it did, you know, three, four or five years ago. But just to give everyone a sense for, for what we've built. Adaptive Realty owns, depending on the day, about $200 million worth of apartment buildings in Los Angeles. Unusually, these are small buildings. So it's 54 little buildings. They are all capitalized for permanent hold. In other words, I've never knowingly quoted an IRR to any investor ever. We can talk about the, that the knowingly is a little asterisk because I by accident sent an IRR calc to one guy. So now I have to say knowingly every time I say that. But so we, so we own 54 little apartment buildings, and then we manage another 70, 75 buildings for other, other owners. So it's a pretty simple business. Over the last couple of years, growth slowed way down. We are unfortunately, as you know, Sam Zell likes to say, we're sort of, we're unfortunate to know the numbers. And so the result is that as prices got crazy the last couple of years, we slowed down a lot. But over the course of the preceding 10 years, we were routinely renovating between 10 and 20 small apartment buildings at a time. And we can talk about what it means to build an organization that can do that. It's a very different challenge, I think, than doing larger projects in a variety of ways. So that's what we built these days. To be honest, Adaptive is pretty quiet. We have a really good internal property management team and a finance function. And so the number of problems that actually reach my desk is pretty low. I'm still. Because I'm a little bit of a control freak, I still approve every tenant personally in the portfolio. So there's like a thousand apartments. So I. I approve. I do. I do do that. Do the 10 screening. And I also set all of the asking rents and decide on rent increases. So in that sense, I'm very in the weeds. But it doesn't actually take as much time as maybe it sounds like from what I just said. And otherwise, you know, we're looking at new deals, but, you know, I haven't bought anything in more than a year, so. So it's pretty. Pretty quiet overall.

But even just the asset management and 54 buildings, whether it's a thousand units or 10,000 units, you have 54 different boilers or heating systems. And so certainly there's a lot that goes into that, especially if you're personally screening tenants. But, Moses, you also do so much for the real estate community, right? So I've heard you on multiple podcasts. You're a huge influencer on Twitter. How much time do you devote that. I mean, you really are conscientious and thoughtful with your posts, and I've got to imagine that takes time.

Yeah, but I mean, and I appreciate you saying that, but it's also not altruism, or at least not entirely altruism. I guess an important thing for your listeners to understand is that I didn't come from a background where I had an incredible network. And so in order to get access to capital, and particularly permanent hold capital, which is a different. Which is a difficult thing to raise, I had to do things a little bit differently. And I'm looking at your stack of books here, and I'm seeing Seth Godin, who's like, I've never met Seth, but he changed my life. I did once. Amazing.

The real deal.

Yeah, I stumbled across his book Permission Marketing, probably in, like, 2010 or something. And it really resonated with me. And I had already done a few deals, and I was thinking about how to go about building a network of investors. And, you know, I didn't. My family doesn't have an incredible network. I went to pretty good schools, so I have decent networks from there. But I don't play golf. I'm not in, like, a tennis club or something. So I was struggling with, how do you actually I never. Oh, I never worked at a big real estate company. I never worked at any other real estate company. So it's like, how do I go meet investors? Like, what do you, what do you actually. Like, what do you do? You're like sitting at your desk, I need capital. Like, what do you, who do you call? And so I read Seth's book, which is for those who haven't read it, I strongly recommend. The examples in it are outdated now, but the thought process is evergreen and the thought process goes like this. You put out educational material into the world, people thank you for it. You're teaching them something new and you're doing it for free. And in exchange, all you ask of your audience is that they give you permission to continue to contact them and teach them. And if you do that, over time, what happens is people come to know you and to trust you and you end up building trust at scale. And I did this in the most half assed way possible. I started a blog called Kagan's Blog. It's still up there. I haven't written on it in a while, but it's there as kind of a, a map for other people who are just getting started. So I started writing on Kagan's blog every day for like five years. I wrote first thing when I got in the morning and I got in the office in the morning. I wrote a piece about the business of buying, renovating, managing apartment buildings. And that is a pretty dry, boring topic and like 99.9% of people are not particularly interested in reading about that. However, the people who, who do find their way to a blog like that are highly likely to be interested in working with you as either investors. Investors or at the time we were doing brokerage and also we were building a property management business. So that was the core of our capital base. And also we, like I said, we built a brokerage that we had some agents pretty active for a while and then slowly built a property management business. So my engagement on Twitter and subsequently on podcasts and LinkedIn and all that kind of stuff really is an outgrowth of what I did on Kagan's blog. And it worked. You teach people and you build trust and then people come to you and say, hey, I think what you're doing is really smart. You think about real estate in a different sort of differentiated way. It resonates with me. Can I give you a check? And it's an amazing. And sorry, I know I've been ramped.

This is, I'm so glad that you're bringing this up. And I was going to ask, are you familiar with Donald Miller's story brand?

I've heard of it.

Okay, so I need. I'm sure you've got a stack of books that you're waiting to read. And, uh, not to mention my. My book, which. Which happy to give you a copy, but his whole point is to make it about the audience, right? And it's. Don't make it about yourself. And the content that you post is, again, you're doing it to be helpful to others. It's not like, oh, hey, aren't I great? Look at all this that I've accumulated. It's. How can I be helpful? There's gotta be a why behind there, though, for you. Because. Because look, it does take time and effort to do this right? And you could say, well, at the end, I. I'm cultivating. But I mean, you've taken it to a whole nother level, so why do you. And maybe now it would be a good time to talk about reseed and what you're doing there. But why are you so committed to helping other people?

Well, look, there's a couple of things going on and I'll circle back to why it's not altruism in a second, but a couple of things I want to say. First of all, my father spent his entire career as a college professor at RPI at Upstate New York here. If I were less greedy of a person, I would have been a history or politics teacher, probably at a prep school. Like, I like teaching it. It fills me with energy. So I've just figured out a way to teach in a way that pays me a lot of money instead of not paying me a lot of money. That's. That's one. That's one way of thinking about what I do. Another thing to say, though, is distribution on these. Distribution writ large, like whether it's on Twitter or LinkedIn or wherever, is extraordinarily powerful. To go back to the fundraising piece, I mean, literally, I have had people reach out and say, hey, I'm interested. Can I give you a $20 million check? And for someone who, like, who had no access to capital, that's an amazing thing.

Can I just stop you and ask you about that? Because when I see, and I'm sure you're very thoughtful and you do this in the right way, and you know what? You can and can't say you're not making promises, but the whole idea of raising capital over social media, you know, would make me a little nervous.

Well, how do you.

Yeah, yeah.

I mean, look, we. We don't do solicitation. I mean, I'm not raising for anything now, and frankly, most of the time I'm not. And in fact, when that guy came to offer that check, we were unsolicited. Unsolicited?

Yeah.

Literally. It was like, hey, I've been following you on Twitter for a year or two years or whatever it was. Come talk to me about your strategy. And so I met with him in his office, and it turned out that he was about to experience a large exit, and he wanted to place Opportunity Zone capital. And he realized that our model of doing these gut renovations of buildings was actually perfect for. For the Opportunity Zone model. Right. And so. So it was really. It was like literally unsolicited. It was. He came to us and said, hey, would you do an Opportunity Zone vehicle for me? And you have to understand that for someone who had spent his. The early part of his career, like, with no access to capital and like, scraping and clawing together 50 grand or 100 grand there for so many deals, this was like, that's a revolutionary thing. So, so, so that's the first thing to say is that that distribution is extremely valuable for just running one of these real estate private equity businesses. But separately, it has given me these other opportunities. So the first thing is I started what we call an unconference, an event called Reconvene, which we do in Southern California every September. We just finished the third one. We'll do a fourth one next year. And we bring together all these sort of, let's call them, sub institutional real estate operators and passive allocators who like to write checks into these kind of deals. And we all hang out in Santa Monica for a couple days and eat good food and drink good booze and have these very, very dorky real estate conversations that lead to all kinds of interesting deals and capital being raised and all that kind of stuff. And that has become, you know, it's not like the best business I've ever been involved in, but it's a pretty nice business for my. In fact, I partnered with my wife on it. We run it together. And it's. And so that has been that. That in and of itself is an interesting thing to do. That then has led to all these other relationships, one of which is recede. A partner, my now partner, Red Bennett, approached me with the idea of effectively doing like, Y Combinator for real estate operators, right? Selecting, training, and capitalizing a bunch of people to go do the kind of deals that We've done permanent hold, multifamily and supply constrained areas across the country. And that is early days, but that feels very, very promising. We've selected eight operators and raised a bunch of capital and we're in contract to buy what I hope will become our first deal. So that, that, that opportunity, I mean, I have people literally weekly coming to me, both in Southern California, but also all over the country and saying, hey, I've got this deal. Would you be interested in partnering with me on it? So I've got on the one hand people saying, would you please take money? And on the other hand people saying, hey, I've got this deal. Can you capitalize it for me? It's an amazingly powerful position to be in. And I got there literally by writing, which is, I mean, I always loved writing when I was in high school and college, but I never in a million years thought that all those, you know, five paragraph essays that I wrote would lead to this.

Well, to think of how many people you have inspired to get into this business because before this, whatever you want to call it existed, you know, this knowledge base, this access to these kind of programs and podcasts, people just either stumbled in the business, they had to figure it out. Yeah, I think I remember you said that your father owned a little two family in Troy. And your story, and we'll put in the show notes this interview. And it was a really deeply personal interview. This was not just like you woke up one day and you had, you know, 200 million under AS. I mean, it was a real grind. And meanwhile you're looking around and some of your friends who graduated, you know, they had already retired and you're sitting there, you know, just grinding.

So yeah, it was.

Does it still need to be a grind for the people listening? I mean, is it?

Yeah, I think the answer is it does need to be a grind in the beginning. I mean, the kind of person who is capable of being doing this business successfully probably has pretty high opportunity cost, which is to say that they could probably be making a bunch of money elsewhere and the early days of this business, unless you get super lucky. And it's like a, you know, like a 20, 20, 2021 type thing where things go crazy and maybe you make fast money, but generally this business is a grind. And so if you're like, if you high opportunity cost personally, you probably have a bunch of friends who are likely to be pretty successful. So almost by definition what you're doing when you start one of these businesses is. And I didn't realize this, at the time, it's only in retrospect, but what you're doing is saying, I am going to accept much lower compensation in the first five years of this than my friends are going to be earning in whatever they're doing with the idea that hopefully you come out the other end with a, with a durable business that you own. Right. And I have, fortunately, I have that. I am now out on the other side of that. Like, we have a durable platform. It's tiny compared to, I'm sure, the people you deal with and a lot of listeners. But, but it's mine. Mine and my partners and my employees own some and, but, but it's a, it's a durable business that I can do for the rest of my life. It affords me an enormous amount of freedom of time and, and, and a growing net worth and plenty of money to spend. So it's like, it's an amazing life. But it, but I guess so. Just to answer your question, that crawl, I call that period, like the crawling across class, the part where you're just like slowly putting together capital and doing little deals and running around and doing everything yourself because you can't afford to hire people. That's a very painful stretch of time. And because I didn't have a mentor or much in the way of family money, I had to take all these detours and twists and turns out brokerage and I did a bunch of fee deals where I got no ownership. Like, we did all kinds of crazy stuff to make it through that period, in part because we just, no one was. We didn't, we didn't know any better. Like, I didn't have a mentor. There weren't all these podcasts, There weren't books to read. There weren't. So, you know, I learned, I was learning a little bit in this book and a little in that book. And I talked to someone and I talked to someone else and you know, we figured it out. But, but the path that we took was like whatever the opposite of a straight line is, you know, it was, it was circuitous, to put it mildly.

Well, what's amazing to me that you figured out is what many of we represent here, some of the New York families, real generational wealth, right? And guess what? They never sell. Now that. But that's not sexy, right? And when you talk about. And I'm not picking on Robert Rovani, I've had him on my podcast and he's doing great deals, but he's buying this deal in Miami for 10 million next month. He's selling it for 20. You know, look, for people who are trying to start off in the business, the idea of like, hey, maybe I can get in, flip a couple deals, get some real capital to work with. But you've really, it seems focused more on building a platform and over time really, as opposed to relying on just the flip and the trade.

Yep.

That you're really owning real estate for what is its intrinsic value?

I mean, look, I read you might even have it over there. The book Skyscraper Dreams was extreme, extremely influential for me. And that's about the New York real estate families and, and there's a little bit of a backstory. My great grandfather used to own some real estate in New York and, and in some ways had the opportunity that those families had in the. I knew him, he lived to be a hundred, 101. So I knew him, he, he was in the business that those people were in the 1920s and 30s and, and did not do what those people did. And so in a sense my career in some ways is me saying like, I wish that I had, that my family had built this generational portfolio and therefore I am going to do it myself. So I have enormous amount of respect for those people. And that is, I consciously modeled our business after that. Now it turns out that there are a bunch of other very smart people, including Warren Buffett and others who have realized that if you own good businesses, it is insane to sell them. Like, if you have a really well located apartment building in a good location and, and it is, you've renovated it and it's, it's full of tenants who you've selected and they pay the rent, they take care of the units. Like, and you've got an operation that knows how to manage that kind of an asset. Like you, you're the right owner for that building. Like, you know, so the question is, how do you figure out a capital structure that allow in a business model that allows you to do that? And that part was hard and it took a long time. I mean, you know, you're, you're, you're used to people talking about IRRs, I would imagine, right? Yeah, yeah, right. Like most people who are buying and selling like they quote IRRs, like. Yeah.

If you have an investor, certainly a fund that has a life to the fund.

Totally.

Like they need to show return, they need to get their money back.

Totally.

You know, how are you finding these forever investors?

Well, that goes back to the, to the content marketing. It's like the, the, the whole, I mean this is a longer Conversation. But in my opinion, the IRR driven real estate model, the one we all know where you buy, fix up and you sell, in my opinion that is driven to a very large extent by institutional investors who do not pay taxes. And so for them, maximizing IRR is a smart thing to do. Okay. But that sort of thinking has permeated the entire industry and it's in my opinion insane for taxpaying investors. Like, we sold the bunch first bunch of buildings that we renovated and I remember looking at the tax returns in the, for the year that we sold them in and it was like, what the hell are we doing? Like we did all this work. We first of all we paid, no offense, we paid the brokers all this money, you know, transfer taxes, title escrow. So you know, you vaporize 7% of the, or whatever it is of the gross proceeds on sale right off the bat. And then you're going to take federal and in my, in California state taxes off the top of that. It's like, that's not.

The government becomes your biggest. Yeah, there's. The savvy real estate broker is going to say, but Moses, you can do a 1031 exchange, roll the gain and go find.

What I'm going to say is I can. You know, and this, we did this very many times. We are adding so much value to these buildings that we were able to refinance out effectively 100% of the capital involved.

So today that might be a little.

Tough, that's a little tougher. But like, but, but so we've done that many, many times. And whether it was 100, you know, 100% or 85% or whatever, it kind of like doesn't matter. You refinance out the vast. We buy these buildings all cash ren. Cash refinance, pull the vast majority of the capital back out, hand that back to the investors tax free. Okay, if you want to own another building, go buy another building, go raise money and go buy another building. But why would you give up this asset? We have assets now where we've gone through three refinances and each time the rents go up and we pull more and more money out tax free. And it's, I mean there's a. Your listeners are familiar with the concept of qualified non recourse basis. Like you get to keep refinancing and pulling more money out even past your own basis, tax free. Like, what are you doing? Like why would you ever sell that? It's a cash machine.

But how do you compete? Because when you're going out there looking to buy. There's a lot of the syndicators out there that have the high octane money. And look, we all know that you can make an irr and a pro forma say anything you want. You can say, okay, I'm gonna juice the rents, I'm gonna double the bottom line, and I'm gonna exit at a four cap and five years. Who knows? So how do you compete against that?

Well, the answer is, in some sense, you don't. I mean, you know, and that's frankly, that's why we, our acquisitions slowed way down over the last couple of years. I mean, unfortunately, we know the numbers. Like we, you know, until recently.

Too much.

Yeah, I've been renovating these 10 or 20 of these buildings at a time. I manage a portfolio of whatever it is, 130 of them. Now I have very good information about the rents and the operating expenses and the capex involved in renovating them. I can't fool myself. So when a bunch of crazy people go around buying rent stabilized buildings at $400 a foot, and this is L A numbers, like, I know how that deal is going to work. Like it's not going to work. And so that means that. But it forces us to invest countercyclically. I'll tell you a story. We, in 2021, we raised $23 million discretionary fund, which was the largest fund that we had raised up to that point. And I was so excited. I mean, it was just, it was partially, it was Twitter, like, raised this. It was amazing. Okay. And we had a two year investment period. I think maybe it was three. And after the first year, I promised the investors that we would target a specific unlevered yield on cost. Like very simple. And after a year, it was very clear to me that like we were not going to. None of the deals crossed that threshold. Gave the money back. Just gave it back. And it's like it really sucked. It was pretty painful. I mean, obviously we ate the fund formation costs and all that stuff, and we never charged, there's no fees. We just let go. We just released the commitments.

I mean, Moses, I've got to stop you because that says so much about character. Because, you know, you raise this, this discretionary money, you could have, you know, tried to, you know, tweak the numbers and say how this is going to work. Because look, it's not just having that money. You know, there's asset management for fees.

Yeah, there was like a few million bucks in fees. For me. Yeah.

For you to give that back. After the amount of work it takes, not just the filing fees and everything, the actual work to raise capital, I mean, that. That says a lot. But I have to imagine that those investors who had. Had pledged their. Their interest. I've got to imagine the next time you come back to them, they're gonna say, you know, Moses is, you know, is only going to invest my money when the time is right.

I mean, that's the hope and that. But I'll be honest. I mean, as you. Many people, as you can imagine, have the same reaction that you just did about how, oh, must have taken character, blah, blah. I can't emphasize enough that it did not take that much character. The numbers are the numbers. Like, and our models could not be any simpler. It's an unlevered yield on cost. What do you think the rents are going to be? What are the expenses? Divide that by what it's going to cost to buy and renovate the building. There's no. We don't even use debt when we, when we underwrite. So there was no. There's. There's. You can't play hide the ball. There's nowhere to hide the ball. Like, you know, we have. We underwrite the rents based on a portfolio of, you know, now a thousand renovated stabilized apartments that we own in all these neighborhoods. We know the operating expenses and we're doing all this construction, so we know how much it costs to renovate the buildings. So the only variable is that. The only variable is the price that you pay. Right? And so if the price doesn't work, the price doesn't work. Like, there's no, like, there's, you know, there's nowhere else. It is. It is what it is. So I, you know, to. To have put that fund out in light of what I had promised the investors would have been, I don't know, not stealing from them, but it would have been like. It would have required, like, real. Just dishonesty on my part. And it's like in our business, like, the whole point of the business is people let you take the following coin flip. Imagine. Imagine you're in a business where you get to flip a coin and it's heads, I win, tails, you lose. That is an amazing coin to get to flip. Okay? That, that's what the private equity business is because you get a disproportionate. You, as the operator, get a disproportionate share of the upside, right? So you get to flip a coin. Heads, I win, tails you lose. Okay, as long as people trust you because if they stop trusting you, you stop getting to flip that coin. Right? So viewed properly, our job as operators is before any. Before even protecting our own money is protecting the trust that. That. That capital providers have in us, such that they will allow us to flip that coin when it makes sense to flip the coin. That's it. And so viewed properly, any individual deal is not. It's just never worth it to. To do something that's gonna. That's gonna jeopardize this trust that you've built up over a career and which you expect to continue to draw on for decades to come and hopefully for your children to draw on that.

We talk so much on this show, which you build over a lifetime, can take minutes to lose. So no question that doing the right thing above all is paramount. So. So. But, Moses, I've got to ask because you're saying, okay, you haven't bought in the last year or two, the numbers no longer work. But you still, you've set up reseed, you have sponsors bringing deals. You have a lot of people listening to this program right now who are saying, I want to get in the game now and buy. So what do you say to those people? Are you saying right now this just isn't a good time, or is it just maybe for your business plan, what you're looking to do?

Look, I've got it. I'm in final round. In fact, there's a call going on that I'm probably missing right now. That's up for it. It's okay. I knew I was gonna miss it. Final round on a deal that we offered on, like, we'll. We'll buy stuff. It's just, again, it's like, what's the numbers? Like? If the numbers make sense, we're happy to be buyers. Like, there's no. And I would have been a buyer last year if the numbers had made sense.

So you're always looking. So it's not. Yeah. Oh, so you're not sitting out, saying, I'm just sitting out this morning.

No, no, no, no. And it. It. No, because, you know, obviously, first of all, your broker relationships suffer if you do that. And second of all, it's just easy to lose, you know, to lose connection to the numbers if you're not looking at them constantly. So, you know, we're. We're offering all the time, I think. Are there. Look, with reseed, our operators are out there making offers, you know, all the time. Like, there are deals to be done. It's hard. You have to be picky. And as in the current rate environment, in my opinion, it's, it's more important than ever to focus on the unlevered yield. Like if you can buy, if you can figure out how to leg into a renovated apartment building in a good area at a seven and a half unlevered, like you should probably do that. Like, don't you know what I mean? And like rates are kind of high right now and maybe, maybe the leverage is not going to be great and maybe you got to do it all cash or whatever. But like if you're in a good area and you leg into a yield like that, like you're going to be happy over time, like it will work out well. You just have to be really picky and not go do a bunch of work and find that you own a five and a half.

Right. So can you talk a little bit about sourcing? And part of what we like to try to do is really get specific, get good actionable information. So you know you're at this point in your career and you've paid your dues. Right. So you've got brokers who are teeing up deals for you. You've got this incredible network in Twitter where people, I'm sure, are showing you opportunities. But for someone who's listening to the show and hasn't bought their first deal and they don't have a track record, what do you say to that person to first of all get to that point for their first acquisition and then how do they go and find it and have credibility in the market?

Yeah, I mean the number one thing to do is to niche down. So pick an asset class, pick a market or a couple markets if you're in a less liquid market and just study everything. Look at every single deal that gets done, look at what's listed, look at what sells, look at what doesn't sell. Talk to the brokers about why it did or didn't sell. Look at the rents. So look literally like, look at what apartments are renting for. Talk to contractors about what construction pricing is. Talk to property management companies. Get them to give you anonymized T12 so you can see the operating expenses. In other words, you can do a ton of research on a market such that you begin to really understand the numbers. And I call this sort of seeing the Matrix. This is going to date me a little bit. But you probably saw the Matrix. Yes. Like, everyone, Neo, like, like finally starts to, well, starts to see all those numbers all around. He's like. And he realizes that he's basically in like if you, when you first start looking at a market, it's like, ah, this deal sold for this and this deal sold for this and you don't know why or who or how or anything. But if you spend six months looking at that market and really understand all of the different inputs, what happens is eventually deals will start to jump out at you as being priced incorrectly. You're like, I've looked at the last 50 things that are traded, that have traded. This is not priced correctly. There's something wrong here. And sometimes what's wrong is there's some problem with the building and you haven't figured out, but often because real estate is an imperfect market and it's opaque and there's bad information and the brokers, present company excluded, often or sometimes, particularly in sub institutional brokerage, like, don't know what they're doing. Like there are deals, there are things that are mispriced. The problem is that when you're just beginning because you haven't done the work, you don't know. And not only do you not know, but even if you think you know, you probably don't have the confidence to go out and tell all the rich people, you know, your best sources of capital that this is the one. So the trick is to do that insane amount of research until you're seeing the matrix. And then when an opportunity pops up that is clearly mispriced, you A, know that it's mispriced and B, probably more importantly, have the conviction to act right.

You know, I, I could not agree more. And how I got started in the brokerage business is we had a territory system and it said, hey, a lot of shops, you just, here's a desk, here's a phone, just start dialing for dollars. It was, no, no, you're not picking up the phone for three months, right. Which is a little daunting when you're on commission and saying you're gonna study this market and what does study mean? Like building by building and researching the comps and rents and zoning everything else. And let me tell you, even though I was brand new to brokerage, after three months of intensely studying that area, I knew more than anyone else out there, so could not agree with you more. Now I was speaking at a local master's program yesterday and just, you know, asking the audience by show of hands, you know, okay, how many of you had invested so far? Maybe a quarter of the hands went up. And then for everyone else, I said, okay, what is the impediment why, you know, how many of you would like to invest? Everybody else's hands go up. Okay, so you all want to invest. Why haven't you? And the number one thing that I always hear, and maybe you hear the same is it's that fear and it's, oh, I'm not ready financially. So I'm sure you're not going to tell everyone, just jump in and put your entire retirement account on the line. But you know, what would you say to that person who's not, doesn't have millions of dollars in the bank to get started?

Look, it's really hard and the truth is that most people probably shouldn't. Okay, No, I mean, look, it takes a specific type of person to pull the trigger. Okay. And the way I would describe myself is I'm among the, the most risk averse people who is still willing to pull the trigger. Does that make sense? In other words, there's a spectrum of risk tolerance among all humans. Most humans do not have sufficient risk tolerance to do, to do a concentrated levered bet of the type of, of the type that we're talking about. So let's like take those people out of the equation. Right? Those people should for sure be putting their money in mutual funds or whatever else. Okay. Of the people who have enough risk tolerance that they, that they might potentially be trigger pullers. Right. There's also a risk spectrum. And then on the far risk accepting side of that spectrum, they probably shouldn't pull the trigger, but they will. So the question is, how do you kind of, what you're really looking for is those people kind of in the middle who are willing to pull the trigger but are sufficiently risk averse that they actually want to know what they're doing and take this seriously and think about the downside. And the only thing I can say, so part of that is temper is temperament. Like there are people who are just too risk averse. I'll give you an example. There's a guy I met in like 2008 or 9 and he was ready to do a deal same time I was. And I saw him again three years later and he still hadn't bought anything. Maybe it was four years later and we had bought a whole bunch of stuff. It was like, dude, if you had bought literally anything in 2009, it doesn't matter what you buy, you would have done great. There's a certain point you have to just jump in and do stuff. But, but yeah, it's, I think the, for someone who is, who is of, is the kind of person who could conceivably take that risk. I think that the only, the only thing that will get them over that line is intensive study and then also just seeing other people who have done it. Like in other words, like seeing that it is possible to do this and do well.

So Jordan Vogel came, came on the show and he said that after even buying 70, 80, 100 deals the day after every single buy, he always had this buyer's remorse. Where did I pay too much? What's going to happen? I mean imagine even early on when you're buying things, you're, you're questioning. I mean it seems like you're very disciplined. It hits the model, but there is still a leap of faith. Right? And maybe that's what you're saying is you, you have to be wired a certain way to do this.

Yeah, I mean I would say that our, compared to, so compared to what I understand about how the New York market works, there is, you are, you have to accept less risk in Los Angeles. In other words, we have inspections and contingency periods and, and documentation that, that I think my understanding is that you all don't get here. So I think that it is possible to do deals in LA and other markets in a way, in a more risk averse way than it, than it is possible to do them in New York. So that's, that's, that's part of what's going on. But the other thing is when we have a good deal like a deal that, like a one that we, that we're going to do, it works. Like, you can see in the numbers that it's going to work. And particularly if you've done a bunch of them, you just kind of know how it's going to unfold. So it's not. Well, I don't feel buyer's remorse because I like, I can't emphasize enough that when we bid there's a number, there's no other number. Like in other words, like this, we're in this final rounds for this thing right now. And like we did the first round bids and I gave the guy my number and then they came back like, okay, what's your second round? But I was like, no, that's the number. Yeah, like there's like do it or don't do it, I don't care. But we're gonna bid the number where the returns make sense to us and, and if someone else pays a dollar more and gets it like they should have it, that's it. So I don't feel buyer's remorse because Whenever. When we get something, it's because we got it at our number. I'm fine with that. What I'm paranoid and terrified about is the execution. Like, okay, I don't feel like we overpaid. I feel like we made a bunch of promises to capital partners about what is going to take place over the next couple of years, and now we as an organization need to deliver on that. And I have, as I've got older, mellowed a little bit in the sense that I'm not literally screaming at people, but for a very long time, like, you could. My partner, like, unfortunately bore the brunt of it, and my, My. My first wife, I, I was like a nervous wreck, like a disaster. Like, just because it's terrifying for people. You know, you make a series of promises and then you have to fulfill them. And when you do fulfill them, and it's amazing. It's an amazing feeling because A, you make money and B, it feels amazing to make big promises and then. And then fulfill them, and then people get more trust in you and you can make bigger fulfill those. And that's. That's. That's what this business is. And it's an amazing thing. But the, The. The. The time period between when you make the promise and when. And when you fulfill it is terrifying. It's. It's, you know, and you. And. And you're just trying like hell not to make mistakes, to make sure that you've got all your bases covered. And, you know, and sometimes mistakes happen and sometimes things happen that are out of your control, and it's, you know, and there's an enormous amount of anxiety that comes with that, and you have to live with it.

I'm so glad that you've put the emphasis on the actual execution. I mean, I think in so many people's minds, it's about getting the deal and how you get on first base. And then. Okay, where do we go from here? So, Moses, this has been amazing and only with a couple minutes left. So for that, maybe it's a college student listening right now or someone who's maybe in a different business. They're looking to get into real estate. Where do you tell them to start? Is it, quit the day job? Jump all in? Is it go work for a big shop? What would you say to that person?

I have a lot of these conversations, as you can imagine. And honestly, the first question I ask them is, do you have family money? Because it. That really. That it bifurcates that the available paths, if, if you don't Have a lot of family money. The, the two kind of optimal paths in my opinion are one, ideally working for a high volume sub institutional operator. In other words, what you want is reps. And the problem with working for a big institutional shop is you might work on huge deals and they may take 10 years to full. You know, Hudson Yards, right? Like how many cycles of analysts went in and out of Hudson Yards? Like no one's, no junior person saw the whole thing. So you're just kind of like doing something you didn't weren't there at the beginning and you're not going to be there at the end and blah, blah. You want to be somewhere that's doing small deals and lots of them because you get, you just see so much more. It's so many more bets. If you can't get a, that's the best kind of job to get. If you can't get that job, then I would, I would say high volume investment brokerage is also very good because it's a similar thing. You're, you're, you're meeting a lot of, you're seeing a ton of deals, you're meeting a lot of people who invest in real estate and those are likely to become your, your initial LPs. I will give one word of caution about starting an institution in, in, in brokerage though, and again, I hope you'll accept my apologies in advance. The skill set that is involved in becoming a very successful listing broker is very different from the skill set that's involved in investing. Listing brokers are fundamentally marketers and there's nothing wrong with that. Like, I'm a marketer too and, but they're marketers and they're. So their job is to paint a picture of what this building is. Could be for the next guy, right? Or next gal. And that's cool. That's their job. And the good ones are very, very good at it. Okay. When you're an investor, you need to be focused on the downside, all the things that can go wrong, all the ways you can trip over your, you know what. And so what I found, weirdly I said before that we did some brokerage in the very beginning. We did a lot of buyer representation, which is a thing in California. I don't know if it exists here, but buyer representation turns out to be an amazing preparation for going into doing your own deals because it forces you. I mean, I had the experience of like having a client being contract in a building, deciding, me deciding during the diligence that the client shouldn't Buy the deal. And even though I was broke being like. And it was going to be like, whatever, a 30, $40,000 commission, wherever it was, I was like, don't buy this. You know, which, when you're broke, that's a very hard thing to do. But that turns out to be incredibly good training for being an investor investor. So, anyway, there you go.

No, we really appreciate the candor and again, all the incredible content and wisdom that you put out there. So, Moses, with just a couple words and the name of the show and the book is the Insider's Edge to Real Estate Investing. You know, based on everything you've done, all the success you've had, what would you say in a couple words is your insider's edge?

It's a really good question. To me. It's the trust that we've built up with, with the investors who back us. There's that. This. We can talk all day about cap rates and rehab budgets and, you know, on and on and on, but fundamentally, if you're not coming from a very wealthy family that's going to capitalize your deals, this business is about getting and keeping the trust of people who have capital. And so for me, that's. That's it. That's. That's what it comes down to, and that's what we've sort of hopefully built over the last decade plus of doing this.

That's awesome. Well, Moses, this is an incredible way to end. Let our audience know if they've been, you know, hiding out in a cave. Maybe they're not on Twitter. We'll give them a little bit of credit. But where, where can they find you, where they can follow you? How can they plug in to Recede and your conference and everything you're doing?

Yeah, the best thing to do is follow me on Twitter. So it's just at Moses Kagan, I guess it's called X now at Moses Kag. I also, if you want to see that blog and see, like, literally in real time, time, how we built the business, it's Kagan's blog.com and I'm. You just. You can read along from, like, almost right in the beginning of the career, all the way through as we, as we built it. It's pretty cool.

Well, this is awesome. Thank you again for joining and sharing your story. This has been incredibly impactful.

Thanks for having me.

All right, and thank you all, as always, for joining. Until next week, this is your host, James Nelson. And if you like the show, please give it a rating. Please subscribe. Please share it with a friend. That's how we get the word out there and help you gain the insider's ed. Real estate investing so you can outperform the market. Thank you. All right, let's do it.