In this episode of The Same Day Podcast, Mat Zalk is joined by Joel Kraut, Co-founder and Managing Director of BRRRR Loans, to discuss financing options outside conventional banking and the role they play in long-term real estate investing. Joel explains how experienced investors evaluate risk differently and why preparation often determines whether a project succeeds or struggles.
The Realities and Risks of Real Estate Investing Beyond Traditional Lending With Joel Kraut
Joel Kraut is the Co-founder and Managing Director of BRRRR Loans, a direct private lender and nationwide commercial and residential mortgage broker specializing in fix-and-flip properties, BRRRR (Buy, Renovate, Rent, Refinance, Repeat) strategies, small balance commercial investments, and specialty use real estate transactions. Joel has built a reputation for helping investors secure financing for projects that many traditional lenders decline. His expertise includes residential investment properties, commercial real estate, and specialty-use assets across the country.
Here’s a glimpse of what you’ll learn:
- [04:00] Joel Kraut explains why consistency trumps credentials when building long-term wealth
- [06:28] Early lessons on leverage that shaped Joel’s approach to BRRRR investing
- [10:21] How real estate investing evolved from the “wild west” to a professional industry
- [18:46] Why proper due diligence makes or breaks your investment deals
- [25:50] Key economic growth indicators to watch when choosing investment markets
- [28:51] How preparation and organization instantly build lender trust
- [39:25] Avoiding costly mistakes, even seasoned investors continue to make
In this episode…
Leverage can accelerate growth, but it also increases the importance of understanding every aspect of a deal. According to Joel, investors who underestimate potential risks often encounter unexpected setbacks after closing.
By carefully evaluating properties, planning multiple exit strategies, and avoiding overly optimistic assumptions, Northwest Arkansas investors can better position themselves for sustainable long-term success.
As Northwest Arkansas continues experiencing rapid development and increasing housing demand, investors are looking for creative ways to finance acquisitions and renovations. Joel shares how private lending and BRRRR strategies can provide flexibility while emphasizing that every opportunity should begin with strong due diligence and realistic financial projections.
Resources mentioned in this episode:
- Yonatan Schmidt on LinkedIn
- Mat Zalk on LinkedIn
- Keyrenter Property Management
- Keyrenter Property Management in Tulsa | Oklahoma City | Arkansas
- Keyrenter Property Management email address: [email protected]
- Chris Lile State Farm
- Joel Kraut on LinkedIn
- BRRRR Loans
- BRRRR Masters Training
- “Paving the Way for Affordable Housing in Urban Communities” with Devin Howland on The Same Day Podcast
- “Property Management FAQ: How Keyrenter Handless All Aspects of the Process” with Yoni Schmidt on The Same Day Podcast
- “HVAC Systems: Maintenance Considerations and Pricing” with Kevin Evans on The Same Day Podcast
- Brandon Turner on LinkedIn
- David Greene on LinkedIn
- BiggerPockets
Quotable Moments
- “Show up every day with intention, and you’re going to look down at day 100 and then one year.”
- “I’m only standing here because I was dumb enough to show up every day, right?”
- “Slowing down a little bit to then go faster is what’s going to help you.”
- “If you’re honest, it’s not going to be perfect, but you’re going to cut down a lot of that.”
- “If you’re not really doing your due diligence beforehand, starting due diligence after you’re the owner is a horror show.”
Action Steps
- Do thorough due diligence before buying any property: Verifying zoning, condition, and market realities upfront prevents costly surprises after closing.
- Prepare your financial and personal documents early: Being organized builds lender trust and speeds up financing when timelines matter most.
- Slow down your buying process to analyze deals realistically: Taking extra time helps avoid emotional decisions and protects long-term cash flow.
- Study local economic drivers, not just property numbers: Understanding jobs, infrastructure, and government investment strengthens long-term investment performance.
- Use leverage strategically instead of aggressively: Balanced leverage reduces downside risk and helps deals survive market shifts.
Sponsor for this episode…
Chris Lile at State Farm Insurance:
This episode is brought to you by Chris Lile at State Farm Insurance.
Chris Lile at State Farm helps you protect your most precious assets and investments, including home and auto.
To learn more about how you can save double digits on all your insurance needs, visit diallile.com or call Chris’ office at 918-878-7771.
Keyrenter Property Management:
This episode is also brought to you by Keyrenter Property Management.
Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.
The team helps clients build wealth while taking the headache out of property management.
That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.
To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].
Episode Transcript
Intro 00:04
Welcome to The Same Day Podcast, where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.
Mat Zalk 00:20
Mat Zalk here. I’m the host of The Same Day Podcast, where I connect with top business experts and real estate leaders. Past guests include Devin Howland, talking about economic development in Fayetteville and Yonatan Schmidt of the Keyrenter team, talking about property owners frequently asked questions. We also had Kevin Evans of Liberty Air Services talking about HVAC systems, how they work and why they’re so darn complicated. Today’s episode is brought to you by Chris Lile State Farm. Chris Lile State Farm helps you protect your most precious assets and investments, whether it’s your home and auto investment, rental properties or other valuables.
Call Chris Lile State Farm for quick and painless phone call to potentially save double digits on all of your insurance needs, that’s (918) 878-7771. Today’s episode is also brought to you by Keyrenter Property Management. We are a full service property management company helping our clients buy, renovate and operate real estate assets. We help our clients build wealth while taking the headache out of property management. Doesn’t matter what you have.
Single family homes, condos, townhomes, apartments. We have the management solutions you need. Go to keyrenterpmc.com or [email protected] if you prefer to email us. Today’s guest is Joel Kraut.
Joel Kraut’s a direct private lender, if I can just speak. Joel Kraut’s, a direct private lender and nationwide commercial and residential mortgage broker specializing in fix and flip, which is man buy, renovate, let’s say what it is, Joel.
Joel Kraut 01:40
Rent, refinance and repeat. But you were on a roll.
Mat Zalk 01:44
Got it. Buy, renovate, rent, refinance and repeat. He specializes in fix and flips. BRS small balance, commercial and specialty use real estate transactions. With more than 20 years of experience structuring commercial real estate loans, Joel has built a reputation for financing deals that traditional lenders won’t touch, and we’ll get into that.
Some of the gas station financing, some other stuff. Joel’s expertise spans hard to finance niche assets, including hotels, gas stations, car washes and oil change facilities, self-storage properties and construction projects. Having worked as an owner, developer, broker and direct lender, Joel brings a rare full spectrum perspective to every transaction, allowing him to structure financing solutions that balance speed, risk, and long term viability. As a former developer and builder in new Jersey, Joel possesses a deep firsthand knowledge of subdivision approval, zoning, regulatory processes, and entitlement risk which enable him which enables him to participate and solve issues before they derail a deal. He’s also widely regarded as an expert in gas station financing, with extensive experience navigating the environmental complexities and risk considerations unique to specialty use properties, particularly throughout the Tri-State area.
His approach is rooted in practicality, transparency, and structure, helping investors and operators not just get deals funded, but get them funded the right way. Joel, welcome to the show.
Joel Kraut 03:03
It’s amazing. My son did an unbelievable job of writing that.
Mat Zalk 03:06
That is a hell of a resume.
Joel Kraut 03:09
Well, you are really kind. You said like two decades I’ve jumped on. Sometimes somebody is at the.
Mat Zalk 03:15
Seven decades.
Joel Kraut 03:16
Like, slow down a little forty’s a little long. Three decades. Yes, but not for don’t rush me. But it’s pretty cool. I mean, obviously just having the opportunity to be around and still here after 30 years of doing this is it’s unbelievable.
The people we’ve had the opportunities to meet and situations. It’s just really been exciting. And, you know, it’s it’s helped me build a family, have them have our opportunities, you know, through college and different avenues. So, you know, we’re really grateful to our clients. They mean everything to us.
Mat Zalk 03:50
I guess it just speaks to time in market instead of time in market. It just longevity over a period and in in industries important.
Joel Kraut 04:00
I’m sure you get the opportunity to you know we talked to a lot of young people and that’s one of the things that we talk about. They’re so worried about, am I getting an A or an A plus or an A minus. Right. Like show up every day with intention and you’re going to look down at day 100 and then one year. And by the time your sophomore year is over, you’ll have met a couple of good people.
They’ll be helping you do something you had never anticipated before. And that’s kind of the secret sauce, right? I mean, it’s it’s not. I went to Harvard, I got an A, and there’s a couple like that. But that’s not the reality of what’s going on out there.
Yeah. And people just aren’t willing to be that consistent. Yeah. I’m only standing here because I was dumb enough to show up every day, right.
Mat Zalk 04:45
And get knocked down and stand back up.
Joel Kraut 04:47
Right. That’s true. I mean, anyone who jumps on any one of these things and just bangs their chest and tells you how great they are. You know, never had a losing deal. What did you do for deals?
I mean, you know. Come on, be serious. You’re working at this for 30 years to do thousands of deals. A couple were clunkers. I mean, it’s just reality.
Yeah, right. So if you want to help people with those experiences, you won’t be able to talk to him comfortably about it. You know, for me, that all changed during the zoom, you know, explosion during Covid, right? I’d never been on a zoom call before. And during Covid that became, you know, the daily norm.
Yeah. And we just like we’re doing right now, we started talking to each other that way and everything kind of changed. You got comfortable with people where previously, if you were on a teams meeting with Microsoft Teams, you’re kind of fighting your way through it. It was sort of new to the industry. And, you know, I wasn’t really comfortable with that yet.
But then when we started doing these webinars with 40, 50 people, hundred people are in these little scrunched little boxes kind of look the same now, right? I used to joke with people, this is the first time in 18 months I’ve actually spoken with my pants on. People have stopped laughing, right? Right. Because you have no idea what’s going on in the zoom world.
So, you know, it sort of changed the playing field and leveled it for a lot of us. It’s easier to have much more fun with it now and just be more normal and help people.
Mat Zalk 06:09
Yeah. Let’s let’s talk a little bit about you. You’ve been an owner, developer, broker. Now you’re a direct lender. What do you think is something that you understand about real estate finance today, that you just did not understand when you started 20 years ago?
30 years ago?
Joel Kraut 06:28
Well, I got into my first real estate investment in 1996, and I started to learn about leverage quickly. I was a Wall Street trader. I understood derivative products because that’s what we traded all day and helped create. So I got that aspect well. And what happened was I met a residential mortgage rep she came to me about ten, 11 months after I bought this property and she said, hey, Mr. Kraut, you know my name is Maria.
I work for, I think, countrywide at the time, and I got this playbook with me, and the playbook has, you know, 8000 mortgage choices. And if you don’t like one, we could get a new one. But I looked it up. What do you mean, you looked it up? Like I didn’t realize that all the mortgages were recorded.
Public instruments. You know, this is 1996. There’s no HDTV yet that you could just jump on and watch flip everything or this or that about real estate investment. So I was learning as I was going. So she told me that I bought my property inexpensively and that my mortgage was pretty low, and I could get the property reappraised and get a refi and do a cash out and take all of my money back out of the property and still own it.
I was nervous about that. That would I own it or not? Because like, that seems too silly that someone would be dumb enough to let you do that. and through that I started to learn about real estate, the power of real estate, leverage, right? I had never even thought that way before.
So I could start buying properties that are in at that time. Pretty good condition too, by the way. Wait one year because back then banks made you wait a month, right? 12 months in one day mark. And then do cash out refi and have no money in the deal.
So I’m like, well, I’m a Wall Street guy. That just seems too easy, right? So I could do that. And why don’t I just add fuel to the fire? I’ll borrow the 20% privately from buddies, right?
And I’ll pay them 10% on their money because, sure, in a retirement account and they had money. So we did that. She opened my eyes to what’s possible. And actually we went on between myself, my ex-wife and a friend, we actually did 22 transactions in the next two years.
Mat Zalk 08:43
Wow.
Joel Kraut 08:43
So we started to get the concept going and then we took it to a ridiculous level. And over the course of about 40 months, 36 months, we actually bought 144 properties. Wow.
Mat Zalk 08:55
Which geography or geographies?
Joel Kraut 08:58
Upstate New York and coastal new Jersey. What a lot of people call South Jersey. But to me, Asbury Park, Neptune, Long Branch are kind of like central, but by the beach. The areas were tougher. We had just about every landlord you would meet that owns 100 plus units.
That’s in, let’s say, the D to C minus neighborhoods. We all have the same haircuts. Right. There’s nobody that’s doing it as well as you with a full head of hair. It’s not possible.
You’re laughing because, you know I’m telling you the truth, right? You know that’s true. And the people are miserable. Yeah, we own 180 doors. Yeah.
You haven’t had a fun day and been able to sit down and dinner with your family.
Mat Zalk 09:42
Sure.
Joel Kraut 09:42
Calmly. For a two hour stretch. And how many decades?
Mat Zalk 09:45
Sure.
Joel Kraut 09:46
Right. And when’s the last time back? Then you went to collect rent without the gun in the back end, right? Because back then, in those neighborhoods, if you look like me, you only went to four way intersections for one of three reasons, right? You went there for drugs, women or rent.
So you’d be at a four way and you’d have to be paying attention all the time.
Mat Zalk 10:08
Yeah, well.
Joel Kraut 10:09
My youngest kids, my oldest kids now, they were young. Once in a while, they’d be out with me. And, you know, you would have to pay attention, I guess is a nice way of saying it.
Mat Zalk 10:20
Yeah.
Joel Kraut 10:21
So the world has just changed so dramatically in the in the small investment property world. It’s infinitely more professional now than it was then. Systems, policies, procedures that are in place now. It’s just dramatically different. This is for the better too.
But back then it was definitely the wild wild West. It was crazy.
Mat Zalk 10:45
Systems produce professionalization, or did professionalization produce systems?
Joel Kraut 10:53
I think professionalization demanded and pulled forward system to better systems. Yeah, I believe so. I mean, you had a I had a thousand tenants. At one point we were collecting the rent.
Mat Zalk 11:04
And you were doing this on spreadsheet and yes, Excel.
Joel Kraut 11:08
Yes. And handwritten on yellow pads. And we had a property management office. They’d come in drop off. You were dependent if the property manager would even tell you if they.
Yeah, they got the money or how much of it. So there wasn’t a really good solid way to track things. Yeah. And that just demanded we move forward. Right.
It just created a need. And young people like we have in our office today are creating that all the time on software and, you know, creating product where they’re working in that space and understand the real needs of what we all do, so that it’s easier to implement and be proactively implementing and not just creating software they think is great. So we’ve worked hard here to do that in what we’ve been developing. So that’s important for us all.
Mat Zalk 12:00
What when you had in 36 months 140 properties or whatever, whatever you said, what do you remember the first deal that taught you how fragile a good deal can be, something that looks great and just is not?
Joel Kraut 12:21
Well, it’s one of my favorite wholesaling stories ever. So for those of you out there that understand the concept of wholesaling and for some that don’t, you know you’re basically getting a contract under, you’re getting a property under contract at a set price, and then I’m trying to resell it to Mat at a higher price. Well, we were working in Utica, New York, and there was a pretty well known person. She was on the radio, so she was an emcee DJ on the radio, and her friend lived in Utica, but a totally different section, she thought, because she lived in Manhattan in this 700 square foot box, that even back then probably cost her $700,000. She bought a single family house, four beds, two baths for 30,000 or $30,500 and just thought, you know, how could you miss?
Mat Zalk 13:10
Sure.
Joel Kraut 13:11
She didn’t do any due diligence. You know, her friend lived in Utica and just assumed because it was the same zip code. It was the same zip code. Well, it wasn’t. So if anybody out there has ever seen the movie Goodfellas, and they see the scene where the supply truck shows up in front of the restaurant, they load up the handcart with all kinds of great stuff, and that goes right through the restaurant and right out the back door.
You can imagine furnaces, sheetrock, insulation, kitchen supplies going in the front door delivery from Home Depot and gone by the end of the night. We had spent about $20,000 of our money on renovation, which we could not control. I called her up, told her, look, I don’t want to spend any more money here. What are you talking about? I explained the situation.
She obviously had a heart attack. You could hear it and feel it through the phone. It got to the point where after six more weeks, she had given up like she put the houses on the market. Nobody ever came to see them. She had done no due diligence.
If anyone is familiar with Utica, New York. This is in a section called Corn Hill. And if you know New York, back in the day when Harlem was Harlem, it was a tough area. Cornhill made it look like a cupcake walk.
Mat Zalk 14:25
Wow.
Joel Kraut 14:26
So this is a six block radius where the police don’t go. They just circle to make sure nobody comes out so they don’t have to go in.
Mat Zalk 14:33
Wow. Still today.
Joel Kraut 14:37
It’s still tough. Not as bad. They’ve done a lot of urban renewal where the government has built houses for whole blocks. Yeah. So it’s definitely better, but it’s still one of the tougher sections up there.
Anyway, we can see who the problem is. And eventually she says to me, you have to buy the house from me. I said, oh, you know, wait a minute, I don’t have to. I’m not interested. I said, well, how much would you pay me for it?
I said, well, I’ll give you a dollar. You could hear her almost have a heart attack and drop the phone. She thought that was insane because, you know, she’s 50, 50, 1000 into this, and I’m offering her $1. Well, I’m working there. I know what’s going on, I understand.
Well, I own rental properties on the fringe of this.
Mat Zalk 15:27
What? Hold on real quick. What was your what was your contractual or fiduciary responsibility to her in this relationship? You were just doing the construction or construction.
Joel Kraut 15:39
We were just doing the construction and I altered the job. Being honest with her, I didn’t want to see her waste any more money.
Mat Zalk 15:44
Yeah, okay, I understand. Yeah. So you offer. You offer a dollar?
Joel Kraut 15:51
Yep. Four weeks go by. She’s listed the property. Not a person shows up. She calls me back, you know.
What are we going to do? I’m like, well, time out, I, I told you, you know, you own the property. You’re trying to sell it. I don’t own the property. I’m not trying to sell it.
Mat Zalk 16:07
In other words, there’s no we here.
Joel Kraut 16:09
Right? Exactly. I’m not trying to be mean and nasty. I want to help you any way I can, but, you know, I’m not a contributor here.
Mat Zalk 16:16
Yeah.
Joel Kraut 16:17
So at the end of week six, she finally gives up, asks me if I’ll still buy it, and I do. She was trying to get me to pay her 10,000, but I really felt like the house would never be worth anything. Sure, it would become a burden to me.
Mat Zalk 16:31
Sure.
Joel Kraut 16:31
So we bought this house for a dollar. I turned around to my contractor who lives there, and he lives inside of Cornhill with his wife and kids. And I said to him, Harry, I would sell you the house for $3,500. He says, well, I don’t have 3500. I said, well, give me 500 down.
And then every week when we pay you labor, we’ll take $500 out of the check and you can pay it off over time. So that was part of the equation. The other piece was I went about four houses down. I walked into the backyard. In the backyard was just a looking very different than me.
Looks more like my shirt. So it was, you know, us against them type of feeling. And you could kind of feel the room get small. And I said, look, I need to talk to you. I want, I need to work out a business deal with you.
And it was a very stereotypical situation. It was kind of insane. But I basically offered to pay him $250 a week to move his party from the house backyard he was sitting in to my house’s backyard. Because if we did that, that would automatically mean no one else in the area would touch the house anymore.
Mat Zalk 17:44
Wow.
Joel Kraut 17:45
Right. So, you know, we had to be a little far out of the box. So we had him guarding the house, essentially with his firepit in the backyard, having his barbecues with his guys. And then we had Harry in the house working, and now he could actually get the work done for himself. So by the time I netted it out, I made about $1,700 on the house.
After about eight weeks and I never touched it. That’s my favorite wholesaling story ever. Wow. Again, you know, you have to be creative in the markets. You have to really understand what’s happening.
And most people don’t really spend enough time to understand what’s happening. And that’s that’s part of the shame of what’s going on out there today.
Mat Zalk 18:26
What? And then at some point, you moved from buyer, meaning the investor, to construction to the lender seat. And what when you move to the lender seat. What surprised you the most about. How about the differences between how investors and lenders approach risk?
Joel Kraut 18:46
Well, I think lenders for the most part, not all, but for the most part have a fairly good handle on risk borrowers. Not so much. You know, they will listen to a realtor. And no offense to any realtor out there, they’re in a sales role, I get it. They’re not actively trying to hurt people.
But because you told me something is worth 260, I shouldn’t just take your word for it. I still need to go do some homework to verify.
Mat Zalk 19:13
Yeah.
Joel Kraut 19:14
I mean, everyone’s going to get paid in this transaction when you close, right? Except for you as the buyer, you’re paying out all the money. And if you’re not really doing your due diligence beforehand, starting due diligence after you’re the owner is a horror show. Yeah. And we see this time and time again.
You know, it’s it’s a shame. I mean, we try to help people understand the process, but, you know, they go to it one day, boot camp, they’re really excited, which I get. And they jump into a deal without really doing the homework on it. And that can hurt a lot of people. It’s not quite as easy as HGTV, you know.
Those are actors and actresses. Yeah, they’re renting houses from people like you and I to put into shows. They’re not really developing the house in 45 minutes, but people think that’s real and it’s easy. And I think that’s a big disconnect out there.
Mat Zalk 20:03
Is this is this kind of cycle what ultimately led you to to build the burr master course and just seeing the same structural mistakes over and over?
Joel Kraut 20:14
That’s definitely a big part of it. I also, you know, have a chance to speak around the country at different groups and whatnot. And sometimes I’m waiting my turn and the person will usually go, oh, you know, hold all your questions to the end And as soon as they’re done talking, they jump off the stage and goodbye. Like they really don’t have that much experience. They might be really handsome or really good looking and speak well, but they really don’t have any transaction history and can’t really help the audience.
Sure. And they charge a lot, a lot of money for it. So we did something different. We tried to use 30 years of experience. We still do it today.
We can give out addresses and whatnot. They can go look and charge very little for it. They can learn.
Mat Zalk 20:59
Who specifically did you build the course for? And I guess, conversely, who who is it not for?
Joel Kraut 21:06
I would say it’s not for the super seasoned. You might pick something up, but let’s be realistic. You’re doing hundreds of deals yourself. You don’t need my help. But for newer and rookies that want to get some taste of some bad experience without really going to their own pocket to do that, it can be very helpful.
You know, we’re we’re disgustingly honest. You know, we made sure of that. That we wanted to show you where some of the mistakes are. And I know it’s like eating candy, getting all these 0% credit cards and this and that and the other thing. But the reality is, when you start over, leveraging and the markets go sideways, where in many cities that’s happening in America right now, you see the blood.
And I was there, I bled art. Yeah. So we want to help teach people that balance, right? I know we all want to be tricky. Not tricky in a bad way, but use these opportunities to lever and grow portfolios really, really quick.
And I know some of the mentors, they’re great men and women. I’m not arguing. They’re not trying to hurt anybody, but they’re talking about a very unique 30 month cycle that happened off a super cycle. That’s not reality. And if you’re late in Austin, Texas, which is one of the beautiful cities, right?
But if you bought something in the first quarter of 24, and now you find yourself 25% underwater, that wasn’t how it was supposed to be. Yeah. Boise, Idaho, or the northwest coast of Florida, which were high flying places growing at 30% a year.
Mat Zalk 22:46
Yeah.
Joel Kraut 22:47
Now, if you bought it in 21 Q1 and you sold out in 23, you’re a superstar.
Mat Zalk 22:52
Sure.
Joel Kraut 22:53
But if you missed by eight months, you’re sucking wind.
Mat Zalk 22:56
Where where do you think we are in the cycle right now?
Joel Kraut 22:59
I think we’re sideways, slightly down. I think this is a pretty healthy, normal sort of cycle. It gives people who do their homework a great advantage, because now you just can’t buy everything and get taken out by the market. Now you have to buy, right? Everyone has all these courses, all these boot camps.
They say, oh, you make all your money when you buy it. Well, now you’re going to learn that. And if you haven’t paid attention to it on the side, I’m sorry. The market will teach you that. Yeah.
So we need to spend more time with each other, helping to understand how to look and analyze market properties. What you’re really looking for. And we spent some pretty good quality time inside of that course doing that.
Mat Zalk 23:41
You and I were talking before the show started about haggling over a couple of bucks when a, you know, when when the deal size is substantial. And it got me thinking that a lot of people think deals fall apart over price or rate. But in your experience, what what actually kills the deal before closing?
Joel Kraut 24:01
A lot of people are ill prepared. They haven’t put their credit and background profiles correct. They’ve overspent to buy a property. You know, they have actually spent money not invested it. I think that is the biggest issue problem, regular occurrence out there.
And right now a huge percentage of investors or potential investors are losing money across America. That’s the truth. I don’t care what our courses tell you. That’s reality now. So slowing down a little bit to then go faster is what’s going to help you.
Making sure you don’t shortcut your own checklists. Making sure you touch those boxes. You know, we’ve seen mistakes in zoning. You know, I thought it was a three family. Well, it’s not it’s a two with a bonus unit that now I need you to actually on bonus the bonus unit.
Because in the appraisal we can’t have that third kitchen. Oh, how am I going to deal with that? Well, maybe you should have thought of that before you purchased and closed. And now you want to cash out refi, right? The value is.
Mat Zalk 25:05
We had a situation in Kansas City where an owner bought a property that was a duplex that was not legally zoned to be a duplex, and we moved a tenant in and I can’t remember. I wasn’t super involved, but it somehow got sideways. And then the county came in and is making him Reconfigure it to be a single family home from a duplex. That’s painful after you’ve done the renovation on two sides of the place.
Joel Kraut 25:29
Yes, you can feel the tears.
Mat Zalk 25:31
Yeah, right. So, what are you on? On those you’ve mentioned some of them. Zoning entitlements. What are the red flags that that make you pause when you’re looking at deals in Alabama or other places that you know where the numbers technically work, but you’re like, we got to go deeper on this.
Joel Kraut 25:50
To me, around the country, we’re still looking at what’s happening economically in the areas.
Mat Zalk 25:55
Yeah.
Joel Kraut 25:56
Like I waited 26 years for Alabama to become a place in my career. And now you look at some of the motor plants that have been built there by Mercedes and Kia. It has probably the largest Amazon plant I’ve ever been past in my life. The government installation and growth and government contracting, you know, you’re looking for places where you’re seeing a lot of cranes. So a lot of road work where there’s growth and there’s government involvement.
Once that ball starts rolling, things are going to continue, right? Sure. I know everybody has talked about the Walmart effect when, you know, if you could buy a property within one mile of Walmart, it’s going to go up in value over time. Well, similarly, if you just spend some time in zoning and see who’s making applications for zoning and Planning Board to see what’s coming, you can work around that as well. Right.
If you have a consistent flow of government contractors, I mean, those are high paying jobs. People are going to rents are going to go up. Right. It’s not rocket science, no pun intended. But, you know, you’re looking for things like that.
Now there’s a giant aluminum plant being built outside of mobile. Mobile?
Mat Zalk 27:06
A smelter or a where they actually roll it into product.
Joel Kraut 27:12
It’s going to take about three years to finish, but they’ve already broken ground. And the construction workers are everywhere. middle management is there now and it’s going to be start to finish. So they’ll have end product coming out of there. Wow.
And distributed around the country. So it’s an exciting time.
Mat Zalk 27:29
That means that means they’ve got cheap feedstock. That means they’ve got cheap energy as well. Yes. Because aluminum is heavy energy.
Joel Kraut 27:36
Yes. Yes it is. And real estate taxes for investors from what people are used to, from most parts of the country or almost non-existent, it’s unbelievable.
Mat Zalk 27:48
Yeah.
Joel Kraut 27:49
I mean, for us coming from the northeast, I often will check it just to make sure it makes sense because it seems.
Mat Zalk 27:54
Like.
Joel Kraut 27:55
It can’t possibly be right. And then even the water utility bills on the whole are just lower than what we’re used to seeing. So it’s tenant friendly in that regard. And then the markets are neutral for tenants. So it’s good that way as a landlord as well.
You’re not killing anybody but you’re also not getting killed which is really all we all want as a landlord. Yeah. Just some level of reasonable fairness to both sides.
Mat Zalk 28:18
And potentially that you don’t have to carry your pistol when you when you go to collect rent.
Joel Kraut 28:22
Yes.
Mat Zalk 28:23
Base load. Switching switching from your investor hat to your to your lender hat. What what’s something that a listeners that that we have on the show that are borrowing money going to lenders like you can do or do do that you’ve seen sometimes I guess it would be unintentionally to to build trust and help a deal flow better because there’s trust there now.
Joel Kraut 28:51
So one of the things that we do with, with newer investors is we want them to be prepared. So we’re explaining to them what they need. We have had amazingly good success with those that are more prepared. You ask them for their corporate docs. Fill out an application.
We’ve had people send us a bio on themselves and a resume of past experience without asking. That was their lead opener. Well, if you’re that organized, then. My first immediate perception is you’re going to do that throughout the whole job.
Mat Zalk 29:24
Sure.
Joel Kraut 29:25
And if you’re leading with how can we work together versus fighting me on the opening? Hello, for 50 bucks, who am I more motivated to help and actually provide that -$50 you were looking for? Yeah, the person who’s the most organized. Yeah. So for young, newer people and I don’t mean young just chronologically, but anyone newer to the game, you should be talking to lenders all the time, whether you have a property or not.
You want to see what their requirements are, so you become familiar with them. Then you call the next lender. You look like you’re really prepared and they’re impressed, even though you might not have this long resume, right. So that’s going to help you a lot. And when you’re brand new and you sign your first contract, you’re going to be nervous because the time clocks starting.
Yeah. So being familiar with this deck that we’re going to require from you. It’s just going to calm things down a little bit for you. So that’s going to make a lot of sense for you. I tell you, I know it’s two guys talking, but the women unbelievably more organized than the men.
You know, you think about it, people haven’t really broken things down into slow motion for a lot of people. One of the best borrowers is the single mom. Why?
Mat Zalk 30:39
She doesn’t have time to mess around.
Joel Kraut 30:41
Yeah, but think about it. She has been a scheduler or her adult life. Sure. She’s been a budgeter, right? She’s been a logistics coordinator.
These are all things that transfer to the jobs, but no one has helped them see that until they see it. And then you can see the light bulb go off like, oh, wait a minute, I can do this. I do have experience doing these things. Yeah, right. I’m not going to just take it from that guy to contractor.
So that’s translated very well. And we’ve seen great success from people.
Mat Zalk 31:10
So okay so now somebody’s got a They’ve got your attention, they’ve got trust. They’ve sent you the docs that they need and everything’s organized. When you’re looking at it from a lending perspective in the Bir space, what’s the what are the distinctions? What distinguishes a Bir deal that survives from one that, you know, fails a year later?
Joel Kraut 31:36
Well, I know this will sound counter to what a lot of people think, but I think the market is much better right now than it was at 4%. And I’ll explain why. At 4% one, rents were a lot lower. But two, when you speak to a lot of the younger players out there that were really loading up at 4%, borrowing as much money as they could, they never once spoke about the cash on cash return of the money they had to put into the deals. So they started out very, very thin.
And now, as costs have all gone up, they’re losing money Versus starting now at 6%. For argument’s sake, buying really well, rents being infinitely higher. It’s giving you a much better place and a more realistic place to start from. And now cash on cash returns are back in the teens or you shouldn’t be doing the deal. So we’re seeing that differentiation.
I remember sitting with one of my really established clients, and I’d asked the guy, I need two months of bank statements. So in seconds he downloaded two bank statements. They had a million and a half dollars of liquidity in them, and he wouldn’t take any money. He said, why would I take the money at 4% if I have nothing to do with it other than just pay? I own these properties free and clear.
Why don’t I wait till there’s a strategic advantage for me to go to the market, and I’d rather pay a little higher interest when I could redeploy the money successfully at my advantage point, instead of just giving you lenders money. Honestly, he’s very successful. He’s been at the markets for a long time. I’ve unfortunately sold them a property to which I watch go way up, which I wish I had back. But he’s a great guy and he really laid it out for me, and I hadn’t really thought of it that way previously.
You know, people would call me up. I’m a really long term investor, you know, just three weeks later, they’re trying to refi flip the property. They don’t like it. They’re not into the markets. Whatever it is, you know, you’re starting to see and you’re seeing that around the country right now.
There’s a lot of investor divested trades going on. And the investor that came in in middle 23 from California or from Texas in the Midwest by you in Kansas City or Oklahoma or flip over to Ohio, West Virginia, Michigan, some of those states where it became very popular to rotate to. They’re not loving section eight from a thousand miles away. It wasn’t quite as easy as the book made it look. And now they’re selling back out at a small loss on a small dollar property.
Mat Zalk 34:12
Yeah.
Joel Kraut 34:13
So you’re starting to see that. And seasoned, experienced people are starting to buy from those people quietly. I’m starting to see that. So you’re starting to see smart, seasoned people acquire quietly portfolios in cash flow areas, but they’re prepared to cash flow them out for the next three, five, ten years and give them to their kids eventually. Those people are going to be super successful.
Mat Zalk 34:39
Are you seeing. I had a I had somebody tell me recently that the conventional thinking about portfolios was not quite right. Historically, you and I may have thought if I go in and buy a ten unit portfolio, I want a discount because, you know, I’m an investor, you know, I’m an investor. I need the numbers to make sense, etc.. And he was saying, rather, in today’s market, portfolios are being given a premium.
That is to say, I came through. I put, you know, individual loans on all these properties. I did the diligence one by one, etcetera, etcetera. And I’ve spent a lot of time doing this, and therefore I should demand a premium to exit this portfolio and allow somebody to come in and do what I did individually over multiple years in one fell swoop. Do you do you see it that way, or do you see it the way we’ve always kind of thought about it, where portfolios get a discount, portfolio buyers should get a discount.
Joel Kraut 35:36
I’m the buyer. I want the discount. But what I’m seeing in the market is, is what you’re saying. And what’s happening with a lot of those is you’re doing and seeing wraparound mortgages from the seller. Right.
So providing an easier way for you to enter.
Mat Zalk 35:51
Yeah.
Joel Kraut 35:52
Thus the seller can get a premium. Right. But maybe you only having to put down 10% instead of 20 or 25 or terms that could be advantaged. Right. A lot of people.
People meaning investors screw up creative finance because they speak what they think. The seller is often not thinking as an investor, right? A mom and pop who owns four doors and owns them for 25 years and renting them to locals, isn’t a super sophisticated investor and doesn’t know they should automatically have a ten year balloon with a 6% interest rate, and it should be amortized for 20 or 20 5 or 30 years. They don’t know any of that, so investors have killed themselves often. Instead of saying to you, Mat, I understand you want to retire and I want to help you, how much money do you need a month from these properties?
Because if I can work it that way, and now I hit your monthly number, I can just buy relative to that and forget about it. Yeah. We met somebody recently that did a 17 unit portfolio in Oklahoma at 0% interest.
Mat Zalk 37:10
I sell a carry a full seller carry.
Joel Kraut 37:12
Yes, they found out. I think they put down 5%. I don’t want to mislead anybody, but the rest of it, 95% was at 0% interest because they had the right monthly figure. So Mom and dad could go move to the warm weather and have their monthly nut handle. That’s what they were concerned with.
They’re not thinking, okay, wait a minute. The fed just lowered it to six and three quarters the prime. The five years at 3.7 ish. What premium should we get over that? How are we going to match?
They don’t think that way. They’re humans. Right? You and I might think that way because that’s what we do all day. But too many investors will superimpose what’s between their ears onto the seller and blow any kind of creative finance deal we see right away.
Well, you know, three year balloon. If you just went through this market and you watched interest rate go up 200 basis points in one month, and you offer somebody a three year balloon out of your own mouth. You. You’re not long for this business, right? You’re pinning yourself down beforehand.
Mat Zalk 38:14
Yeah.
Joel Kraut 38:15
So we don’t want people. We want to teach people not to think that way.
Mat Zalk 38:19
And among among experienced investors, I mean, you said there are some guys that are that are quietly scooping up real estate from some of these folks out of California and Texas that, you know, bought them maybe when they shouldn’t have. They were exchanging money or they’re doing something else. I mean, I figured that some of those are also seasoned investors, right? They’re exchanging money out of California and getting to Texas now. You don’t have to own very many properties in California for a very long period of time in order to have enough money to exchange into 3 or 4 properties in Oklahoma.
So I’ll caveat that comment that way, that they may not be experienced really in the in the the true sense of the word of having done ten or 15 or 20 deals. but what are some of the worst mistakes? The most costly mistakes that you’ve seen experienced investors make or repeat after they’ve had, you know, some initial success?
Joel Kraut 39:11
I think one of the things that needs to always be accounted for when you go to the high cash flow areas, those homes tend to be a lot older than where you live. Sure, you need to make sure you understand the deferred maintenance. Don’t assume.
Mat Zalk 39:24
Yeah.
Joel Kraut 39:25
Don’t assume right down to even though it’s 450 to $600, depending on where you are. Run the camera down the sewer pipe out to the to the line, to the street, because that’s if your buddy’s doing it for you at 7 to $8 dollar fix. And if you don’t know anybody and you got to do it now, that could run you 15 grand. Yeah. And 15 grand on $100,000 house.
That is going to put you in a negative for a decade.
Mat Zalk 39:51
Yeah.
Joel Kraut 39:52
So we see that sometimes, you know, not factoring in a new roof, not factoring in new windows in 120 year old house. Those types of things can really undermine your investment.
Mat Zalk 40:05
So they should they should be all built into the proforma in a conservative way, where you’ve padded it a little bit so that it doesn’t destroy your investment over time.
Joel Kraut 40:14
People are way too aggressive to the positive. I mean, look, I’m 60 years old and I don’t want to hurt anybody’s feelings, but Santa Claus, the Easter Bunny, the tooth fairy, they are not coming to save you. So if you’re going to lie to yourself, you’re going to get those results. If you’re honest, it’s not going to be perfect, but you’re going to cut down a lot of that. Yeah.
And that’s what we try to help people understand.
Mat Zalk 40:38
Yeah, I feel like some people, they fall in love with the deal. Yeah. And they, they don’t want to see accepted rose colored glasses. And so they. Yeah, I mean, my first deal, my first deal, maybe my second deal in Oklahoma was a 58 unit apartment complex.
It was, you know, I really wanted to do it. I brought some of my mentors out there and they all said, this is, you know, I wouldn’t do it in my age, but for a for somebody who’s full of piss and vinegar like you, you know, maybe it makes sense. And they, you know, of course gave me all the good recommendations. Come out, come out here and see how the property looks after a hard rain and some other things. But yeah, I mean, you you just you want to get the deal done so badly and it’s your first big move maybe, and a big move to you.
Maybe a single house and maybe a duplex, or maybe a big apartment complex. But you want to do it so badly that you that you gloss over some of the things that are going to cause you pain down the road.
Joel Kraut 41:31
Absolutely true. 100%. And you’ll ask somebody sometimes, you know, how’d you get into this deal? My friend said it was going to be a good deal, or the realtor told me can’t miss in his zip code. Like that was their due diligence.
So to your point, you know, we’re still asking people in the various markets that we know or have access to, you know, what are some of the pain points in that market, both location wise, but also in the properties themselves, right? Because it does not work the exact same in all parts of America. And I’ve learned that from traveling around those people that you can contact, communicate with, and just get honest feedback from or invaluable. I mean, they can save you tens of thousands of dollars and people make mistakes. Sure, that’s part of our business, but to go in completely unarmed, that’s not being professional.
Mat Zalk 42:23
Yeah. Let’s switch for a second. Are you still actively doing deals, financing deals for asset classes that the banks don’t love for gas stations and, and car washes and other stuff? Is that happening through Burr or is that happening through another entity?
Joel Kraut 42:40
So we do that privately. And the answer is yes. We just closed on a combination of three gas stations for 3.5 million. Privately. It’s a known client.
He owns like 15 or 16 other locations. I was just at a car wash today picking up some documents from somebody. So yes, those types of properties are right in our wheelhouse. In 2009, I think it was I met my first gas station owner, and he was a guy who owned the business, not the property. He said to me, you know, Mr. Joel, if you can help me get a loan, I’ll introduce you to 40 of my friends.
Well, it’s literally been hundreds later. So if you were to go to my phone, the amount of names from Southeast Asia that’s in my phone is abnormal for a guy who looks like me. And it is built an amazing business for us. And my children have all been able to go to college from that. The people have been warm, thankful, grateful, unbelievable referrals from all over America.
I could never have asked for a better opportunity, quite honestly. I know the properties are often looked at as ugly, unwanted, but if you remember in Covid they were all essential properties. All of a sudden essential businesses and they all stayed open and they killed it. They were doing really, really well. Nobody knew what the prices should be.
The margins were insane. The government was helping you. So a lot of people didn’t really care about the cost. Right? They were spending, quote, free money or relatively free money.
So it was an insane period there for 18 months. Yeah, yeah. But especially used property is really misunderstood. There’s some of the most heavily self-regulated industries behind the drug and pharmaceutical industries that we have in America. And I know it’s really cool to watch television, and every once in a while, a gas station blows up and goes on fire.
But that’s just not real. In the real world, TV looks great, reality doesn’t happen. So, you know, for us having that knowledge and having a lot of customer clients and friends that God forbid we had to take one back in a foreclosure would immediately buy it from us and operate or partner with us and operate gives us a big market advantage. Sure, sure.
Mat Zalk 45:00
For anybody that wants to go deeper into how you think and and pay a small amount of money to avoid paying a lot, a lot bigger checks for for mistakes that they’re going to make themselves. Where do they go? How do they find you?
Joel Kraut 45:16
So the easiest places to find us is right at our website. Our website’s really simple. It’s brrrr.com. If you are an investor, if you’ve ever been in some of the platforms around the country, our name is everywhere.
We’re kind of like the vanilla ice cream salesman to the industry. Like basically everybody knows what we do. BiggerPockets made the name famous. They forgot to buy it. We did.
And then they made us.
Mat Zalk 45:43
When did you buy it? What year did you buy it?
Joel Kraut 45:45
2018.
Mat Zalk 45:46
Wow.
Joel Kraut 45:46
So coming out of Covid in 21. Brandon Turner with the beard. We were at BiggerPockets in New Orleans. He came over to say hi. Welcome to the team.
He assumed at Brrrr we had to be part of BiggerPockets because, you know, his whole podcast was Brrrr this, brrrr that. And him and Dave Greene sort of coined the acronym and made it famous. And we explained to him how we didn’t we weren’t part of BiggerPockets. And the private equity firm that owned BiggerPockets didn’t own us. And he was kind of blown away.
He took some pictures with us. They went viral. We literally went from doing 200 loans a year to 1000 instantly. It was unbelievable. So something we bought for $6,500 as a URL, which to me was just insane.
I couldn’t believe spending that kind of money. We’ve been offered over $1 million for it, so.
Mat Zalk 46:35
Wow.
Joel Kraut 46:36
You know, it’s it’s one of those rags to riches, unbelievable story type things. And, you know, it’s changed the trajectory of our company. So it’s been very an amazing blessing.
Mat Zalk 46:47
I love it Joel. You’ve got a course that’s launching here before too long, right? Quarter one 2026. There’s a pre-launch page at training.brrrrmasters.com/special/. That’s training.brrrrmasters.com/special/.
Joel Kraut 47:06
Just getting to your point. Look if you buy the whole course it’s a whopping $1,000. If you buy a module it could be 99 bucks. We didn’t want to sell you stuff for $35,000. I would rather answer questions for you in a free community every two weeks and help you.
Yeah, I feel very fortunate to have had an unbelievable opportunity to make a big comeback after the zero eight through ten debacle, which almost ended my life. And my kids are good. The young people that I have in my office are good. I feel very fortunate. So for the next 20 years of my career, to be able to help people and do something that’s good.
Yes, we’re making money too. I don’t want to sound like, you know, ridiculous, but to make money at a reasonable level, I think is fair to be able to help people. So that’s what we set out to do.
Mat Zalk 47:56
Joel Kraut, a direct private lender and nationwide mortgage broker with over 20 years of experience structuring real estate loans, especially the deals most lenders won’t touch like gas stations. As we heard before, he specializes in fix and flip bur small balance commercial and specialty assets like gas stations, hotels, self-storage and construction projects. Having worked as an owner, developer, broker and lender, Joel brings a unique real world perspective on risk structure and why deals actually succeed or fail. Joel, we really appreciate you being on the show and we wish you the best of luck with the course and everything else.
Joel Kraut 48:28
Thank you very much. I appreciate it, Mat. Thank you for having us on.
Mat Zalk 48:31
Thank you. Take care.
Joel Kraut 48:33
All right. Have a good night. Bye bye.
Outro 48:38
Thanks for listening to The Same Day Podcast. Tune in to a new show each week and be sure to subscribe to get future episodes.