Kristopher German has specialized in selling multi-family residential properties since joining RE/MAX Commercial in 2007. Kris consistently ranks among the Top 3 Commercial Agents within the RE/MAX Commercial National Division, and over the last 16 years, has been awarded every award RE/MAX has to offer. With a proven track record of more than 400 successfully closed transactions, accounting for more than $450,000,000 in investment real estate, Kris attributes his success to a client-centered business based on hard work, honesty, and unparalleled negotiation skills.
In his spare time, Kris has been an active community leader working with high school youth through religious and athletic outreach programs. In addition, Kris is a contributor to philanthropic efforts such as St. Jude Children’s Hospital, the American Cancer Society, and annually provides a Holiday Celebration for Veronica’s Home of Mercy, a women’s and children’s shelter in San Bernardino, CA.
In this episode:
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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Kristopher German has specialized in selling multi-family residential properties since joining RE/MAX Commercial in 2007. Kris consistently ranks among the Top 3 Commercial Agents within the RE/MAX Commercial National Division, and over the last 16 years, has been awarded every award RE/MAX has to offer. With a proven track record of more than 400 successfully closed transactions, accounting for more than $450,000,000 in investment real estate, Kris attributes his success to a client-centered business based on hard work, honesty, and unparalleled negotiation skills.
In his spare time, Kris has been an active community leader working with high school youth through religious and athletic outreach programs. In addition, Kris is a contributor to philanthropic efforts such as St. Jude Children’s Hospital, the American Cancer Society, and annually provides a Holiday Celebration for Veronica’s Home of Mercy, a women’s and children’s shelter in San Bernardino, CA.
In this episode:
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.
Video Link
Radio Show
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:All right, we want to welcome everyone to the podcast today. We are super excited. We've got a great guest with us today. Let me jump in here. We've got a large number of followers that have always asked Bruce Norris in the past about commercial real estate. The answer over the years has always been you know that Bruce was deferring to people with this knowledge. It's simply not what The Norris group has dealt with or have invested in in the past. We typically loan up to fourplexes but that's about the extent of our lending process. So but today, we've got one of those experts that Bruce has always depend to Kris German. Kris German is the CEO of the Apartment Dealer. Kristopher German has specialized in selling multifamily residential properties since joining REMAX commercial in 2007. Chris consistently ranks among the top three commercial agents within the REMAX commercial national division. And over the last 16 years has been awarded every award REMAX has to offer. The prestigious Diamond Club Award in years 2015 through 2022, the REMAX Hall of Fame Award, the Lifetime Achievement Award and most notably the REMAX Circle of Legends award, with a proven track record of more than 400 successfully closed transactions, accounting for more than $450 million in investment real estate. Kris attributes his success to a client centered business based on hard work, honesty, and unparalleled negotiation skills. What Kris' clients have found is that regardless of market direction, Kris continues to successfully sell more real estate and at higher prices than his competitors. In his spare time, Kris has been an active community leader working with high school youth through religious and athletic outreach programs. In addition, Kris is a contributor to philanthropic efforts such as St. Jude's Children's Hospital, the American Cancer Society, and annually provides a holiday celebration for Veronica's Home of Mercy, a Women's and Children's Shelter in San Bernardino, California. Kris, my friend, welcome to the podcast today.
Kristopher German:I just seen that I was wondering who we're going to have on today. It sounds great. No, thank you.
Craig Evans:That's a bio there, my friend.
Kristopher German:Thank you. Thank you for having me.
Craig Evans:Hey, listen, you know, I know you've spoken a lot of our events in the past. It's done a lot of stuff with Bruce. But you know, one of the things that we've kind of been diving into as we're kind of reigniting our podcast and getting the content out is one of the things that we like to do is really let our audience know who you guys are, not just what you do now, but I want to talk about, you know, how did you get to where you are? So if that's okay, let me just go through a few things. I mean, you know, because again, I we met last year, out and in California the event in June, but are you originally from Southern California?
Kristopher German:Yeah, I'm born and raised in Southern California. And, my parents divorced at an early age. So I lived probably in 10, 12 different communities between the age of four from birth to high school. And I always share that with my children because they have more of a traditional lifestyle versus what I had as a child. But yeah, so I know the area well, I've been here all my life.
Craig Evans:Now, as you were growing up, did you imagine yourself in real estate or what were you thinking? Hey, I want to be the the astronaut or what was your desire growing up?
Kristopher German:You know, as I look back in my youth, especially my high school youth, I was just living by the seat of my pants sort of thing, I didn't really, I didn't know what goal setting was at that time. That's one of the things that definitely changed my life as I became a young man. But I was lucky enough to have gone to private high school so and when you go to private high school, college is just a given. So okay, great. I'm going to college but never had a long term plan in terms of what tomorrow was going to look like and but I just knew my father was a business owner. I knew that that looks more attractive than say being an employee, being able to make my own hours and you know what I had advanced or different things my dad could be there because he made his own schedule. And I thought that I liked that idea, being my own boss. I thought, you know, wearing a suit daily would be a cool thing to do. But yeah, just very simple things that I thought you know that okay, you know, one day, if I could have it my way, that's where I like it. But how I got to real estate is a longer story. But at one point, I thought I was going to be a policeman. I had went through all the testing psychological analysis, lie detector and had done this with multiple departments. But I'm actually colorblind, slightly colorblind. And I didn't find out till the end of all the testing a portion that that's an automatic disqualifier. And so that turned my world kind of topsy turvy for a while thinking, oh, gosh, I went from not really having a goal, to now okay, I'm gonna go into law enforcement. And now that's not going to work out. So after that, that was probably around the age between 20 and 21. I was floundering around for a while to kind of skip ahead. A good friend of mine that I went to high school with, post college got hired by Marcus and Millichap, which is a very large commercial firm, was doing well for himself. And so the December of 2006, I went to reach out to him, he wasn't around, he was on vacation. So I sent him an email. And in this email, I basically said, You know what I have, by this time I had a small family of my own. And if you're willing to be my mentor, I'm willing to be a good student. And that January, or by that, and following March, I was licensed by that following September, I had made enough money in real estate to walk away from what was my full time job, which was not very impressive. As I'm studying real estate. I was actually by day I was working for school police, and having to supplement my income, I was delivering pizzas at night. So literally, the year before I get into real estate, that's what I'm doing. I'm a pizza delivery boy, if you will. And that first year in real estate, I was awarded from our office we had in downtown Los Angeles Junior agent of the year, the following year, I doubled my income the following year after that, I doubled my income again. And so it's just been the trajectory, you know, by God's grace of my career that it's worked out, I fell in my niche, I found, I think what I was some, you know, born to do is they say, I get to be my own boss, I get to sharpen the suit, you know, those couple of things that I was looking for as a small boy. And yeah, and I'm just grateful for all the mentors I've had along the way, because it you know, they say, You're a self made success. Nobody's self made. Everybody has mentors along the way. And definitely Bruce Norris is one of those. And so, you know, I'm happy to assist you guys, you know, however I can.
Craig Evans:Who do you think was the biggest influence on you
Kristopher German:Growing up as a small child, probably my growing up? father again, just, you know, because he was a business owner, and versus my mom worked for the school district. And this isn't to say anything against you know, union employees. But obviously, that's two different lifestyles, two different types of income. And it was, for whatever reason, it was just more attract. And he always told me and I now I tell my children, except my kids kind of make a joke about it. But you know, my dad would say whatever you're gonna be in life, even if you decide to be a trash man, just be the best at it, you know, that's all I'm asking of you is just be the best at it. And so my kids joke like, 'Well, Dad, are you the best trash man in town,' you know, so they naturally make light of it. But that simple thing is, is really what I've chased after. So I could just be a realtor and just sell multifamily properties like I do. But I wasn't satisfied with that. So a big arm of my business is investor education, or educating the landlords. We hold live events, we have a channel on YouTube, and so forth. And so that's part of that idea of being the best I can in this field, is that most anyone can sign up a real estate purchase agreement. But we've we've gotten the next step to essentially lock arms with our clients, the landlords, and to educate them along the way, or at least make available to them. Those mentors, real estate attorneys, eviction attorneys, tax professionals, individuals like Bruce, who could then educate them, keep them apprised of what they need to know year to year and then only helps them move what I call their financial legacy are their real estate portfolio in a positive direction, year after year, and so, you know, we like doing that.
Craig Evans:Sure. So, you mentioned faith a few times, you know, by God's grace, things like that, how big of a role does faith play in what you've done growing up into becoming who you are?
Kristopher German:You know, so the last interview that I was headed to when I was trying to become a policeman, at that point, things weren't working out, I just felt like, Okay, I'm fighting destiny here. And so before I leave my house to go to the the interview, the chiefs interview that I'm headed to, I said, a little prayer in the car, 'God, if, if this isn't what you want, then you got to show me another way, because this is what I'm going after, at this point.' And literally, on my way to the interview, my radiator broke in my car, and not just broke, I had literally just fixed the radiator, like a week or two prior. So it was loud enough of a, you know, a signal that maybe law enforcement, you know, wasn't meant for me. And at that time, and since then, I've always worked with high school age, kids, in terms of I was a youth minister at one point, and, you know, teaching them, you know, the faith, and still involved today, in that realm. And so it's a big part, you know, my wife and I, we have nine children, faith is the center of our household. And, yeah, I think it's my compass. It really is.
Craig Evans:I mean, you know, everybody that knows me, really knows me know that I'm completely unashamed about my faith in Jesus Christ. And I was super excited to read more about that. Because obviously, when I met you last year, you know, we didn't get to talk about our faith or what, you know, it's not what we just don't stand around and do that every second of the day, right. But as I've learned more about you and prepping, being ready to interview for this, I was excited to read more about that and hear more about that. And all of a sudden, you start out talking about so. So appreciate you diving in on that. But so listen, I hear you're an avid reader. So what are you reading now? What's the one book or ebook or thing that you would recommend to investors now?
Kristopher German:So right now I'm actually reading a book, Gut Check by Dr. Steven Gundry. And so the one thing aside of real estate and my faith, the thing that I know most about is health. I've had some family members that have had health challenges, I've had some of my own. And that's caused me to have take this deep dive, I'd say over the last decade. So Gut Check. Yeah, I'm it's a series of books that Dr. Gundry has written. And he's just reshaped the health of some of my family members, my own health. And so anyway, I'm not doing a commercial for him. But that's great. And along that same line, that same thread, you know, we can make all the money in the world. But if you don't have your health, and I'm fortunate, I've had clients who are"wealthy", but not very wealthy when it comes to their health. So long that point, I would say one book that everyone should read, it's a book by Dr. Lee Eat to Beat Disease. Most people I've seen him he's been on Oprah has been on all these different shows. But in that book, he essentially talks about what are the foods that we can eat daily, that will suppress or mitigate your risk to all the various diseases like cancer and these you know, simple things, just food you can add on we're not talking about it, you got to be outlandish with supplements and these sorts of things, but food so anyways, yeah, I would suggest that book Eat to Beat Disease.
Craig Evans:And that's what's fun about talking to more people, you know, when you start to dive in, so many people want to talk about, how do we make more money? Like you said, you know, if you don't take care of yourself, what good does making it? Do you know, if you're not there to be a good steward of it, to have fun with it, do those things making it doesn't matter? How many beans in the world, right?
Kristopher German:Yeah, I mean, there's plenty of books, I try to read a book a month, I've tried to keep that keep that in practice, over the course of my life. And so someone's looking for something outside of health, and maybe that will help them in their real estate business, if they haven't read it already. Atomic Habits is a great book. Matter of fact, when I was talking to Bruce, he had said he just had finished that book as well. But you know, simple, you know, we get in our own way, with a lot of things. And for investors, especially a lot of our clientele, they become just complacent over time. So in other words, they purchase a property that is supposed to have been a stepping stone. And then they get too close to the tenants, life gets annoying, whatever it may be, and then they wake up 20 years later, and they own the same property. And yet they could have made these various moves through 1031 exchanges and you know, to grow their portfolio. So I think, you know, habits, right, so if we form the habit of what it is that we're doing daily, better, our future self will thank us if you will. I think that's very important. So that's a great book as well.
Craig Evans:So let me start diving into more what your expertise is about and who you are, you know. When did you actually, how long have you been in the industry of real estate?
Kristopher German:Yeah, so I was licensed March of 2007. And initially for the, you know, the first two, three years, I was just trying to put a couple of dollars together to provide for my family. But then once that started gaining steam, I said, look, I need to be an investor myself, for two reasons. One, if this is the product that I'm going to sell to people, and if I truly believe in it, then I should know what it is to be a landlord myself. In other words, whatever it is that I'm asking them to take upon themselves, you know, taking on more units and doing exchange, I should be able to speak to that personally. So around 2009, my wife and I bought our first investment property. And so since 2009, I've been an investor as well. So I've been an agent since 2007, still practicing today, the vast majority of what we do is, of course, represent landlords purchase and sale multifamily real estate. But since since 2009, I've my wife and I have grown a small portfolio we've purchased and flip multifamily properties. There's some that we've just rehabbed to hold for our, you know, our own future retirement and so forth. So yeah, I've been involved in both capacities.
Craig Evans:So if I remember right, you said that you're with another company prior, was it only that and then REMAX or have you been anywhere else? What your history looked like that?
Kristopher German:Yeah. So just by chance, you know, I've always been with REMAX commercial. That's why I joined day one, I'm still with them now, different franchise, but same brand. And then my brand, you know, The Apartment Dealer is a brand within the brand. I was asked to oversee the multifamily department division of the franchise, I'm a part of now. And then as a part of that, I said, you know, there I need, I need to create a way of separation to brand ourselves and what we were doing because again, it wasn't just sales, it morphed into these educational conferences and so forth. So The Apartment Dealer, I forget what year we actually branded that maybe around 2010-ish or so. And so yeah, it's the The Apartment is my company but we're, I'm still under the umbrella of REMAX commercial and they and they do a lot of good stuff for us as well.
Craig Evans:So you've talked about that you've been in the real estate investment side was multifamily, your first endeavor? Or did you start with single family or have you ever dabbled between the two or have you always stayed in multifamily?
Kristopher German:So I cut my teeth on multifamily. It's what I know best. And that's what I sell today. And that's what I own today. Along the way. I've sold a warehouse here and there and an office building here and there. And but multifamily it has been my focus.
Craig Evans:Now with the change of ADUs, have you looked at any of this stuff in your market with single family and adding ADUs or is that still not the space you stay in? Or is that not the space you look at really?
Kristopher German:Yeah. So you know with ADUs the interesting thing is that here in California, you know, we have statewide rent control. And so if you buy a single family home, and then you add an ADU the minute you do that now that house is now under rent control. It wasn't under rent control. But now that it's multi unit with an ADU now it falls under rent control that just wanted it. When it comes to multifamily, many individuals now are taking carports and garages, turning them into ADUs or you know additional space on a property. I'm yet to do it myself. But I've had a number of clients now, do that because especially with where we've been in the market cycle, and rent control, you know, under rent control the way it is today, if something was built within the last 15 years, it doesn't fall under rent control. So if you build an ADU today, that particular unit is not under rent control. Although, let's say this is like a 10 unit building, all the other 10 unit are under rent control. At least that ADU now is not under rent control. Now, we have a proposed bill we could talk about this a little bit later on. But there's a proposed bill that's going to be on our ballot here in California in November of this year that would change everything it would put single family houses under rent control, it would put new construction under rent control. And the nail in the coffin for landlords would be it also would make vacancy control legal. So that's just something that you know people have to be aware of new we'll see what happens in November but ADUs are a way for investors to increase their cash flow and the value of properties that they currently own for sure.
Craig Evans:So as you continue to grow in this industry, you mentioned the one mentor that really kind of jumpstarted you into this career. Is that still the biggest mentor for you? Or do you have others? Who do you look to as your go to mentor today?
Kristopher German:Yeah, so for anyone who's read Think and Grow Rich, Napoleon Hill says you're supposed to have a mastermind, right? You're supposed to, encircle yourself with individuals from various industries that as you all work together, you build this"mastermind", and I just been very fortunate that my close friend learned the industry brought me under his wing I learned under him and then went out on my own. Shortly after his mentorship, I befriended a real estate attorney, Steven Spear, who has been a part of now my educational events ever since the beginning. And you know, he's an individual that owns 1000s of units, he runs a site of a very successful law practice. He runs syndications and so forth. And so I've had him in my back pocket, you know, so to speak, in terms of when I have questions, only to then be friend, one of the best commercial lenders here locally, to then befriending that one of the most prominent eviction attorneys here locally, and I can go on and on. So again, God in His grace to help me along the way, every facet of this industry that I possibly could need a mentor, or someone to turn to I literally have him now. And that's actually speaks at, you know, our educational events where they've been, at least on our YouTube channel, but everything and even from, say, I started thinking about tanning buyouts, and then all of a sudden, I bumped into somebody that said, you know, you gotta meet this guy, Dennis Munoz, he actually does what you're looking for. And now we've befriended him, we have a good working relationship he's already helped sell for our clients by our tenants, because again, here in California with rent control, that's something you need. But yeah, just again, every facet that you could come up with, I have not just a person to turn to, but arguably the person to turn to and, and Bruce being one of them, you know, in 2015, maybe I saw Bruce, I had heard Bruce's name everywhere. He spoke at a educational event that I was also asked to be a part of, but he and I were on the panel together. We weren't speaking at the same time. And I thought, Okay, I got to find a way to, I got to meet this guy, Bruce Norris. Everyone's talking about Bruce Norris. And he gave a talk, and I thought, Okay, after his talk, meet him off in the wings, forget it, the minute he got off stage, everybody just rushed him the attendees, you know, the ask them questions. And so I didn't get an opportunity. So my accountant who was holding the event, I said, Look, you got to somehow create a bridge between me and Bruce, I'd love to interview him, you know, for my channel. And that was our first interaction, you know, Bruce, of course, you know, he was very humble, and what have you, he was more he didn't know who I was from anyone except that to do an interview with me. And I started our friendship. And shortly after that, I came to Bruce and I said, you know, I know you don't land on multifamily properties but what if I could convince you that I have some good projects I'm working on personally. And you can use me as the beta test. And since then, you know, through the hard money division of your company, we've now funded at least three or four multifamily properties that we bought, improved, and then flipped and done very well. And, you know, Bruce was very gracious in that way, in the sense that he trusted me, you know, he entrusted me to do the right thing there. And it worked out great for both of us.
Craig Evans:That's awesome. So you talked about your brand, The Apartment Dealer. You know, there's a lot of people in commercial real estate, a lot of pieces of people in the multifamily space. Tell our audience, what do you think is the biggest specialty that you guys do within the brand of The Apartment Dealer?
Kristopher German:So, we talk about the financial legacy, the way I see it is that anyone who owns investment, real estate, they're building a financial legacy for themselves, you know, many of these individuals are either working individuals or own small businesses like myself and my wife and they're purchasing investment real estate, to replace them some day down the road in terms of you know, passive income. Many of these individuals are already at a point where their properties represent the vast majority of the income that they're living on. And then there's those who, you know, they've had the cash flow, right where they want it for several years. They're not looking at you know, expanding they see themselves as too old for that and they're beginning to contemplate well, the next generation behind them, their heirs, their children, is it cash they give them or is it properties? Do the kids want to be landlords or not? Do they want to put the kids in partnership with each other because that's what happens when you will your kids the property is whether you look at it that way or not, you just made them business partners. So I talked about the financial legacy in the sense that that's what this is. And so I think what differentiates us is that rather than calling everyone and saying, 'Do you want to buy or sell', understanding that there are these various segments of investors that have these differing needs. And, you know, Zig Ziglar, he says that, if you give an individual, what they're looking for what they want, you'll get everything in return that you want. So us by having served these investors in this way, specifically, through our education, have done a good amount of business in return, because again, they've all had different needs. It's not about just, you know, 'Hi, sir. Are you looking to buy or sell' like in a cold call, but knowing each other investor stories, and then being able to serve them in that need? And I think that is what has differentiated us over time Is that helping them along that road of building the financial legacy, educating them along the way, making sure they had the right resources and at their disposal. And, yeah, just being there trusted resource in that way.
Craig Evans:So, you know, part of what we're trying to do with the podcast is always bringing the best information we can to our listeners. And you know, I know a lot of our listeners are, they deal in a lot of SFRs, you know, their single family is an easier process. I know when I started in investing, you know, at one point, our portfolio was a little over 1000 doors. When I first started investing, I started in FSRs, and or SFR rather and got into multifamily. Tell our investors our tell our listeners really, if you will, do you find it difficult to get into the multifamily space?
Kristopher German:I think what's difficult, difficult about it today is just the price points, right. So for example, I met with a client yesterday, who was telling me a story about you know, he bought some property by accident with $3,000. And I'm just like, oh my gosh, if I could buy a property with$3,000, I'd be done you know, next week, right? You know, I unload my treasure here. So the price points, I think is the biggest barrier of entry. And would it be for me, I would have to guess why individuals start with single family because you can get you know, there's lower price points, you can get in with a 20% down not owner occupied maybe even less depending on what kind of financing you're using versus if you're buying multifamily properties, especially something that's five units or larger in the commercial realm. Well, in California, based on our prices, today, you're probably looking at 35, 40%, down easy that the banks will lend up to 75% LTV, but the reality of it is different than single family homes that are more dependent upon your personal income. They're looking at the income of the property relative to the purchase price. And so that's why while they will land, say 75%, LTV, the property is don't qualify for that and you're needing to increase your downpayment. Second to that, I would think probably as something that's more just psychological for whatever reason, there seems to be this negative perspective that well, more units is going to have to equal more evictions or more tenant headaches or you know, something like this. And nothing could be farther from the truth. It just comes down to your management style. And you know, of course, location matters. And you might inherit some bad tenants from a previous owner. And there's ways to deal with that and get the property turned around. But it's your management style. And I think that especially in the multi, you know, when people that are buying and flipping homes, tenants really are not a thought, right, you're not having to worry about personalities, you're dealing with a vacant unit, multifamily, you know, depending, you know, you're dealing with people. And if you don't treat it business like and I see that being one of the biggest challenges for a lot of landlords, you get too close to the tenants, you get too involved in their story. I'm not saying that you don't have a heart, but you know, this is business. This is not a work of charity, you know, make money in real estate so that you can do your charity over here. But if you use your units like charity, and you don't raise your rents and do certain things. Well, that's why now that we have statewide rent control, landlords got caught flat footed, and is a big obstacle for them now to grow from where they are. Because the cash flow isn't there, and maybe the value isn't there because of the rental rates or what have you. And so, yeah, they just have to, I know it's kind of long winded, but you know it from beginning, beginning to end, it's you gotta be business business oriented.
Craig Evans:That's right. That's right. And that's what we're trying to say is we want people to understand that you know, reason that we're having the experts if you will on is we want people to be armed with that information. And so often you're right, I see so many people that have the feel and call it a pie in the sky mentality of like, oh, this is going to be great. And then, like you say they get sucked into the tenant of thinking that this tenant, well, I'm gonna give him a break. And that's not business. You can't function like that. So, you know, Kris, I know you started going straight into multifamily. Do you think that's an easier route? Or you know, there's a lot of variables to that question. And so that's probably a big open ended question. But do you typically see the people that are coming to you have they been in smaller stuff before they've been either in smaller multifamily or SFRs? Or do you find people that are coming to you, is it because of a cash situation, that they're looking for bigger deposits to build to place their cash.
Kristopher German:So you know, our investor base really is a mom and pop clientele. These are individuals that, you know, against what culture will say today and demonize the wealthy. They started out with not two nickels to rub together, bootstrapped it and maybe bought a house or at most bought a duplex, and then just played the rules of real estate, let it go up in value, either refinance it, pull some equity out, buy something else, or sell it do a 1031 exchange. And I'll tell you, I've been lucky enough that the two largest multifamily owners here in California, they're both my personal clients, right, you know, I've done business with them. And one I'm very close to more than say the other. But they both have similar stories where they were immigrants came to this country, were educated in this country, didn't come from money, they didn't start with that handout, found value in real estate, and simply by continuing to buy and and, and exchange and ratchet up over time. These gentlemen are worth a lot, a lot of money. One's even a billionaire today. And we're again, didn't have two nickels to rub together. The one who's a billionaire today started working out and a canning factory originally when he got here and was going through college. And so it can be done. So again, if you have enough to buy a single family house, then buy that first single family house, even if you got to buy it out in the sticks. But the idea is if anyone's contemplating, well, look at the market today, look at the economy, look who's present look at real estate's, real estate, people need a place to lay their head, it's not going to be taken out by Amazon or AI. Because again, people need housing. Here in California, we're so spoiled in terms of the supply and demand. That vacancy is next to none. And even when it takes up, and people get a little worried, we're talking about a 5% vacancy versus other states that when they have a problem, we're talking 15% vacancy, or maybe even more. So real estate, again, with my limited knowledge, the last, you know, 17 years. But when we look historically, it always goes up. And when you look at rental rates while they do stymie at times, or maybe pull back slightly over time, they go up and when you look when you track vacancy, and these are things that were Kris, you're just talking about these, like, you know, just on a whim, no, no, at our in our educational events, and we do market updates, we look at all the numbers. So I could give, you know the boring numbers, but the overarching idea here is that values go up, rental rates go up and vacancy comes down. And that's what you can rest assured on now. Can you do a bad deal? Of course, and can you make it bad, and that's where you know, you have to get educated ensure that you have the right network of professionals that are assisting you. But I think the name of the game is get involved. My first property was a three unit property, just by accident, my first investment property. And I mean, I done some of the dumbest things with when we were rehabbing that property. And I mean, so I thought I was going to be slick and not pull permits. Hey, we're gonna, you know, because I figured I didn't have much money for the rehabs. So we're gonna do this with no permits. And I had, you know, some of my bigger clients. They're like, Hey, Kris, you don't need permits, I think I'm going to be like them, you know, what do I know? And my workers at that time were so brilliant that we ordered a trash banner for whatever reason from this company. We ordered the trash bin, it was bright red. They thought it was smart to put this bright red trash brand at the front of the property so that when the inspector was driving down the street he just said oh, there must be work being done here. Let's go check their permits. And we had none. We got red tag, we had to stop the project. I had to go pull permits and it was a whole project. And but you know what it just worked out in the end and that's how we got started.
Craig Evans:So as you know, let me just clarify with the multifamily space you primarily, is it primarily or solely deal in Southern California?
Kristopher German:Yeah, Southern California and not even all of Southern California. So those who are familiar with the area, I'll give you some boundaries here. So if you're, we start at the 710 freeway. So just before you get to downtown Los Angeles, we go as far east up to about where San Bernardino begins. We're along all the foothills, and then we go about as far south as the 91 freeway. So that's our box. And now Riverside, we're also moving into Riverside, sorry, to our competitors, but we're moving there as well. So, but that's our general geographical area that we cover. You cannot, in this business, you cannot be a jack of all trades, in my opinion. So it's multifamily that we do if you have some other type of asset type than like warehouse or some what have you typically, we're going to refer that out. And we're going to speak to and help those individuals that own within that geographic area.
Craig Evans:In the multifamily space, the area's you deal with what kind of cap rates are you seeing right now?
Kristopher German:Easily above 5%. Now, and in the multifamily world, it's a push and pull between interest rates and cap rates. And so for those of you maybe not familiar with the terminology, easy way as a cap rate is if you were to buy a property, all cash, what would be your rate of return. So when I say a 5% cap rate, or Craig mentioned a 5% cap rate, again, if you were to buy that property, all cash, you would make 5% return on your money. Well, the interest rate today for a multifamily property is about 6.7%, and probably headed upwards. And we can talk about that. But I made that prediction three weeks ago that the week after the Fed came out and said,'We promise you three rate cuts later this year'. I'm on stage the following week, saying I'm sorry to tell you that's not what I'm reading. That's not what I believe the data says. So I think rates are going up. But today, it's 6.7%. So that differential 5%, cap rate 6.7. So now let's say you didn't buy the property, cash and you purchased the property with financing, you're losing 1.7% on every dollar borrowed. So hence, at the beginning of 2022, we still, or at the end of 2022, we were at about, say a four and a half percent cap rate, at about the same very close on an interest rate. So almost even maybe it sure was slightly higher than that. By the time we get to third quarter 2023, interest rates had gone up to seven and a quarter. And cap rates were lagging behind him and we were finally cusping the hill of 5%. The needless to say the market was dead third quarter 2023. By fourth quarter 2024 interest rates had come down some and sellers got the reality check that I need to lower my price, the lower the price that increases the cap rate. So to where we are now where I would say easily if you want a property to be sold, and you don't want to be on the market forever in the geographical areas that I just mentioned, because I'm gonna speak to what I know, you're probably looking at least five and a quarter 5.4 cap in order for that unless there's something really unique about it, or maybe it's been fully rehabbed or something, but you're in that realm. And again, you take a look at that interest rate, which historically speaking isn't all that bad. But when you're dealing with an investor base, who remembers 3.5%, three years ago, they're looking at that saying, you know, well explain to me why I would buy that deal, you know, with such a low cap rate. And so that and that's been the other tug of war is trying to educate the landlords that we're not going to see 3% Again, we're probably not going to see 4% again, and if we did, it's because there's some sort of economic calamity. So I don't think we want to see those interest rates. And if we get into the fives, that would be a godsend, and we should be happy with that because again, historically speaking, that is about somewhere between five and six is about an average interest rate. There's probably viewers here I was before my time but that remember 15, 16, 17, 18% interest rates and so those individuals are hearing us cry about 6% saying what are you crying about? You know, I had to figure this thing out with it. Obviously, prices were cheaper and cap rates were higher but the point is historically, were more in line and that three and 4% that we got to enjoy was a good ride hopefully made a lot of money during that time. But I think those days are gone for a while.
Craig Evans:Okay, that's gonna do it for part one with Kris German. Make sure and catch us next week for part two.
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.