In this episode, I talk with Alix Kogan. Alix is a seasoned real estate professional with over 20 years of experience and half a billion dollars in transactions under his belt.
He is the President of Ashland Capital as well as an active investor and operator in over 2,000 multifamily and student housing units.
We discuss his transition from single family to multifamily and student housing and how student housing is different than multifamily.
He will explain the student housing market and the real estate market in general.
Whether you’re a seasoned real estate investor or just starting out, this episode is packed with valuable insights that you won’t want to miss.
Don’t forget to like, share, and subscribe to our channel for more inspiring stories and informative content.
Transcript:
Alix Kogan 00:00
But I would never invest in somebody that’s not full time in the business and has a team you got to be full time because why would you invest in somebody who’s not full time? Don’t get me wrong, I respect everybody’s trying to transition. But if you’re not full time, I don’t want my money being with somebody who was not totally focused.
Chris Bounds 00:19
In this episode I talk with Alex Cogan, Alex is a seasoned real estate professional with over 20 years of experience and a half a billion dollars in transactions under his belt. He’s the president of Ashland capital as well as an active investor and operator in over 2000 multifamily and student housing units. We discuss his transition from construction and small portfolios to multifamily and student housing, how student housing is different than multifamily investing, how to properly mitigate risks with student housing, especially when you’re renting by the bed, talking about the student housing market, and also the real estate market in general. I hope you enjoy now onto the show. How’s it going?
Alix Kogan 01:01
It’s going great, Chris, how are you?
Chris Bounds 01:04
Good, good. Thanks for coming on. No way to scheduling a pickup with illness last time, but glad to have you on now. And we connected I think was on LinkedIn originally. And we’ve got a couple of mutual connections after after we spoke. So you’ve got an extensive real estate background and happy to have you on and talk. Talk about everything, you know, um, specifically, we’ll get into some things like multifamily, also student housing, but first, you get your real estate. Start in construction, right?
Alix Kogan 01:39
Yeah. Pretty simultaneously with construction and development. But yeah, I grew up around a father brother that our build our developers. So it was it was in my blood, although, truth be told, I swore not to follow in the family footsteps. I was gonna, you know, do something different than I did. And I was, you know, in my 20s, I wanted to save the world and teach high school. And so I had a short stint of that that a lot of people don’t know about.
And so that was a complete departure from the family business, obviously. But gravity pulled you back. Yes, gravity pulled me back. I enjoyed my interaction with, with high school kids and all the relationship building, I hated cramming information down their throats. Truth be told, I was starving at $26,000 a year, my salary back when I taught so all those things sort of slapped me on the head and said, Hey, maybe you shouldn’t run away from something you actually love and passionate about and grew up around. Maybe you ought to go back to it. And that’s exactly what I did. Love it. Love it. So
Chris Bounds 02:56
you ended up building a pretty sizable construction company. And then at some point, you decided to exit so what was the what was the reason to wine that venture down and move into your your, your next evolution?
Alix Kogan 03:14
Well, it was it was kind of twofold. So while building, you know, the company, the construction company, I started founded in 98 took off like a rocket ship. And we doubled in size for many, many years until we were the largest in the region.
Chris Bounds 03:31
And then what timeframe is that? That’ll be helpful for context. Yeah.
Alix Kogan 03:35
So I started. I started I guess it was early 9998, right around there. So that’s when I founded my company in southwest Colorado. We built and developed around the Durango Telluride southwest region, about a two hour radius.
Chris Bounds 03:53
So the content was in so in the market, that’s kind of when the housing construction was the boom was just really starting right. It really kicked into gear in the early 2000s. All the way through a wait.
Alix Kogan 04:08
That’s right. That’s right. Yeah. So it was a it was a great time to start. You know, it was it was a really successful venture. I was super passionate about us design build firm. So ultimately, we grew to be vertically integrated with architects, designers, the whole construction crew, I was lead designer and lead lead our design team and worst of everything else being being the principal but loved it loved every minute of it had an incredible 20 year run. But along the way, you know, almost almost immediately I started doing some development work you know, it’s making a lot of money on a construction company lived under my means.
Took that capital and started developing, doing small multifamily infill projects, some land entitlement some some vertical construction subdivision work townhomes, condos, mixed use a little bit of commercial. So so that took off. And then you know, so you have the two, two entities, so to speak, making money. And I took all that capital and then started buying existing assets buying rentals. College rental is what we call it back then before it was, you know, student housing, started buying conventional, really anything that produce cash flow that I get my hands on. So the evolution over over 20 years, was building these two businesses plus a personal portfolio.
And then I realized that I built a monster in terms of the personal portfolio that we were self managing. My CFO led that effort, and we realized we have a business within a business, it was crazy chaotic. And I made a decision to sell the entire portfolio. Because of that, and that was that was one of the pain points, I knew that it was time to scale into larger institutional assets that we actually didn’t have to manage as long as I can find good third party partners to do the do the day to day, and we could ask manage them. And then the other pivotal moment as I had a kid, and my are my only kid, our first kid and what was in 2015.
And they decided we want to raise our kid back in Chicago. So closer to family, better schools, etc. So had a great run in Colorado. But in about 2017, we moved back to Chicago. And then I sold the construction and development company solo portfolio. And as I, as I mentioned, transitioned and pivoted into larger scale apartments and, and that’s when I really started bringing in outside money. Prior to that it was my own capital, a little bit of family capital. And then we started syndicating and bringing in friends and family and, you know, again, took off pretty quickly with a lot of people wanting to partner and so so what
Chris Bounds 07:18
was it exactly that moved you from going into the institutional type assets and by institutional, I think you’re just referring to larger assets that I mean, they take teams to run so multifamily and individual is not gonna run a 200 unit multifamily or student student housing communities, what made you move into those assets, as opposed to just replicating what you did back in Colorado? Or was smaller units for single family?
Alix Kogan 07:46
So two things. Number one, I knew I was moving back to Chicago, I did not want to buy and build a portfolio in Chicago, Chicago, unfortunately, had its issues back then not that there’s not opportunities everywhere that there are, but I saw opportunities elsewhere outside of Chicago. So I was strictly moving back to Chicago for family reasons.
And I thought that the opportunity was to scale a business, in growing markets with population growth, employment growth, everything that we all listen the industry talk about. So that was the primary reason that I decided to buy larger assets. Because if they’re large enough, I don’t have to be there every day. I could have a team of great asset managers, which we do that came from property management, and they know what to look for they know how to work with on site, and they’re doing that on a daily basis.
Chris Bounds 08:39
Yeah, the scales of economy could afford that team versus a single family buying that, you know, out of area at a stated you can it’s just the economics are pretty difficult, or you’re really not gonna make any cash flow.
Alix Kogan 08:54
That’s right. And, you know, assets. I just saw more upside with larger apartment communities that had a lot of liquidity, a lot of demand versus scattered sites, single family and small multifamily. Yeah. So
Chris Bounds 09:10
alright, so you’re in Chicago, and you’re moving into multifamily student housing? Is this mainly as an operator owner operators? Or is this as a passive investor like an LP?
Alix Kogan 09:21
No, I mean, I’ve always been an LP for 20 years. But now, the Aslan capital, that, you know, evolution from my earlier companies, we we buy, we own we operate. When I say operate, you know, it’s really truly what I what I, what I call a hybrid where we’re working with the onsite we do technically have third party property managers. But the asset manager, yeah, yeah, yeah, you’re structuring
Chris Bounds 09:52
the deal. You’re putting everything together. You’re putting the team together and beyond that, it’s asset management.
Alix Kogan 09:58
It is it is but Uh, you know, I think one distinction that I, you know, I’m proud of that I think we do a little bit differently than some is that, you know, my guys, my asset managers came from property management. And one of them, one of my guys came from Blackstone, we are working directly with the onset with, we have a dialog every day with the leasing manager, the property manager, the maintenance staff, it’s almost like, you know, we are the third party, or the I’m sorry, the property manager. But underneath the platform of have a different property manager and it’s, it’s a little bit more hands on, it’s a little bit different, it can be taxing, but we that’s the only way we know how to have a really good handle on our assets other than truly being vertically integrated and having your own accountants and, and support staff.
Chris Bounds 10:51
You feel that as a LP So you mentioned you were an LP or passive investor in these type of assets years prior, do you feel like that helped you become a better operator, and I’ll just preface it with this, a lot of folks that do get into multifamily. Especially if they came from the single family background, they go in head versus an operator first and then passive second. You’re the opposite. You are an operator in real estate. It’s just not necessarily in multifamily first passive, and then went into operations with multifamily. Second, are correct me if I’m wrong there, but well,
Alix Kogan 11:32
so we were we were self managed for many years, and all the assets that I own personally, but there were smaller assets. So I knew I knew what it takes. I mean, it’s it’s basic blocking and tackling. For some reason, I was actually a bit intimidated by larger assets. So when we started buying larger 100 Plus unit communities, I did not want to self manage them. And naturally they were in different geographies, so it would have been more difficult.
So when I started investing, as an LP, I was still literally managing smaller assets. But I invested in larger assets, I thought it was much more complicated. And therefore, I became an LP in a lot of those deals. But truth be told, once I was an LP, I realized it’s not that different. It’s just, it’s just a few more beds, basically a few more zeros.
And I think that just gave me a lot more confidence that, you know, I invested in some some good sponsors, I invested in some that were average. And it certainly gave me a lot of confidence that if they can do it, you know, with my background, I can do it. So, you know, that allowed us to then obviously scale the business and not have any kind of concern that we can do it.
Chris Bounds 13:02
Yeah. In your I would say yeah, having that experience being an asset manager and a property manager because you were self managing your your other portfolio like that, that experience definitely parlays over into multifamily. fundamentals are largely the same. It’s just there’s there’s a few more gears that that turn, but definitely parlays in and you understood the value of team building like that. There’s an operator in Houston that I don’t know all the details, but you probably heard about it recently got foreclosed on.
And then I heard like he’s a team of one like, what the heck, like how can you have 2000 units and be a team of one that clearly is in over his head and and then the property minion didn’t realize how to manage the property manager or whatever. It seemed like there was a really downhill track for for them, but you had that experience, you knew what to do. And then now you’ve got you’ve got institutional folks on board on your team that really know the property management game, which makes them be a better asset manager.
Alix Kogan 14:02
Yeah, yeah, absolutely. I mean, that’s the difference. I think back about everybody that I ever invested in, we’re full time legitimate firms, and some are better, and some are mediocre as I said, But to your point, you know, the the poor guy that everybody’s jumping all over in Houston. And you know, I don’t know him. I don’t know what the circumstances but everybody certainly is using that as an opportunity to jump on this guy, I will say that I would have never invested in nor would I today, we don’t have, you know, a certain deal flow.
I still invest as an LP because I want my money always working for me. But I would never invest in somebody that’s not full time in the business and has a team so you got to be full time. Because how why would you invest in somebody who’s not full time? I mean, I don’t get me wrong. I respect everybody’s trying to transition. But if you’re not At full time, I don’t want my my being with somebody who’s not totally focused.
And then secondarily, if somebody doesn’t have a team, what happens when they get hit by a car? Right? What happens if they, you know, email? Right, something happens, the business stops, and I don’t I don’t want, you know, a lot of a lot of my family’s money is in our deals, my friends, extended family, my network sought them happens to me, I want to know that I’ve got a team, that’s a good steward of everybody’s capital. So it is amazing that I hear the stories that you just brought up in Houston, and many others that are just not set up to be a serious business. It’s like, it just it’s shocking to me, but that’s tangent.
Chris Bounds 15:46
And there’s a lot more details to that. So I think it would be a good wake up call for, for LPS to take more responsibility and due diligence, as opposed to throwing their money at an IRR. And then for GPs to step up their game and fiduciary responsibility to their LPs. So that I hope is the positive outcome of that, hopefully, he’s able to dig himself out of that mess. Um, student housing, what’s what brought you into student housing. Because anyone, what my initial reaction, and it’s by full admission, lack of education, because I’m not that educated in student housing. But I’m, I’m always a little apprehensive when I hear it. But I do see a lot of opportunities with student housing. And you you’ve mentioned, so what, what brought you into that? And then we’ll follow up with another question on the student housing market?
Alix Kogan 16:46
Sure. I guess what started was my experience as a college student renting from one of the most horrible slum lords in town, man, you know, I just I just remember that dynamic being so painful, because he had a captive audience when when you there’s only a certain number of houses, or today we call it beds, bedrooms. In a market, there’s certain number of students, it’s an efficient market, meaning everybody’s going to have to find one and sort of equalize itself. Yeah. Which is different, you know, in multifamily, you know, you can decide to go to another neighborhood or this and that it’s not, it’s not as efficient. So I think it’s like a fishbowl, right, and you’ve got a certain amount of fish in that bottle, and they’re all going to find find their their path.
So it was frustrating that the slumlord just knew that he could basically do it, everyone, because we just didn’t have a lot of options. And he had 10 More students that wanted to rent from him if we did it. And so fast forward to a year or two, after I started my company in Colorado, I started buying college rentals, because I said, look, it’s not that complicated. They’re actually a good renter, if you know how to deal with them. And if you can plan around all the issues that you have the college students, so I still, you know, it was it’s not easy work, but I enjoyed it.
We were able to grow our scattered site, student or college rental as what we call it back then. portfolio and it did great. Fast forward to around 2017 18 When I was started selling everything. And I realized that there’s this whole institutional class of student housing that’s actually rented by the bed, I was still renting by the house, to college students. It wasn’t furnished it didn’t it didn’t create a lifestyle. So that just has evolved over the last 10 years, it’s really become, you know, something that you would probably equate more to, like running a senior housing or assisted living asset, it’s you’re creating a it’s a service, it’s not just a home, you know, so you have to create a lifestyle events, you know, all kinds of things to do it successfully. So I love it as an asset class, I would say that I’m lucky because I partner with a guy who’s has 25 years experience in the business.
And then ultimately, his number two guy ended up leaving property management because he wanted to be on the ownership side came to work for us. So we’re still using my friend who was a was an expert, but we also have expertise in house. If you were I’m leading with all this if you have that kind of expertise. It’s a fabulous asset class. If you don’t, and you just sort of blindly buy assets and then hire a third party. It could be a nightmare. And we’ve actually have bought a couple of opportunities where it’s conventional guys, thinking that student housing is no different than conventional. They fail miserably. A we buy their asset and turn it around, and it’s been great for us.
So you have to go into it, why is eyes wide open, it’s very dynamic markets change, schools change. So you have to be on top of it, it’s all driven by enrollment, then enrollment is driven by the academics, it’s driven by the school’s you know, 10 year plan is driven by sports programs, you know, you can have a bad you know, something come up in the news that some football coach did that was, you know, that was horrible. And all of a sudden, you’ve got enrollment decline. So, the reputation management, my point is, it’s a very dynamic asset class that you just have to be in real time measuring constantly.
Chris Bounds 20:49
Yeah. Now, when you’re talking about renting by the bed, is that like, you have a three or four bedroom property and you’re renting individual rooms? Or is this more dormitory style where the room will accommodate one or two students and you have like community? Baths, shower toiletries?
Alix Kogan 21:09
Yeah, good question. So when we say renting by the bed, it refers to by the bedroom. So what all we do is private off campus housing, which really, they’re single family or smaller. They’re all I shouldn’t say they’re all there, we have both in our portfolio, we have the equivalent of a Class A apartment building, and you’ve got anywhere from a one to a five bedroom apartment. But the leases are signed per student per bedroom.
Chris Bounds 21:43
And you you segregate that by by gender, where it’s like all males and one and whatnot, it’s
Alix Kogan 21:51
it’s a mix, because there’s there’s basically a property management software that pairs people up. So if they have a gender preference, they’ll state that and we’ll have to pair them up. So there is a matching and pairing process. And then of course, once they move in, there’s also some some occasional mediation efforts. So you know,
Chris Bounds 22:13
then that my immediate fear jumped up in a coed situation, which there are coed dorm. So it’s not like, it’s not like this is your unique situation. But my immediate fear is toilet situation, I get a call. There’s police and there’s like a rape investigation. Like, that’s I don’t know. And hopefully you’ve never had to deal with that. But that type of risk, like, how do you have that discussion with your insurance and your legal team?
Alix Kogan 22:42
Well, you have to know your legal rights, obviously. So we’ve got you know, we’ve got counsel, at our disposal constantly, if something does come up, fortunately, you know, those kinds of crazy incidents rarely happen. But you know, you have something that comes up, it’s typically two roommates that don’t get along, you know, one’s eating the other’s food, one of them smoking. Yeah, you know, it’s typical college stuff. So we rent by the bedroom, and there’s, there’s a matching process, that doesn’t always happen that way.
Oftentimes, you get two roommates that want a two bedroom, they come in together, or you have a group of five, you’ve got five sorority girls that want to rent an apartment together. So there’s a lot of that that happens. So that’s the one sort of typical type of asset it looks and feels just like a highly amenitized apart a class apartment building, there’s gyms, there’s pools, there study rooms, I mean, you name it, our assets have it. It’s it’s crazy what college students are living in today, by far, much nicer than anything I ever lived in, in college or after college actually.
So and then, we also have a product that’s a cottage style, which is really equivalent to like a Bter built for rent single family home community, but it is designed and built for college students exclusively. And that’s been a really popular product. Say same reason, you know, that we’re a family made prefer a single family home. A group of college students prefer to have a single family home, they might have a dog and want a little yard, etc. Yeah.
Chris Bounds 24:25
Um, so what what unique things do you look at and looking at, say, a large student housing community versus a multifamily?
Alix Kogan 24:35
I mean, how, what’s the different evaluation? I mean, from an underwriting standpoint? Sure. So it’s a whole completely different set of underwriting metrics. I mean, we’re, we’re looking at the obvious you’ve got a lot more turnover. So you have turned costs. Yes, it’s, you know, the, I think the obvious one that people are fearful of is you have a limited window to lease up to get all your all your residents in for the fall. And then you’re done. There’s not a lot of backfilling that happens, there’s some but but not a lot, you have second semester students come in or are late, a late enrollment, something like that. But you got to really, by, you know, by July, you know, mid July, you better be fully leased up, or else you’ve kind of missed the boat. So there’s, that’s a whole nother.
So when you’re underwriting when you’re buying that asset, where are you in that process? What’s the pre lease like? So as we’re reading the underwriting deals today, you know, if we’re looking at a deal, and they’re 30%, pre leased, and we’re gonna buy it today, and we’re in April, that’s a bad sign, we’ll probably not get to 95 96% occupancy, by the fall, that’s a that’s a problem. So if I’m gonna buy that asset, I’m gonna buy at a severe discount. So those are some of the metrics that we look at. I mean, probably the biggest things in terms of underwriting and evaluating opportunity, is you start with the school, which is no different than multifamily.
You’re starting with the market? How much do we like the market? Is the school growing? You know, what, what? And how is the asset positioned? Within the market? Are you pedestrian the campus? Are you within a mile of campus? Are you a class? Are you beat class? So some of the kind of higher level analysis is the same, but the details are different, if that makes sense?
Chris Bounds 26:36
Yeah, 100%, I was talking with I went to Texas a&m, and I was talking with some other grads that are, you know, our kids football practice, and we’re just talking about the attendance numbers. And I did invest it while I was at a&m, but I never bought a property in Bryan College Station, it was always San Antonio, because they were online for so from my dorm room, I could find them and I just couldn’t find anything in qualification. But man always said, given the given the attendance and also just the development they’ve done over the years, but um, if want to flip over into maybe just the the market for student housing.
So I mentioned my first apprehension is, besides just lack of education, you may have been more of a risk mitigation from a tenant standpoint or management, but also in the market. Because there’s been a lot of talk a lot of government. Now, a lot of government talk about student, like the student loan bubble. And really what’s driven these college campuses, to the ginormous sizes that they are now is a lot of loose money with with student loans.
And when or if that bubble ever burst, how does that impact these mega universities or even smaller universities? How it has an impact them? So what’s your take on that? And how that relates to the housing market? Or the student housing market? Or how that would affect it? If? Yeah, I’ll let you run with it.
Alix Kogan 28:07
Sure. I mean, there’s there’s been a lot of talk, unfortunately, I just got back from the National Student Housing Conference in Austin. Last week. The sentiment in general and I’m gonna get into details why is is very strong for student housing, the rent growth has been tremendous. All the student housing owners operators are very bullish. However, there is a consolidation going into the smaller schools are struggling. And I even use that loosely because you can be a small school, a private school with a fluid students and be doing very well like, take like, Wake Forest, for example, small school, but attracts a lot of wealthy students. When you have that kind of dynamic, you know, student loans are less of a concern, because, you know, their parents have put money away from them and their, whatever it is 401501 college fund that I have for my kid, I can’t remember the name of it, but you know, the money is set aside, they have the affluence. It’s a it’s a, it’s a rite of passage, they’re gonna go to college, it’s part of the family. It’s, it’s, it’s part of, you know, just a culture. So there’s, you know, those schools are gonna do fine.
The smaller schools that have less focus on academics, less focus on sports, they’re suffering, and people are not seeing the value in going to those schools. But what’s happening is if they were going to go to school, you know, see, that’s mediocre, and they’ve decided not to go to that school, they’re going to shift over to school, a, that is a larger state school as a great education program, great sports program, and those who are thriving. So the the deck is kind of getting shifted, if you will, in terms of where the where the students are going. You know, it’s Schools are, are like a business, you know, if they need to grow their enrollment, they have levers that they can pull, it’s increasing the the enrollment requirements or lowering the requirements.
So they they can throttle that stuff up and down. And, you know, they they’ll find a certain amount of student loans and aid within their, their their system if they need to. So we’re less concerned that, you know, the student loan dynamic is going to affect the good schools. It certainly can affect some, but it’s not something that that the industry right now is terribly concerned with.
Chris Bounds 30:42
Yeah, so really just similar to multifamily or any other real estate, it just goes down to knowing your market and your market is heavily knowing your market, but also knowing the the like the the jobs, like you’re looking for jobs. Now, in your case, you’re looking for schools. So it’s knowing that very well and understanding the macro micro trends that they’re going for before you invest? So I definitely agree. And the government’s definitely very, very bested in continuing a gravy train for for student loans. How this shakes out?
I don’t know, before, before we got on this, I looked up like $1.8 trillion. Yeah, 1.8 trillion. Surely, like AI, there’s just my belief, like it’s changing, like, old old school, the way of learning and which means universities had to adapt to. It’s not like a university podcast, but things are changing. And the schools that don’t don’t adapt quick enough, they may find themselves more relevant, which which is going to hurt their enrollment. So, but the larger universities should be more equipped, or better equipped to do that.
Alix Kogan 31:59
Yeah, absolutely. I mean, during COVID, the big conversation was, are people just going to go to school online, and not, you know, go to school visit in person. And that proved to be not the case. It works as a hybrid and works if you have a pandemic. But, you know, the polls of students after the pandemic, would you go to school online, if you had the choice is no, because you go for the social aspect is quite interesting, educational, and I don’t care what anybody says, educationally even, you do not get as much out of it. Doing this versus in person with other students with, you know, dynamic professors, it’s just a different experience. So depending on your major
Chris Bounds 32:42
to, it’s like, you typically don’t get the street education for your, whatever your vocation is, I know I did, other than learning how to use Excel for statistics, and how to make a PowerPoint presentation. Like those are the two educational things I learned everything else was social like, and that is invaluable. But of course, if you want to go into STEM,
Alix Kogan 33:07
you’re probably gonna learn a few things you might need in the street. Yeah, I was gonna say stem, there’s a big focus on STEM. And you can’t replace being in person with that. And I think our our country is realizing that there’s other countries that have left us in the dust in terms of math and science. And so we need to shore up our education system that we can compete. And, you know, the only way you can do that really is in person.
Chris Bounds 33:33
So what’s your take on the real estate market? In general? We’re going through some cloudy skies in the economy, it’s gonna like we’re in a recession or manana we’re going to be what’s the Fed gonna do?
Alix Kogan 33:46
It’s a crazy time, there’s no no question. You know, it’s, you know, the obvious, you know, I’ll just say it, but you’ve heard it 1000 times the bid ask spread and sellers wanting yesterday’s pricing? Well, we’re only buying it today’s price. But having said that, you know, we’re still bullish on it, you know, we’re much more cautious. You know, when you don’t have cheap money, when you don’t have markets just you know, going through the roof and, and rent growth, that’s insane.
You have to be naturally much more careful. You’ve got to buy the right asset, right market, and you have to have the right expectations of rent growth. You have to have the right debt structure. You can’t You know, I mean, you can be floating rate debt today. If you are confident you can execute your business plan and get into permanent financing and all your expected metrics and out sure you can do it but it’s not something we’re doing anymore.
So I am overall bullish on the market. You know, our our country needs housing. You just want to do it in places where your odds are significantly increased because population is growing there. There’s good employment You’re buying, you’re buying the right asset, there’s, there’s, for us, I’m speculating a lot less. I’m not just saying, Hey, I’m going to buy this, I’m going to throw 10 grand a door into, you know, cosmetic rehab, and I’m going to just push rents 300 bucks, I’m not making those kinds of bets, I’m much more conservative, I’ve always been a conservative investor.
So we’re looking at less of a lift, less of speculation, and more of look, here’s the cash flow, we can increase that cash flow some, but let’s not get over aggressive. And if we have to get aggressive, we’re just not buyers. We’re not a fund we’re calling in to buy when it makes sense.
Chris Bounds 35:41
Yeah. And that’s kind of the approach that I’ve been taking. I, I see the projections that are still coming through that I mean, they’ve got they’re very rosy. And while it may be possible to hit those, it’s just at the end of the day, I want to know, like, Hey, if you have to hold this thing for seven years, does that make sense? Can you actually do that and still meet your your metrics for your union for the LPS versus the short term game that has been played over the last few years to two, three year refi, selling four or five, or sell in 15? Months? Like we did that once. But it was still a five year gameplan. And it was on fixed debt.
Chris Bounds 36:29
we had the ability to hold much longer, it’s just the market gave us good the only take it so you’re you’re you’re still buying a lot more cautious being definitely cautious in projections and operations, which I guess that’ll lead me to the last question. It seems like and I’ve seen this one a lot of analysts lately is the market has been able to push performance very heavily over the last few years. Performance now is going to be primarily met by strong operations. And typically with budget management, how are you able to budget properly to maintain your income and increase it as necessary, but also, cap your downside cap your expenses, because insurance taxes and labor materials that are just skyrocketing? Any thoughts there any advice there for other operators that, you know, they’re starting to shift their game plan to shoring up the ship?
Alix Kogan 37:37
Yeah, I mean, I think if you own assets, it’s a lot easier to look at those assets and find where there’s a little bit of fat, where you could trim in cap your expenses, there’s, I mean, there’s so many different little levers that you need to look at. And that’s a real time monthly sort of evaluation, you could have a seasonal dynamic, where you’ve got to put more money towards x, and then a different season, you could scale back some of that expense. So it’s really, again, we could talk for hours on that, but it’s a very granular, real time analysis of expenses.
I’m not going to bore you with all the typical stuff, your you know, utilities, management, and all that stuff, I would say, the biggest thing that operators should be looking at which I don’t believe that many were in the in the last several years is I don’t think they’re doing good deal diligence upfront on your costs. So where insurance costs are unpredictable. Today, they’re all over the board. And they’re different from like, we’re buying an asset in Louisiana LSU, that we’re closing out in 30 days, the taxes they are the imaginary the insurance being a cat area is is insane.
And it was almost a deal killer. So don’t guess, and make sure you’re getting insurance codes. Make sure you’re hiring a professional to do a tax study. We do a tax that in every deal that we buy, we don’t just say, Gee, let’s let’s get on the county website and look at the mill array. And let’s just guess we’re not experts in tax analysis, but the national firm that we use, they are and I’d rather pay a couple 1000 bucks to ensure that I know my worst case, my best case, and my base case of insurance. So a lot of those things, I think are not being diligent, straight upfront and underwriting for it, as well as CapEx, you know, guys are just saying, hey, it’s it’s an average of 10 grand a door.
We’ll have you check, you know, viable vendors today in your market that are validated with those with higher number bids and multiple bids. That’s probably my best piece of advice right now in the market that we’re in because we can’t afford to be wrong, right? We can’t afford because we’re not going to make it out. up on unranked growth, right, we’re going to plug in a very conservative number. So I’m not going to get it on right row, if I do read, but I can’t depend on that on the front end, I’ve got to have all my numbers set.
Chris Bounds 40:13
Yeah, that way, if you do get the positive rent growth, or more than expected, it’s your LPs are happy with. Not that you came in a little bit below below. And they’re they’re questioning why the returns lower than expected. Yeah. And the other thing, I
Alix Kogan 40:31
think, expectations of returns, you know, we’ve all been spoiled. And I’ve told our investor base, I mean, our, our portfolio track record is is exceptional, but I keep telling him do not have those expectations going forward. And I feel like that’s okay, because we’re still in an asset class, that’s very tax efficient. And you know, there’s other things you can invest in, there might be ordinary income rather than long term cap gains. You know, are you going to be in the market that’s volatile? You know, it’s not for everybody. I’m not saying don’t invest in the market, I invest in the stock market, but the majority of my wealth isn’t real estate. So I’m okay. It’s saying, hey, if I was, you know, doing an average of 15 IRR. In the years past, I’m okay with 13. Because, you know, it’s still a great asset class, but let’s not have unreasonable expectations.
Chris Bounds 41:26
Yeah, that’d be interesting. See how just LPs, get it because you’re educated and you’re educated through experience through opportunities and all that on, hey, these are what these opportunities shouldn’t be performing that. So it’s almost like from a GPS perspective, if you’re putting out something lower than that, like, it’s already harder to raise now. But even though you may be honest, it’s going to add some extra headwinds on the rays and how they react to that. So it’ll definitely be interesting to see how LPS react to that. But at the end of the day, when they go through a few cycles and see it in real time,
Alix Kogan 42:03
they’ll get it. Yeah, I mean, the thing that I’ve been hitting, we’ve just raised for a couple of projects successfully knock on wood. And my LPS said, Well, why are you in this 1314 IRR range? I said, I’m in this range, because I’m assuming that for five years from now, interest rates will be the same as they are today. And they say to me, well, that’s that’s probably unlikely, they’ll probably be a little bit lower as I agree with you. And if they are, your IRR will be not 1314 will be 1617. Are you okay with that? Oh, yeah, great. Well, so it’s it’s an education with the with our investors saying, we’re projecting this because we’re not projecting interest rates will be lower. If they are, that’s an arbitrage because cap rates will come down, and we’ll be able to do better, but let’s just be conservative, all things are equal, will be in the lower teens rather than the high teens.
Chris Bounds 42:59
Yeah, I say 12. Plus, with my fund, it’s like, I feel comfortable. You know, exceeding that, that expectation. So yeah, moving on to the Final Four questions, I asked to everyone that comes on the show. So closing this out with the first question, you could give advice to your 20 year old self? What would that be?
Alix Kogan 43:24
Um, take the blinders off, and realize that, you know, there’s more opportunities, you know, I just thought, very, very narrowly in terms of investing in businesses. And there’s a lot more things out there. So I think just think more broadly look at look at more opportunities and take off the blinders.
Chris Bounds 43:46
But what book or books have greatly influenced your life?
Alix Kogan 43:50
Oh, God, I I don’t have I don’t have one
Chris Bounds 43:54
more maybe podcast? Yeah,
Alix Kogan 43:57
I’m just an active active listener of all different kinds of podcasts, not not just real estate related, you know, I mean, I like a guy like Sam Zell, obviously, he’s made most of his wealth and in real estate, but he understands the economy understands business. So I really like podcasts that are a little bit more holistic. And then, you know, I listened to plenty of stuff on nutrition, and exercise. You know, I’m 53 with an eight year old, so I’m focused on being as healthy as I can be in keeping up with that little dude. And so, you know, I want to make sure my business is healthy, but my, my state of mind and my health as healthy as possible as well.
Chris Bounds 44:42
All right. And the last five years what new belief behavior or habit has most improved your life?
Alix Kogan 44:47
The last five years. I’m more focused on my health and my family. I was an I was a typical entrepreneur for 20 years with my head down I’m doing whatever it takes to drive that business. And in the last five years, I’ve looked up and and certainly I’ve realized if you don’t have the health and the family all all in check them. What’s the business for?
Chris Bounds 45:14
Yeah, it’s a it’s a stool and you can balance a one legged stool for a little while, but
Alix Kogan 45:21
not forever. Yeah. How can people reach out to you? So my email is Alex with an AI a lix, at Ashlynn, capital fund.com. And of course, the website is Ashlynn capital. fund.com. Awesome.
Chris Bounds 45:39
Thanks for coming on, Alex. And look forward to talking talking with you again soon.
Alix Kogan 45:45
Awesome, Chris. Thank you. Good to be with you. You too. Take
Chris Bounds 45:48
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