Long Term Hold Strategies For Multifamily, With Kira Golden

While shorter time horizons and quicker exits remain popular among multifamily investors, there can be tremendous value in a long term hold strategy. Increased time horizons can lead to greater cash flows and more. Kira Golden, CEO of Direct Source Wealth, joins the show to share her longer term perspective on multifamily assets.

Click the play button above to listen to the conversation.

Episode Highlights

  • Why Kira is bullish on multifamily real estate, regardless of macro economic conditions.
  • How a long term approach to multifamily real estate can drive value for both residents and investors.
  • The story behind Direct Source Wealth, and how Kira first got into real estate investing.
  • Why “boring” properties can offer some of the most attractive (and stable) returns for investors.
  • Which multifamily projects Kira is particularly excited about.
  • What trends in multifamily to watch out for.
  • What the future may hold for the multifamily landscape.

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Direct Source Wealth is a wealth building opportunity for investors using commercial real estate and note-lending as their primary vehicles. The advantage is a passive turnkey model that generates cash flow, tax advantages, and equity growth.

About The Multifamily Investor Podcast

The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses passive investment offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.

Show Transcript

Scott: Hello, and welcome to another episode of the “Multifamily Investor” podcast. Scott with you, and we’ve got a great one on tap today. We’re going to be talking, well, multi-family. And joining me to offer her insights and share her intriguing story is Kira Golden who is the CEO of Direct Source Wealth.

Kira, welcome to the show.

Kira: Hi. Thanks for having me.

Scott: Well, thank you for being here. I want to dive right into it.

Kira: Sure.

Scott: Why are you bullish on multifamily real estate?

Kira: Well… Gosh, there’s a lot of reasons for that. I think number one is I’m a long-term investor, so, a lot of times, people get dragged into these conversations of, “What’s happening with interest rates in the next six months, or, you know, is the market going to have a correction here or there?”

And I tend to take a more programmatic structured long-term buy-and-hold perspective. So, it’s hard not to be bearish. When you look at residential real estate over the last, let’s say, 100 and even 40 years, even 50, I do think that we’re going to have some meaningful adjustments in the real estate market over the next decade.

I say meaningful a little bit reserved because, again, for a long-term investor, I think we’re okay. So, you know, even if we’re buying kind of at a height of the market, in a sense, I don’t think we’re there, but even if we were, number one, we have a lot of value-add cash flow streams that we layer on our real estate deals.

So, we’re able to profit in markets that move multiple, different directions. Number two, we do really long-term debt because of our long-term perspective. And, number three, I really think that right now, we’re in a precipice of maybe the last era of ownership of tangible assets.

I think as we move into the blockchain over the next 10 to even 50 years…I mean, I know it’s a long window, but as we move more and more in that direction, people are going to have less opportunities to get chips on the table owning hard assets and everything’s going to become fractionalized. So, most of the world is going to end up either owning fractional economic interest in something or they’re going to be the last few people who actually own hard assets.

So, when you take that kind of like long-term perspective on it, we really just want to get as many chips on the table as possible while that’s still something that can be done.

Scott: I love that. And it is a unique perspective. I mean, I do think that there are lots of folks in the real estate world and in multifamily that do have maybe a shorter time horizon that they’re thinking about. And so, I just think that’s really powerful. You are the CEO of Direct Source Wealth, and we want to talk about a lot of different things, but before going forward, what’s the story behind Direct Source Wealth, and how did you even get into the world of real estate investing?

Kira: Yeah. It’s all I’ve ever known. So, I grew up an insomniac child, watching Robert Kiyosaki before he was even really “Rich Dad Poor Dad,” back when he was teaching the cashflow quadrant, and buying companies, and all of that, and invest encouraging people to invest in the stock market. And he did a really simple explanation of inflation and my little 12-year-old brain was like, “Oh, my goodness, like inflation is going to hurt me way more than it’s even going to hurt my parents or my grandparents.”

Like, you know, inflation has like a big impact on me. And the flip side is now while I’m young, I can take risk, I can put chips on the table. And even if there’s challenges, even if there’s ups and downs, if I move now, I’m going to be better off than if I wait.

And so, as soon as I could, I started buying real estate, and it’s really all I’ve ever done. I spent a brief stint as a financial advisor for a reputable investment advisory firm, but, otherwise, real estate or things related to real estate, hard money, lending, mortgages, etc., and generally in a principle or consulting capacity. And it just sort of evolved, single-family homes, then hard money mortgages, then multifamily, then other asset classes in real estate, industrial or new bill, development, all kinds of different things.

Scott: And so, how did that translate into Direct Source Wealth? So, I love that you were 12 thinking about inflation. Okay, you start going into real estate having some success, where does Direct Source Wealth come into the picture?

Kira: Yeah. So, it really grew up organically. So, you know, it started out friends and family coming to me and saying like, “Hey, what are you doing? Can I participate?” And we’ve really, I think, kept that culture, that tenor, I mean, all of my investors are people I care about personally, and hopefully care about me. I mean, we have amazing investor calls. And over time, we just started to realize that this was really something that was needed.

The name, Direct Source Wealth, is really about being an alignment with direct source and that creating true wealth, which isn’t about money at all. And then sort of as a double entendre, my belief is when you do direct deals and you buy directly into deals, you’re more connected emotionally and psychologically with what you’re invested in, and that gives you the emotional fortitude to ride out through the ups and downs in an investment cycle and really make good long-term decisions.

So, it’s both about having your values aligned correctly in order to create genuine wealth and also about being connected to what you’re investing in so that you don’t do what a lot of people do, which is sell at the bottom and buy at the top. But really just, you know, consistently building a portfolio of quality assets.

Scott: Right. And, again, it connects to that sort of long-term view that you have, right?

Kira: Yes.

Scott: So, okay. Let’s shift it to just multifamily markets. I’m curious to know, what are some markets that you like for multifamily, and what do you like about them?

Kira: Yeah. I grew up in California, so, don’t take this the wrong way, but basically anything other than California and New York. You know, what do I like about them is everyone’s moving from California and New York into those markets.

Scott: The Chicago in me is shifting uncomfortably right now.

Kira: Yeah, yeah, yeah. You’re right on the cusp. Exactly. But we’re really focused on the Midwest. I mean, what used to be called the flyover states. I don’t know if people still say that, but I think that the biggest opportunity are in communities where you can make a difference and it’s also sort of a value opinion for us, is to get into markets where, you know, we’re not elbowing with all the big hedge funds and all that.

Nothing against hedge funds, but, you know, we really just want to be connected to the communities we’re investing in and be able to make a difference, and I think that also translates to making margins.

Scott: Absolutely. So, I guess, could you speak to maybe some current or recent projects that you’re particularly excited about and, you know, what excites you about them?

Kira: Yeah. We have a number of properties that, you know, we still, you know, are buying holds in Colorado, Indianapolis, Ohio. I’m really boring, and what excites me about things is how boring they are. So, the more vanilla something is, the more interesting I find it, right?

Like in my 20s, maybe I was like always searching… I always thought the cool party was wherever I wasn’t, you know, everyone else knew what was fun and what was happening and not me. And now I’m like, “I want to be where things are just steady, and stable, and consistent.” So, I’m really loving our property in Ohio.

That’s going through another iteration. So, you know, again, as being a buy and hold long term investor, oftentimes, we’ll create new rounds of equity investment as values are coming up as ways to create value for old owners that are leaving or create new opportunities to take advantage of rising markets. And so, we’ve got a great, just tried in true asset in Dayton, Ohio that I love that has been a labor of love.

I actually bought the asset pregnant with my first son who’s now seven and we went through a really deep value-add in repositioning and renovated almost 315 units that was literally 0% occupied when we purchased it and… – Oh, wow.

Scott: Yeah. Like, heaviest lift we’ve ever done. And we’ve finished and stabilized phase one years ago and then moved into phase two and now we’re heading into phase three and I’m super excited about seeing that whole vision. It was, again, long-term buy-and-hold kind of step by step, pushing our way through and getting that to where it is now.

Kira: I love that. And full disclosure, I’m a Buckeye, born and raised in Ohio and… In Columbus, actually. So, I’m also familiar with Dayton. And I love how you kind of…you talk about like, oh, maybe it’s boring, but, you know, a lot of people are living in Ohio, raising families, moving back. I have so many friends that went around the world or whatever and then they’re…about that time to settle down, and they head right on back to central Ohio.

So, I think that, that… – Yeah. Absolutely. It’s stable, it’s salt of the earth. I mean, my contractors there, I trust them, you know? We trust each other, we shake hands, people do what they say they’re going to do. It’s incredible.

Scott: Right, right. And it’s interesting too, hearing your perspective as well just because there’s always, you know, so much hype about the Sunbelt and stuff. And, of course, there’s great opportunities down there, but it is interesting to sort of have your perspective where you’re saying, “Hey, this nice property in Ohio and it’s working out really well for us.” Right?

Kira: Yes, absolutely.

Scott: So, I guess, what’s your overall multifamily strategy? You know, that was a pretty heavy lift you were mentioning there. You know, what do you really look for when you’re evaluating a multifamily property?

Kira: Yeah. So, kind of sticking with my theme of boring, you know, I look for assets that… So, the way I relate to the real estate, I think of it as a widget. I don’t fall in love with a particular property. What I’m looking is for something that’ll fit squarely into our model. We have what we call the 500, 200 strategy.

It’s an underwriting approach where a certain amount of investment, the objective is to turn 500K of investment into 200,000 in cashflow over a 10-year period by like buying, refinancing, pulling cash out, buying more properties, etc. And so, I really want a property that’s going to fit in that model, which is most Midwest properties. It’s very vanilla.

And then I’m also looking for something, if you remember the concept of the old mining town, right?

Scott: Mm-hmm.

Kira: So, the miners would come in and, you know, the mining company owned the mine, but they also owned the grocery store, and the housing where people paid their rent, and the schoolhouse, and, you know, all the facilities. And they picked up a little here, a little here, and like the collective economics really made it work for them. So, you know, from that same model, we’ve created a program called DREAM, direct revenue, earnings, acceleration model.

And when we buy an asset, we also layer onto it as appropriate ancillary business services. And so, this is why we can buy an asset maybe on a tighter margin than our competitors and yet we can still go in and we can add some of the typicals you’ve heard of, you know, try it and true, like laundry, you know, valet laundry, or vending machines, grocery vending, but also some more innovative things, like we own our own internet service providing company and do a joint venture with them across our assets.

And that allows us to have back call that also provides more security options, smart home units that we can pick extra revenue up on. Work from home opportunities that we can provide our tenants with, employment opportunities. You can imagine how helpful that was during COVID, to own apartment complexes that essentially turned into office complexes.

So, we didn’t know that we couldn’t anticipate that, but we did know that, over time, the tides were moving towards people working from home. I’m a working single mom. So, you know, the ability for one of my residents to stay home, stay with his or her kids and be able to work and cut down on childcare expenses and invest more time in the family, that excites me. And so, we add those additional business services on, and that, of course, trickles down to the NOI and also, the multiple, and that improves the returns on the assets, even if the assets themselves are very vanilla.

So, what we’re really looking for is something that’s going to be stable, predictable, steady where we can go in and add additional economics and then benefit from that. And then the second component to the strategy is long-term financing. I mean, if I can get 35, 40 year HUD money at 2.9%, I see that as an asset.

In rising interest rates, having consumable debt at low-interest rates is my hedge. If I do have to sell an asset and values of real estate have come down but I can sell that debt that’s in place at a premium because debt is much more expensive, that becomes a hedge for us. Not that we want to sell, we probably won’t sell, but knowing we have that lever is sort of part of my always having an ABC exit strategy.

Scott: Right. So, having that flexibility, but then also focusing on those cash flows while you have it with the goal of the long-term hold, right?

Kira: Exactly. It’s about… I mean, I see my relationship with my real estate the same way I see my relationship with my kids, or my friends, or my business partners, they’re long-term. And I find that we can always do better when we have that baseline of trust and understanding, when I know how an asset works. When I know it well, I can optimize it.

And so, I’m much more excited about optimizing an existing asset than maybe some of my colleagues are in doing a big value pop. The other thing is I feel like the art of quality work has disseminated. When you know you’re going to be in and out of an asset in three years, maybe five, you know, when five years is considered a long time horizon, what kind of decision are you going to make around materials you put in the asset, or if you have to replace the plumbing, you know, are you going to do the quick fix or are you going to really do it right?

And so, we’re able to make smart long-term investments because of our objective and our long-term horizon and I think in the end, that that pays dividends in a way that people don’t realize because as you optimize that asset, you have less repairs, less maintenance, and, ultimately, that passes through into the bottom line.

Scott: Right. You know, you’re thinking on down the road, like, “Okay, what about that roof?” As opposed to maybe someone with a shorter-term view, right?

Kira: Yup. And when a property trades every three to five years, you have to think the mentality of the ownership is a one-year to three-year bandaid on everything they do. And then the next owner, the same, and the next owner, the same, and you end up with properties…and we’ve done this. We purchased properties that are a hodgepodge of many short-term viewpoints. And then we have to take time, three years, five years sometimes to go through and correct things and really bring them back into alignment with a long-term perspective.

Scott: Absolutely. You were touching a little bit earlier on your investors, and I’d love to know a bit more about them, you know, tell me about your capital base, who are your investors, who are the types of folks that are with you on these long-term projects?

Kira: Yeah. We have three core values at the company that we use to evaluate our partnerships. And, by the way, my largest investor on almost every single one of my assets is my lender. So, when I think about my capital partners, my very first one is my lender and my lender relationships.

So, I only have a couple of lenders I work with, we work with the same ones, you know, who specialize in certain verticals, the people who took a chance on us, you know, 10, 15 years ago. And, you know, yes, we shop them once in a while, keep them on their toes, but as long as they’re competitive or, you know, in market they’re going to get our business every time. So, that long-term loyal relationship, super important.

The next piece of it, obviously, is our equity partners. And in those relationships, we’re looking for people who value our three core principles. So, in addition to being long-term in terms of our perspective, we’re looking for value for value. So, there’s a lot of people in the world who want to get a free lunch or a quick buck, and I don’t want to be paid until I’ve created value, but I don’t want you to think that I shouldn’t be paid for creating value.

So, we need to be in alignment that we believe that economic value is an exchange of energy and that it’s best to keep that energy flowing for everybody. The next thing is co-investment. So, you know, I put my skin in the game in our deals, a lot of it, oftentimes, especially on the more challenging deals, a disproportionate amount. If I had a financial advisor, they’d say, “Don’t put that percent of your net worth into that asset,” but I’m like, “Fuck stops here. You do what you got to do.”

But the flip side is our partners are pretty active. So, we do regular meetings. We’ll, you know, if we’re going to paint a building, I might send out an email and say, “Hey, is anybody an, you know, interior decorator, or are your kids interior decorators? What colors should we paint this building?” And they’ll contribute time, treasure, and talent as a co-investment. So, even though they’re not… It’s not required, they don’t have to be on a monthly call or any of that, but we like that co-investment in that partnership.

So, it’s value for value, co-investment, and transparency. And in full transparency, I’d say that’s probably the place we’re the weakest, not because we don’t want to be transparent, but because we’re a small group, a small team. And so, we’re constantly working on upgrading those processes for communication and reporting. But, certainly, one of the things I think we do well is if we run into challenges or problems, we immediately will call the investors to a meeting.

A lot of people think that they need… They’re afraid of their partners. They don’t want to call with bad news. They don’t want to say with, you know, what’s going on. And I have developed a tremendous amount of trust and respect for my investment partners because we’ve been through stuff together, lots of stuff. And so, soon as something goes wrong, I’ll call them and we’ll say, “Hey, here’s, what’s up? What ideas do you have?”

It’s open, it’s a brainstorming session. It’s not finger-pointing. It’s how true partnership and teamwork should work. You know, I’m the operator, but they have as much invested interest as I do. And so, we’re very collaborative and transparent in that way.

Scott: Right. It’s a partnership, and I think that that’s sometimes lost. And it’s refreshing to kind of hear your perspective on that, for sure.

Kira: Yeah.

Scott: I’m curious what you might say to an investor. And you’ve dedicated, you know, your career to real estate and so many of these great opportunities here. What might you say to an investor who’s still kind of sitting on the sidelines, they’re unsure about multifamily family, you know, maybe they’re concerned about rising, you know, interest rates, they’re con concerned about something like this and they’re sitting on the sideline.

What might you say to them to maybe get them to shift their perspective there?

Kira: You know, it’s funny, this would be one of those questions where if you went and clipped together how I’ve answered it over time, it’s changed a lot. So, I think, for a long time, the answer would’ve been just do it, just… Like you can’t learn in a book, you can’t take a seminar. By the time someone’s curated a well-presented seminar, the information they’re sharing is outdated, the market’s changed.

But like, there’s some tried and true, but innovation moves more quickly than people might think in our business and you have to be very adaptable. But I think part of where that’s evolved, I’m hitting a moment or a time in my career where I’m really seeing the opportunity costs of deals that require a lot of attention, maybe more attention than their economics were, you know, originally worth.

And so, I think at this stage, I would say a healthy amount of skepticism is good, but at the end of the day, make the best plan you can and work it because I wouldn’t know all the solutions I know now and I wouldn’t know how to navigate whatever challenges come up in the future if I hadn’t made some mistakes and worked through them.

And, thank God, you know, there’s a lot of people who’ve been through a foreclosure or a bankruptcy, and I’m very grateful that through multiple market cycles, we’ve never experienced that. But I still consider it a failure when we, you know, miss a target deadline or go a little over budget. I’m always trying to hone that and make that, you know, the goal is zero there on those things.

But you’re not going to get there if you think you can perfectly plan it and then perfectly execute it. It’s messy. So, you do have to jump in and try it, but, you know, take a little time, think about it upfront, and also, you know, maybe work a few deals where you’re not getting paid very much, but somebody who’s experienced is benefiting from your donated time and you’re benefiting from their experience and wisdom.

Scott: I think that’s really sound advice there. We were kind of teasing it a little bit, but as we kind of wind down this discussion, I always like to look to the future. So, what do you see in terms of innovations, maybe the general future for multifamily real estate, you know, how might it continue to evolve?

Kira: Yeah. So, yes, I mentioned at the beginning, I see blockchain as being pretty instrumental in the transformation of all tangible assets and apparently bananas and non-tangible assets too. I mean, blockchain’s been kind of innovative, but I do think that the tokenization of real estate assets is going to do a couple of really awesome things and also some less awesome things.

So, on the awesome side, I mean, I think more people are going to be able to get access to tangible hard assets as a store of value and part of their economic portfolio that the layers of transactions are going to be cut down and there’s a lot of expenses from taking, you know, you and I going out and buying an apartment building together compared to a reek, for example, like the further you move from just two guys buying some real estate together to institutional class assets, the more hands in the cookie jar, the more layers, the more expenses, theoretically, those things also add more oversight experience and security.

I think blockchain’s going to flatten that quite a bit. But the downside is when a market becomes hyper-efficient and everyone can get into it, think what happened to the stock market post-Arisa, right? When it was hard and challenging and there were barriers of entry to buy stock in companies and only certain people could do it, the upside and the value was much higher, so was the risk.

Well, real estate, I think, is going to move in that direction where it’s going to get very, very flat, very efficient, and some of the bigger swings that are available aren’t going to be there. And that’s why the DREAM program is so important to us. I think that real estate’s going to be compressed more and more into being a widget and you have to be creative about how to add additional cash flow and additional value. The nice thing about that though is it’ll also make for much easier exchange.

So, when people are ready to buy or sell their economic interest, you don’t have to decide 30 people that you’re going to sell an apartment complex and all be on the same page. You can sell your interest. There’s obviously a lot that has to be accomplished in terms of the regulatory framework, the technical framework, we have a ways to go, but I think the marrying of blockchain in real estate is definitely the future, and people should be thinking long term and positioning for that now.

Scott: I think it’s going to be really interesting to see how it all shakes out. And really some interesting concepts there. And I’m sure that you and Direct Source Wealth, you guys are going to be right at the front there to navigate it all. Kira, thank you so much for joining me on the show today, sharing your story and such great insights. And if folks want to find out more, they want to connect with you, connect with Direct Source Wealth, where can they do that?

Where should they go?

Kira: Yeah. They can go to the website directsourcewealth.com. But as I mentioned before about our transparency, I don’t think we have the best website. They can also call me, (720)-517-2686 or email me at [email protected]

Scott: Fantastic. And we’ll, of course, have links and all that information in our show notes. Kira, thanks again so, much.

Kira: Thank you.