ArborCrowd Investor Q&A: Why a Single-Family Investor Made the Jump to Crowdfunding
Curtis Kooiker, a retired engineer who has built a portfolio of single-family home rentals in Washington State, loves the returns that real estate investments can provide.
But maintaining his numerous properties has become a challenging task. That’s why real estate crowdfunding made sense to Kooiker. Through the innovative concept, he is able to continue to take advantage of the strong returns that real estate can achieve while not having to worry about fixing “sprinkler heads and smoke detectors.”
We recently spoke with Kooiker about real estate crowdfunding and why he chose to invest with ArborCrowd.
Curtis, thanks for speaking with us today. Can you tell us a bit about your professional background?
I’m a retired fire systems engineer and nuclear reactor operator — so I’m an analytical kind of guy. I started to become interested in real estate when I was young and bought my first house. I noticed that I never lost money on a home purchase. About 20 years ago, I got involved in investing in public REITs, both in the office and apartment sectors. But you never really know what properties you are buying — you are really just buying stock in a company as far as I was concerned. While I appreciated that experience, I wanted to get into houses because that’s what I understood.
I first started buying houses about 12 years ago. I bought standard, single-family residences with 3 bedrooms and 2 bathrooms. They were all in the average price range, so they were not expensive homes, but they definitely didn’t need much work.
How have your single-family investments performed?
In general, the houses that I buy with bank loans give me pretty good returns on the cash I invest — around an 18% – 22% IRR, give or take a little. Luckily, our area was not significantly impacted during the 2008 crash. The pace slowed a little, and everyone held their breath, but the rents kept coming in. I never had to sell or was in a position where I felt any pressure.
I’ve also used a self-directed IRA to buy a few properties, and those were all purchased straight cash. They won’t have nearly the same amount of annual returns, but they run at a 7% cash-on-cash return, which isn’t bad. The true difference with those properties is in appreciation, which has been fairly substantial.
It’s great to hear about those returns. So what led you to pursue real estate crowdfunding?
I grew up on a farm and I’m good at fixing things, so taking care of properties is something that I enjoy doing. But I have 15 rentals and my own house — which is quite a few sprinkler heads and smoke detectors to fix and keep track of.
When I retired in September, I started to think that there had to be a better way to invest in real estate. I started doing some research on the Internet and eventually found myself on ArborCrowd. Your [then] current offering was Lago Paradiso
in Miami, which immediately caught my interest.
What got you comfortable with that? Was it the materials or sponsors? Did you call ArborCrowd?
I spoke with [ArborCrowd] Investor Relations a couple times and went through the information that was presented on the website. When you look at all the different offerings that ArborCrowd has put together — it’s all multifamily. Knowing about the history of the Arbor
family of companies, their breadth of experience in the multifamily sector was another factor. In addition, the sponsorship was contributing [approximately 41%] of the equity into the deal, so I knew everyone’s interests were aligned. Those factors combined made me all the more confident that it was worth my own personal investment.
So now you have a single-family rental portfolio running and are invested in multifamily. Are you thinking about getting involved with any other real estate asset class?
While it’s hard to decipher all the ins and outs of commercial properties, I tend to gravitate toward apartments because I feel the most comfortable renting to families or individuals rather than companies. I also like the fact that you can keep an apartment community well occupied while you are remodeling units that turn over.
In the office or industrial space there’s a period of one to two years where you could potentially have no tenants and no income. These buildings also have to match up to some individual company’s criteria in order for them to even be interested in renting, and fewer people are lined up at the door ready to rent in this space.
Apartments are a little safer because even if you have a downturn in the economy, people will still be in need of a place to live. If you encounter vacancy problems with apartments, you can drop the rents a little to adjust or improve the property to meet demand for a better product.
Thanks for your time today Curtis. One last question. If someone was thinking of getting involved in real estate, what advice would you give?
I would tell young people that they need to buy their first house with a frame of mind that the property can be turned into a rental when they move on to their next home. I don’t really have enough experience in bigger apartment communities or commercial properties to be giving advice. For these asset classes, my recommendation is find and work with someone who has a recipe for success.