Wealthy AF Podcast

From Startup to Hedge Fund: A Dynamic Entrepreneur's Story

September 18, 2023 Martin Perdomo "The Elite Strategist" Season 2 Episode 288
From Startup to Hedge Fund: A Dynamic Entrepreneur's Story
Wealthy AF Podcast
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Wealthy AF Podcast
From Startup to Hedge Fund: A Dynamic Entrepreneur's Story
Sep 18, 2023 Season 2 Episode 288
Martin Perdomo "The Elite Strategist"

Experience the unique journey of Justin Freishtat, a dynamic entrepreneur who went from running an organic food company to managing a successful hedge fund. As a managing partner at Kerns Capital, Justin gives us an enlightening look into his hedge fund’s algorithm-based approach to currency pairings trading. Listen in as we delve into the complexities of the ongoing currency war and the volatility of the petrodollar; dissecting how Kerns Capital has been consistently delivering solid returns in such a tumultuous climate.

Dive into a stimulating conversation about the influence of Federal Reserve rates on the real estate market. What does a future with rising interest rates mean for single-family and multi-family real estate markets? Justin, offering unique insights from the position of an LP, reveals the comparative safety and flexibility of multi-family real estate. We also delve into the potential fallout of a declining valuation in both markets - an important consideration for any savvy investor or potential home buyer.

Finally, let's navigate the economic upheavals caused by the government's influx of money during the COVID pandemic. Discover how this has affected savings, spawned a new segment of the economy, and led to non-traditional income generation methods. If you're an LP interested in investing, you'll want to hear Justin's advice on vetting operators and making wise investment decisions. Close out the episode with some thoughts on the intersection of success, passion, and wealth - a thought-provoking end to a truly enlightening conversation.

This episode is brought to you by Premier Ridge Capital.

Sign Up for our Newsletter and get our FREE E-Book where you'll learn everything you need to know about creating financial freedom through multifamily syndication.

Visit www.premierridgecapital.com now!

Introducing the 60 Day Deal Finder!
Visit: www.MartinREIMastery.com
Use the Coupon Code: WEALTHYAFfor 20%  off!

This episode is brought to you by Premier Ridge Capital.
Build Generational Wealth As A Passive Investor In Multifamily Real Estate Syndication!
Visit www.premierridgecapital.com to find out more.

Support the Show.

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Show Notes Transcript Chapter Markers

Experience the unique journey of Justin Freishtat, a dynamic entrepreneur who went from running an organic food company to managing a successful hedge fund. As a managing partner at Kerns Capital, Justin gives us an enlightening look into his hedge fund’s algorithm-based approach to currency pairings trading. Listen in as we delve into the complexities of the ongoing currency war and the volatility of the petrodollar; dissecting how Kerns Capital has been consistently delivering solid returns in such a tumultuous climate.

Dive into a stimulating conversation about the influence of Federal Reserve rates on the real estate market. What does a future with rising interest rates mean for single-family and multi-family real estate markets? Justin, offering unique insights from the position of an LP, reveals the comparative safety and flexibility of multi-family real estate. We also delve into the potential fallout of a declining valuation in both markets - an important consideration for any savvy investor or potential home buyer.

Finally, let's navigate the economic upheavals caused by the government's influx of money during the COVID pandemic. Discover how this has affected savings, spawned a new segment of the economy, and led to non-traditional income generation methods. If you're an LP interested in investing, you'll want to hear Justin's advice on vetting operators and making wise investment decisions. Close out the episode with some thoughts on the intersection of success, passion, and wealth - a thought-provoking end to a truly enlightening conversation.

This episode is brought to you by Premier Ridge Capital.

Sign Up for our Newsletter and get our FREE E-Book where you'll learn everything you need to know about creating financial freedom through multifamily syndication.

Visit www.premierridgecapital.com now!

Introducing the 60 Day Deal Finder!
Visit: www.MartinREIMastery.com
Use the Coupon Code: WEALTHYAFfor 20%  off!

This episode is brought to you by Premier Ridge Capital.
Build Generational Wealth As A Passive Investor In Multifamily Real Estate Syndication!
Visit www.premierridgecapital.com to find out more.

Support the Show.

Speaker 1:

Welcome back to another episode of Latinos and real estate investing podcast, where individuals just like you come to learn how to create wealth through real estate investing, entrepreneurship and business ownership, and today's guest is Justin Fraestat. Did I?

Speaker 2:

say that right brother, good enough. I mean, I don't know if there's a right or wrong way to pronounce it, justin is an entrepreneur, investor and a managing partner at Kerns Capital.

Speaker 1:

This hedge fund is growing and rapidly, has produced substantial profits for investors, with a proven track record of targeting two to six percent monthly returns for investors. That's very impressive. By the way, you're actually hitting those six percent monthly returns. Justin and his partners have amassed a multi-family real estate portfolio comprised of 1674. So 1,674 units across five states. Justin, my friend. Thank you, sir, for showing up here, coming out and sharing with me and the audience.

Speaker 2:

Oh, it's my pleasure. I love having conversations about winning and how we can all collaborate, and just further the initiative.

Speaker 1:

Yeah, man, you know, I was just my team just literally interviewed me a little while ago. We do. They just decided they wanted to interview me and get some stuff. So my podcast and one of the questions they asked me is what are you planning on doing this year? On the untitled run of this podcast, and I said winning. So that was my first reaction. I was like, what are you doing? I'm going to win. Right, that's what I liked, I love to win. But anyways, brother, tell us how you got started in business and in this journey of hedge fund. I'm really curious. On a hedge fund, how do you start that? We hear all these things about hedge fund, these hedge fund guys, these hedge fund guys. It's all the new big money guys and hedge fund and you have a hedge fund. So tell us how that journey started. How did you get into business and hedge fund? And when you get to the hedge fund, tell for the listeners that don't know what is a hedge fund.

Speaker 2:

Yeah, it's been an interesting journey to becoming a hedge fund manager and I think it's also how you reinvent yourself as you work through business. Right, you're not always going to do the same thing. Thank you Will, but that's just not how it goes. So I was building an organic food company with my dad for 10 years. That was a delivery service to homes and brick and mortar, headquarters, trucks on the road, things like that totally different than running a hedge fund. And we did that for about 10 years, got really lucky with. The pandemic blew the company up because we were doing delivery. No one wanted to go to the grocery stores so we ended up exiting that.

Speaker 2:

I'm selling it to private equity and through that process of not expecting to be selling our business, I thought we were going to have this thing forever. I just went out and started looking okay, what am I going to do next? And I ran into Cody Kearns at an event and he was in a little bit of a transition as well. He had a big marketing business that he was kind of winding down a little bit, looking for his next thing and he had been testing these algorithms that were trading currency, commodity pairings, building relationships within the investing space Because, even though we both had businesses coming into this, we were investors as well the whole way.

Speaker 2:

For me, it was mostly real estate, being an LP on big multifamily projects. That's where I was funneling most of my profits and wealth out of our business to diversify where my money was. Cody was doing the same thing and he was also doing short term rentals and he had this algorithm connection. He was testing it and he's like you know what? I'm going to launch this hedge fund. So I was actually the first investor. I had money in this before he even launched it, when he was testing it. And then, when he launched the hedge fund, I just kind of started raising capital for him and he brought me in as a managing partner and we're coming up on the end of the first year here. We've got 20 million under management within the first year.

Speaker 2:

So it's been a great start and it's because we have an alternative investment that's working in a time where most things just are very difficult to make work right now, like real estate right, I hear a lot about how difficult that is, but I mean a hedge fund is. Ours is a 506C structure, which means we only can take accredited investors a lot like the syndications. So these different terms hedge funds, syndications, spv, special purpose vehicles they're all ways to give the accredited investor access to deals that are closer to the source. When you invest in the public markets, you're getting a derivative of the real investment. So that's really the difference of being in a hedge fund, being in a syndication, things like that you're just closer to the source and the returns are better.

Speaker 1:

Yeah that makes a lot of sense. So you're close to a hedge fund, basically, when you invest with you guys, right, it's just basically being closer to our source. So you said a moment ago that you guys are investing in vehicles that are performing right now, where a lot of things are not. Can you share with us exactly what are you guys knowing that's working and making you guys money?

Speaker 2:

Yeah, so we're trading forex pairings, right. So we're talking currency to currency or a commodity to a currency, and we're using algorithms that place high frequency trades and our arbitrage small differences to get these micro daily wins right. And then, when you compound that over a month, the target is a 2% to 4% net return after the fees and splits, and we've delivered on that every single month since inception. We haven't missed once. There's a currency war going on around the world. You've got issues with the petrodollar and all these countries kind of ganging up on the dollar and it's created so much volatility in the currency world. It plays right into our strategy. And so you know, even though we've been averaging about 5% a month since inception, it's not realistic. That's not our target. So anybody that's looking at this that the 2% to 4% monthly range is where we think we're going to be long term.

Speaker 2:

And part of that trading fund our first fund it's not just algorithmic trading. We also have relationships with much larger hedge funds, right. So just like an accredited investor can be an LP of our fund, well, our fund can be an LP of a $17 billion fund or a billion plus fund that's. You know, they've got much bigger, robust infrastructure and give us access to technologies that do this trading right. So that's essentially what we've done.

Speaker 2:

We're partnered with InnovationX for our private equity, we're partnered with Forte Capital Group's swing trading desk and between that and our algorithmic trading in fund one, that's kind of how we produce these monthly returns that aren't market correlated in the sense that we're not, we're not relying on the Fed's interest rates Like they. You know we're in, we trade and then we're in cash every day. So in the Algo, you know, overnight you could have a geopolitical event that tanks stocks or, you know, changes the bond market. We don't really mess with that. We're mostly trading in and out small arbitrage so that we can get that appreciation but protect the capital at the same time.

Speaker 1:

Yeah, okay, there's a lot to unpack there, brother, so a lot for me to learn. So the question is you talked about something that's really interesting to me and I want to kind of take the conversation down that route the petro dollar, brazil, africa, I think, saudis, china and Russia. Right, those are the five countries. There might be a couple more now that maybe went into this thing trying to gang up on the dollar. So what are you? What are you guys seeing? So you're trading on currencies. What impact is that having that political situation having there on the US dollar? Just curious to get your perspective on that, you being in that space, kind of trading the dollar, and what's the sentiment around the globe with other countries and other investment firms like yours, maybe the bigger hedge fund, as to where the direction of the dollar is going, considering Bitcoin and all these cryptocurrencies that are coming up and all of these things? Really like to get your perspective on that.

Speaker 2:

Yeah, the big macro situation is for the high level strategists. I mean, that's actually, whether you believe it or not, not very important to us in our strategy because we just need volatility, right. We don't really care which way the currencies are going, as long as you've got big movements. The algo can forecast that in high frequency and just catch an arbitrage. So but from what I've heard from the big guys that analyze this stuff, it's still King dollar. It's gonna be hard to take down the dollar.

Speaker 2:

Bitcoin is just totally flat lined and I think a lot of the hype and the type of people that were in these pipe dream currencies, if you ask me, looking back on it, they've moved on to AI, the next shiny object. Just don't think we're gonna see cryptocurrency go to the moon, like everyone thought, because what you learned very quickly is that nothing's decentralized. The government controls everything. They don't want it to be decentralized. If they wanna take it down, if they wanna call it a security, it's up to them. I just don't think you really get to have this completely decentralized idea of being able to escape the government, and that's kind of to me what's not gonna make cryptocurrency be what everything thought was.

Speaker 1:

Yeah, what about this? I mean this thing with this petro dollar. What are your thoughts on that with, I mean, china's a real threat, dude. I think China's a real threat to our economy. You, as a hedge fund guy, what is your perspective on that situation? China doing the moves, china's playing. China plays a 200 year playbook. Right, their playbook is long, long long. I mean, we've been talking about this China situation.

Speaker 1:

I remember in 2008, when I had 2007, when I had my mortgage company. I remember I wasn't as savvy as I am today, I wasn't as kept up and I didn't understand a lot of these things. But I remember having hearing and people talking about China, china, china, buying real estate, buying real estate, buying up all of our land, buying up all of our land and I was like who cares? Right, to me it was who cares. Now I understand it, looking at it more intelligently, and understand why that's important. What are your thoughts on that? You know Brazil, latin America superpower right and China and the Saudis coming together with this petrodollar. What are your thoughts on that man? Do you think that that can catch traction? That could be a real threat to America and the dollar.

Speaker 2:

Yeah, I do, and it's interesting, right, like the world doesn't really like us right now, and that is something that we got to change, you know.

Speaker 2:

And if you want to, you know, like you said, china is very savvy, and if you want to take down a country like the US, you know, just have us fight each other, and that's that's what's going on in this country, right? And if we would just focus on economic superiority and, you know, keep dominating progress and innovation in the world and come together as a country, you know, to further it for everyone, instead of just fighting and tearing our tearing ourselves down from the inside, I think that's what they're playing is. And you know, like the oil is really important, it's like cheap energy is is what keeps people alive in third world countries, and some of the stuff that we're doing here, the world does not like it, for good reason. I mean, we have, we have just prioritized below the line issues, when, when people are just trying to put food on the table or, you know, be able to pay their, their heating bills, and and the world sees that, and I just don't think we, we are leading the world in the right direction.

Speaker 1:

Yeah, I totally, totally agree with you on that. Let's switch over to the capital markets, you being in the in that world as a hedge fund. We we've seen the feds just met this past week as we record this episode I think yesterday or the day before you have, the day before they met as we record this episode here, in June of 2023, the feds, for the first time in 15 months, did not raise the interest rates, and that is, I think that's, a positive sign. What impact do you see as a hedge fund guy, and what impact does this even have in your business and what you guys are doing, those arbitrage, day to day trades and that business that you're doing? What do you see in terms of the future of our economy as it pertains to what's happening with the feds and interest rates? Current?

Speaker 2:

Yeah, I mean personally. I'm shocked at the rally that we've had in the stock market and if you saw the initial reaction on on the fed not raising rates it was actually negative. The markets went negative on that news, not because they didn't raise rates, but because they said they're going to raise two more times this year. So, yes, you know at some point I to me, I think the biggest threat is housing, specifically single family just isn't correcting the way I thought it would At some point when the assets are too expensive and the debt's getting more expensive, like something's got to give right, so rates have got to come down or the asset values have got to come down. And one interesting thing I saw a chart.

Speaker 2:

The cost to rent over time is like this and the cost to own is very volatile, based off markets too much money and then rates right. So at right now the cost to own versus rent has the spread has never been bigger. You want to own a house. It's the most expensive relative to renting it's ever been. So that makes me feel good about multifamily, even though people are really negative, because that means people, more people are gonna are gonna rent right. So yeah, I think it's as long as is, we're okay right here. But if they keep going, at some point it's going to break the it's going to pop us.

Speaker 1:

It's definitely going to break us. I want to ask you about your thoughts on do you think that the feds are going to raise the rates two more times this year? What are your sudden comments? I'm going to give you my thoughts on it, but I'd like to know what you think about that.

Speaker 2:

Do you really think that they're going to do that? You know I think they will, depending on how inflation comes down, because you got to remember you know we're at 4% right now and their target's too. So everything that they've done has really cut it in half. But we were like almost eight at the top. So if we're at four now, you know we're halfway there. So, but at the same time, they know that the work that they've done has to work its way through the system and it might come down faster than we think.

Speaker 2:

So you know I'm, I've been, I've been so wrong about about these predictions. I don't even want to make them, you know, because it's nobody knows, but yeah, it just if they keep going. It's because the other thing too is that when rates go up, that means your cash in a money market makes more money. So if I go, I can get four to 5% on cash right now. It's a very low value proposition to put your money at risk to get maybe a little bit more, you know. So, yeah, that that dynamic could, could really cripple things too if the savings rate gets gets too high. It sounds crazy, but that's, that's kind of the dynamic.

Speaker 1:

Yeah, that's an interesting perspective I never thought of like we have. We just moved our money Into a money market, just like you said. We're getting close to 5% with with our bank, because we're like, hey, we're sitting, we have this capital sitting in the bank and our savings are reserved for our investments, right? Or and it's like why we have all this money getting what? Nothing like Movid and we did. But I never thought about it from that perspective.

Speaker 1:

I don't think personally that they're gonna raise rates anymore. Two reasons number one is during an elect. We're going into an election year next year. We're full blown into already. You know politicians doing what they do and we've never seen in the history of this country Interest rates go up during an election year. That's reason of my thought number one. Thought number two is that I don't think, justin, that Responsibly the feds can keep pushing rates With the situation that they've put this country in. More specifically, the financial markets of banks. I mean we got banks failing left and right. Right, because them freaking dropping the hammer and they're they're gonna hurt a lot of, they're gonna continue to hurt a lot of people.

Speaker 1:

My, my next question to you, brother, is what are your thoughts on the future of real estate with these interest rates going up now we're in the middle of refinancing a property right now, which, as you know, it's not a good time to be refinancing. It's just is what it is. We had it. It just is what it is. I'm an operator, I'm a real estate operator and it's part of our job. What we do. We don't stop operating because external factors. We just execute on our business plan.

Speaker 1:

What are your, what are your thoughts on the future of a multi-family and be single family? Because you said single family is a big threat. It's gonna break, and I agree with you was gonna break. And it's just weird, dude, because the prices, prices are strong, sales are still strong right now. Like how, yeah, we're seeing a decline in prices year-over-year, but rates are high and people are still buying. So it's just weird time. It's just a weird, weird time. Just what are your thoughts at? What do you see as a future for For multi and or single family, of the single family space?

Speaker 2:

Yeah, so. So for me, as as an LP and not being an operator, the way I look at it is more so from my risk perspective. So you know, if we're investing in something that's got 300 doors and we do get, you know, multi-family correction, we don't have to sell it right. We're riding this thing out for a long period of time anyway. So as long as the cash flows hang in there, I feel pretty protected in that space. Even if cash flows get cut, you know you're riding out a tough situation and you're not getting killed.

Speaker 2:

Single families is just way riskier to me, because the quality of the operator doesn't really matter. Right like it's it's, it's based off the comps and that's it. So at least in multi-family we have control of forcing the appreciation, buying the properties right. There's a lot, a lot more flexibility, and if you're with a good operator, I think that's more important than the overall market. I was at the multi-family wealth conference here in Vegas a month or two ago and I was listening to some of the smartest people in the space and they're saying you know, multi-family's down about 20%, 20% more to go.

Speaker 1:

Yeah, they were saying valuation Justin. Holy shit. Yeah, when you see that I'm not seeing that, though, man, I'm not seeing I'm not seeing multi-family's pricing drop, what I'm seeing is I'm seeing that I don't see him coming to market anymore.

Speaker 2:

Right, it's a stale me right, huh, that's kind of how it isn't single family too, and it's like how long can it last? And then something's gotta gotta break right and it's, you know, yes, there's still a lot of single-family transactions like, like you said, but you know, are those the people that are gonna be holding the bag? I, I don't know, if rates come down, then no, but it's a tough situation. It really is. Yeah, I mean, I'm looking at like I just moved to Vegas and I'm renting my house because I Could not make any sense at all at buying a single-family home right now. I mean, if you have any financial acumen, you know it's a terrible, terrible move.

Speaker 1:

Yeah, 100%. With these rates, dude, with these rates and the price points it's tough, but people are buying. Dude is weird because people are buying, just that, people are.

Speaker 2:

But people, people were buying all the way up to the last crash, right? Yes, yeah, that's true. I don't know if that's a sign of any of Positivity. It's just, those people might be the ones who made the last wrong decision.

Speaker 1:

Yeah, this is, this is true what you say, my friend. You talked about being an LP and I want to, and I want to dug into that a little bit here and my question is for for listeners that don't know. And you talked about having a good operator and I think if you're an investor and you want to invest in deals at this market and in the upcoming market, I believe we're going into, I believe there's gonna be a correction in the real estate market, just because there has to be. Interest rates are going up too fast and Affordabilities out the window. It's just weird. I thought by now we would have had this correction, but it corrected a little bit last, last year, the last quarter, and then it just came right back. It's just just came right back.

Speaker 2:

Yeah, I think I think people have too much money. I don't know if you saw the the casino stocks just reported earnings all all-time hot. I did see them. Yes, I mean, when you print trillions of dollars, I mean this is just an experiment that we just. I just think it's good. Everything's gonna take a lot longer because of how much money needs to work its way through the system.

Speaker 1:

Yeah, but where is that money go? Like you know, there was reports last year that People's savings dropped. I don't know if you saw that people. So people's savings went up during COVID with all that money that was given, and then last year there was reports that the savings dropped and then there was a new report that came out Earlier this year that people's savings started coming back up again.

Speaker 1:

And I'm trying to figure this thing out here, like, okay, money typically flows up right to the asset owners it always does. Or people spend the money. They spend it on on trinkets and things and vacations. And who Produces that? The producers, you and I, that the people that own the assets or it flows out to the producers and the entrepreneurs and the business owners. But it's weird because Then unemployment is now still low, people's savings went up. So it's just it's hard to make heads of tails when is this money? Where is this money going right and where people getting this money from? Is it just rotating back Like is it trying to get? You know, I can't get my brain around it as to where is it all. Why hasn't this happened yet?

Speaker 2:

Yeah, it's quite a situation, but I mean, you get all this money and then people buy something that flows to a small business owner, and then the small business owner goes and buys a car and then the car you know the car dealership they just churn it, just churn it. And, yeah, I think there's this new segment of the economy that came out of COVID. That it's very interesting, cause, when I look at the thing that takes an economy down, it is job losses, right, yes, and we're seeing that. We're definitely seeing layoffs pick up. Employers are getting really tight on parameters, like you're coming into the office or you can get out, like they're doing all these things and people are leaving.

Speaker 2:

But what COVID did is it forced innovation in people who always, like, wanted to be an entrepreneur, but they just couldn't leave that job and they were forced into it. I think we kind of have a new segment of society that figured out how to make money without a job, and there's a lot of people like that. Now, you know we'll call them small business owners. The internet I mean the amount of people making money online is incredible. I mean a lot of money. So I just don't know if we have the real data on the economy, because these old metrics that we use don't account for this new world.

Speaker 1:

This is a really good point. You bring up my friend. I never even considered things from that perspective and that's a really interesting perspective. I want to talk about LPs, right, so a limited partner, you're an LP, you're in a lot of deals. I believe that in this economy and the future this is the point I was making a moment ago in the future of the economy where we are, if you want to, I believe in real assets. I'm an operator, I'm a real estate investor. This is what I do, this is my bread and butter. Right, by larger multifamily, smaller stuff, I flip Some properties at a time we slowed down. We were doing a lot of flips here in 21 and slowed down in 22 because we saw the warning signs, and so I believe that there's still gonna be a tremendous amount of opportunities in real estate If you're a limited partner, right, that's looking to deploy capital into deals, into operators that know what they're doing, because there's gonna be a lot of blood in the streets with operators coming soon here to a theater near you with a lot of guys that got rich and they had skinny.

Speaker 1:

They had skinny upside forced appreciation. They didn't have a lot, and now we're seeing rents still ticking up some. But I'm seeing rent. It's not my experience in my market. I'm seeing rents kind of flatten out a little bit. It's a little bit. I would say it's a little bit risque in this market to try to push rents too hard. And we're seeing inventory, at least in my market. I, you know I could speak for my market. I know across the country it's different. Over the overall we're still seeing shortage of inventory and rentals, but we're seeing some bikes.

Speaker 1:

But my point was what and how should someone vet an operator? Because there's gonna be opportunities. There's gonna be opportunities, there's gonna be deals. There's gonna be blood in the streets. There's gonna be those guys that were counting on appreciation forever like me, by the way, I was me in 2007 and eight, thinking that it was never gonna come down. It was just, oh my gosh, you're gonna hit this point and it's just gonna keep going up. From that point, what advice are you telling a listener right now on how they should be vetting an operator, right? So if they're looking at one of my deals or an operator like me, I seem to care, like me what are the things that they need to consider? What and what are some of the things you do one, two and three, or what are the questions you ask, things you look for to say, yeah, I'll deploy 50, 100, 200, whatever, however money you wanna deploy with that syndicator to buy real estate.

Speaker 2:

Yeah. So I think it's different strategies depending on your acumen and what your experience is. So when I first got into this, I knew I wanted to be in real estate and I started reading all the books about real estate multifamily and what I realized was that being an operator is such a unique skill set that I don't have and I don't want right. It's just not my identities. So I looked at the LP side as a way for me to just stay in my lane, be great at what I do and diversify my portfolio behind great operators. So the first thing that I looked for was just track record how long you've been doing it, how many transactions have you done? How many cash out refis have you done? Cause for me. I'm looking at this from a different angle. I'm buying real estate mostly as an LP for the tax advantages, so I can mitigate taxes in the rest of my portfolio. So the other way that you mitigate risk with this if you don't really know what you're doing, cause most LPs. Let's be honest, we don't know what we're doing, right. I don't want too much money with one operator. I don't want too much exposure to one part of the country. So the way that I did. It was okay, I'm looking at all these deals. I like these couple operators, I'm gonna spread the money out this guy's in Texas, this guy's in Florida, atlanta so I just made sure that my exposure was in different parts of the country, different types of markets, different operators. So if something goes wrong with one investment, it doesn't kill the portfolio.

Speaker 2:

So one thing I would think about as an LP is if you're gonna deploy 500,000 or a million, don't put it all in one deal. They put 100,005 deals. Spread it out. Because I mean, I've had that experience over the last year. The first one I did when I didn't really know I didn't ask about the debt, right, I didn't ask about the loan on the deal and it wasn't an adjustable rate. Debt and cash flow went to basically zero this year because of that, and then they had to do rate insurance and then eventually we got into a refi and the property stabilized again. But that could have easily taken the whole thing down and I was just early in my process and I just didn't know to ask that question. So as an LP you're gonna learn, just like an operator does in the beginning, and I think the best thing you can do is just spread your funds out and you'll learn as you go.

Speaker 1:

Yeah, that's really good nuggets you shared. And listen, as you know, unless you're getting agency debt, you're not getting a fixed rate right. And that's a really important question to ask the operator what is your exit strategy if you're going on a bridge or how are you protecting us from the downside with this volatility in the market with interest rates? Because this volatile dude, I'm refinancing a small property we bought in October, a quad and I'm getting an 8.5% interest rate, which is crazy. Coming off of I got portfolios that are at five and four right now and it's like whoa, eight and a half and I got to call yesterday. I got to call yesterday. We were supposed to close today on that refi and then we're going to close on Monday or Tuesday.

Speaker 1:

The bank is trying to push back because we locked that rate in a month ago, wanting to give me a high rate, and I'm like, absolutely not, like shit. Can you imagine a 9% rate, a quarter percent rate, like I mean I know people did it in the 80s with 16 and 13% rate, but it's like, yeah, man, we got to be calculating for that, we got to be projecting it out for that and the underwriting has got to be conservative on the rates and when that refi is going to happen and when is that going to be executed on and where? You got to consider where we're going to be at. No one has a crystal ball. None of us have a crystal ball, so where are we going to be at in rates? All we can do is take educated, intelligent guesses, because that's all we got. No one knows as to where we think the market might be in the future.

Speaker 1:

So my last question for you, brother if someone is listening to us and they're like, okay, what resources? Where should I be looking? How should I be educating myself to learn how to invest? Maybe they have some money and they have some capital they want to invest. It might be real estate, maybe it's with a hedge fund like you. Where should they be looking? Is there a newsletter? Is there a website? Is there a resource that you can recommend where people can go and look and kind of educate themselves on places where they can invest their money?

Speaker 2:

Yeah, I would get focused on books and podcasts that are in the specific niche that you want to play in. One of the big mistakes I see people make this is the mistake I made in the beginning of my journey was I started reading all the books that are kind of generic, Like, for instance, I read Money Master the Game to Tony.

Speaker 1:

Robbins. It's a big book, but it's a very high level type.

Speaker 2:

I think it's training you for average. I mean he's basically saying nobody beats the benchmark. The best you can do is dollar cost, average and low cost ETFs. That's cool. If you want to just not be an investor, I mean that's not investing, that's saving right. So I think there's a lot of books you'll read and people buy into that. I mean for me I was like, well, that's not how Tony Robbins became a billionaire. So I'm going to reject this information and keep seeking right. And that's when I found I did the whole Rich Dad, poor Dad series. Rich Dad's Guide to Real Estate Investing Very comprehensive, very detailed tells you how to vet an entire commercial property and what to look for. So I mean, you're going to learn the niche by looking for the information that's niche. So I would just say don't take information that's very broad. It's not going to help you be an accredited investor. So if the information doesn't get you to where you want to go, just reject it and move on.

Speaker 1:

Yeah, that's a very good language that you use. Reject it and move on. I appreciate you, my brother. Thank you for taking the time, for being on this podcast and sharing with me and having this conversation with me Learned a ton from your voice. Two cheers, please. We're going to go into the Untitled Round, my friend, where I'm going to ask you a series of questions. You don't have to think, you don't have to justify, just one word. Answers are fine. Are you ready to play? Let's do it. Let's do it, my friend. Real estate is great asset. A million dollars is not enough. You know all achievers, dude, every achiever. I asked that question on this podcast doesn't say anything. Not enough, nothing, not enough Doesn't do nothing. I've always wanted to travel to Maldives. That's a good one. That's a good one. I think the president right now is trash. People coming to Vegas should try Speed Vegas.

Speaker 2:

My advice to young people is start deprogramming everything you've been taught if you want to excel in family or business.

Speaker 1:

The same thing Passion or stability. Passion, book smart or street smart.

Speaker 2:

Street smart all day.

Speaker 1:

Wine or beer, wine, seafood or steak Steak Angry client or angry coworker Angry client. And lastly, help or wealth. Help. Help is wealth, my friend. I appreciate you coming out. If people wanted to connect with you and maybe deploy some of their capital with Kern's capital, or they wanted to learn how to connect with you, hang with you social media websites. How can they find you? Where can they connect with you, my friend?

Speaker 2:

Yeah, so my personal website is toptierhumancom. It's Justin Freistat, F-R-E-I-S-H-T-A-T on all your social medias. And then Kern's capital. Our website is kernscapital. There's no dot com on the end, so if you put that in, nothing's gonna come up, it's just kernscapital.

Speaker 1:

Perfect. Thank you so much, brother again, for coming on and sharing. Really appreciate you being here, my friend, absolutely, it's been a pleasure. Thanks for having me.

Real Estate Investing and Hedge Funds
Fed Rates and Real Estate Future
Money & Real Estate Investment Opportunities
Deprogramming, Passion, and Wealth