In 1989, Kevin founded The Romney Group; which owned and developed commercial property and managed retail, office and medical projects.
In 2019, Kevin founded the Camino Verde Group; which acquires value-add properties and manages the repositioning and asset management. They develop properties from the ground up, including the buildout of co-living properties in Southern California and the development of a community in Utah.
Announcer:
Welcome to the Global Investor Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host Charles Carillo combines decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now, here’s your host, Charles Carillo.
Charles:
Do you have money sitting in the stock market? And you’re worried about it or worse. You have money sitting at the bank, not keeping up with inflation. My name is Charles Carillo, founder and managing partner of Harborside Partners. And since 2006, I’ve been investing my money and my family’s money into income producing properties. These are real assets, real properties with real addresses that produce real cash flow. At Harborside Partners, we provide passive investors who love real estate with a turnkey investing solution. If you want to put your money to work in real estate, but can’t find deals, don’t have the time to get funding in. The last thing that productive people want to do is manage real estate. We find the deals. We fund the deals and we manage the tenants, the termites and the properties. Partner with us at investwithharborside.com. That’s investwithharborside.com. Go to investwithharborside.com. If you love real estate, you like the idea of passive income and believe that income producing properties will appreciate over time. Go to investwithharborside.com. That’s investwithharborside.com.
Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Kevin Romney. In 1989, Kevin founded The Romney Group; which owned and developed commercial property and managed retail, office and medical projects. In 2019, Kevin founded the Camino Verde Group; which acquires value-add properties and manages the repositioning and asset management. They develop properties from the ground up, including the buildout of co-living properties in Southern California and the development of a community in Utah. So thank you so much for being on the show, Kevin.
Kevin:
Well, it’s my pleasure to be here. Thank you for inviting me, Charles.
Charles:
So you have a a very interesting past and I’d love to kind of learn what your background was both professionally, personally, prior to getting involved in real estate investing.
Kevin:
Sure. Be glad to share that with you. My I got a degree in accounting. Went to work for one of the big eight CPA firms. That kind of dates me now. It’s the big four <laugh>. But learned quickly that people didn’t, you know, they, they didn’t really like to see the auditor coming. He’s just there to catch their mistakes. And so left after about two years decided I wanted to be an entrepreneur and do my own thing. So I’ve, I’ve built several different businesses call center business franchise business, vending business. Most recently I was in the renewable energy space, and I’d run that company for about four and a half years. And I was ready to make a switch. And I, I met with one of my good friends Mike Ballard, who’s my business partner.
Kevin:
And he and I had originally met in college, but we reconnected when my son asked his daughter to prom. And so anyway, we I had breakfast with him one morning. I said, Mike, I’m thinking about selling you know, what am I gonna do next if I sell, sell this company? And he’s a partner in a company that does the, the back office accounting for about 55,000 multifamily units across the country. And he said, you know, and he had done some real estate, I’d done some real estate, but we’d never done multi-family together. So he said you know, why don’t we get, why don’t, why don’t we form a partnership and get into the, the multi-family business? So I did my due diligence and got back to Mike, and I said yeah I’m in. Let’s do it. And that was February of 2019. So we’re coming on just about four years here that we’ve had that we’ve built the Camino Verde Group.
Charles:
So, wh when you were doing your due diligence on getting back into real estate, what were, what were some of the points factors that really weighed important to you in making the decision?
Kevin:
So, a lot of the data that we, that I reviewed and looked at showed that multifamily was one of the top sectors in the real estate industry for returns, number one. Number two as for stability you know, folks that have been in, in, in retail, for example, are going through the, the online issues. And people are, are shopping online as a, as opposed to brick and mortar, although beginning to come back now at this point. But, you know residential, you always have to have a roof over your head. Mm-Hmm. <Affirmative>. And so, you know, we just felt that that was it’s probably the most in, in my opinion, the, the most secure sector of the real estate industry is, is to be in residential and multi-family is just, you can, you can go buy a bunch of single family homes and, and acquire quite the portfolio, or you can do it 30, 40, 50, or 200 or 300 units at a time through multifamily. And that just seemed to be the better route to go for us. Plus that was the area that my partner had had some expertise in. So that’s the direction that we went.
Charles:
Yeah, I imagine So with doing all the back office accounting for all those units, I imagine those were all larger complexes.
Kevin:
Mm-Hmm. <Affirmative>. Exactly.
Charles:
So Kevin, what was your, when you guys started, or like I investing, what was your first property? What was your first investment that you guys did and you know, what did you do with that? What happened? Do you still own it today?
Kevin:
Great question. So our first property was Sherwood Apartments here in Las Vegas, 36 units. We, we found that on, on market through a broker. We purchased it. It was, it was in pretty good shape. The, the units had had had, had, had been refurbished and remodeled. So there wasn’t a heavy lift as far as remodel goes, but we, you know, we did, did a facelift, put some paint on it, did some redid the courtyard and then did some, some minor touchups in the properties. And it’s been a great property for us. We currently still own that property. We, we have tinkered with the possibility of selling it. We actually had it under contract for a time, but with you know, with the increase in the interest rates from the Fed you know, the mar the, the credit markets have been choppy and, and but anyway, it’s a great stabilized asset that’s got a great interest rate on it, especially with today’s rates. And you know, we, we still, we still own that and, and manage it. And it’s been a great asset for us and for our investors as well.
Charles:
So, Kevin, you’ve being based in Las Vegas you’ve been at this prior to Covid, and I really haven’t spoken to an operator that went through Covid in Las Vegas. And as I read online, during that time, Nevada had, was about almost 30, 33% unemployment rate at that point, where a lot of the places where we are in the southeast were 12 or 13. How did you guys fare with having that hit you guys immediately in the beginning of 2020?
Kevin:
Great questions, Charles. You know, we, we, at the time that that COVID hit, we closed on a property just at the height of everything shutting down. And I have to tell you, we were very nervous as to whether or not we should even continue. We thought maybe we should just walk away from this deal. We went ahead and closed on it and did the deal. That property has also turned out to be a super property for us, but I’ll tell you a story. We did have so at the time of Covid, we had three properties here in Las Vegas. And one of our properties, one of our major investors, was just very concerned. He thought, you know, everything was gonna fall apart and he wanted to sell. So we were able to put that up, sell it.
Kevin:
We, we made our investors good money on that one. But the other two, we continued to go and, and run through, through the pandemic. And to be honest, yes, we had 30% unemployment, but we had people moving in left and right from, from from California and other places that wanted to, to, to take advantage of the, of the great you know, benefits that we have being here in Las Vegas. And so, rents grew. I mean, we saw, you know, 25% increase in rents. We certainly had some challenges with delinquencies. Our properties are class C workforce housing mm-hmm. <Affirmative> but the government chaps, the chaps money and the pandemic money was able to assist many of those people. We did have some people that took advantage of the, of the situation, and they sat there. We, we, we had at least one person who didn’t pay rent for a full year.
Kevin:
And it wasn’t until after the pandemic was over that we were finally able to, to get them out of the property. But anybody that would talk to us, anybody that would work with us, we were very flexible with being able to come up with a, a payment program or working with them to help get government funding. And really, it, it, it, it, it didn’t affect us terribly. The properties fared very well. As I said, rents increased and we were able to help most people find help. And so we didn’t even, we didn’t even really of course they had eviction moratorium, so we couldn’t, couldn’t evict folks. But even after we came out of the pandemic most of the folks continued to live with us and stay with us because we’d worked with them and worked through those issues and problems.
Charles:
Yeah. The problems, when I self-managed properties for years, it was when you don’t have the contact communication, that’s when you get nervous, right? That’s when you know there’s an issue. It’s one thing that they come to you and let’s, I got this issue. And then everything’s being poured out, and you’re like, okay, now we can make a deal. We’ll find something. We’ll find something that works. Right? It’s the thing is like when you’re like, we have no idea if person’s ever in this apartment anymore. We have no idea, <laugh>, am I paying for electric? Are they paying for electric? What’s going on over here? So, and how that goes.
Kevin:
Right. Anybody that would talk to us, work with us, answer their door, you know, we, we worked with them and, and helped work through the issue, but some people just said, we’re not gonna, you know, it wasn’t, it wasn’t very many. Probably only one or two. Yeah. That just ignored us. And like you said, we didn’t even know if they still lived there or not. Yeah. Because they, they wouldn’t answer the door. They wouldn’t answer a phone, they wouldn’t answer a text, but, but they were there and we were just kind of hiding out and taking advantage of the situation. But again, that was a very small, small portion. Most people were, were anxious to, to work with us, and we were anxious to work with them. And, and it turned out being being not near as bad as anybody had anticipated it was gonna be.
Charles:
Well, good. So most real estate investors prefer off market deals, and I know you guys do as well. And, you know, what do you consider to be some of the major advantages of doing off market deals?
Kevin:
So we probably about 60% of the deals that we’ve purchased, and, and we’ve, you know, we’ve been in business almost four years now. We’ve got 15 different projects we’ve been, been purchased or working on. So about every quarter we do a deal. And we prefer about 60% of those have been off market. And, and we, we, we prefer off market for a couple of reasons. Number one is there’s a whole lot less competition mm-hmm. <Affirmative> you know, when you’re, you’re, you’re, you’re bidding with a lot of other people and you get to best and final and, you know, it’s just when you’re bidding against 10 other people, you know, the price can, can accelerate and, and your chances of being able to get a deal done go, go down dramatically. So that’s, that’s item number one of why we, we, we like to do off market deals. Another reason is that there, the timeline is, is frequently a little bit, the pace is a little bit slower. It’s not so, you know, the timeline’s not accelerated. So we can take our time a little bit more with due diligence. We can take our time a little bit more with negotiating. And so it just, just generally all around it, it’s, it’s just a much better process if we can find a, a, a property that’s off market.
Charles:
When I, when people I think hear the words off market, I believe they think that a buyer like you is cold calling different property owners. But obviously with larger complexes, that’s not usually the case. I mean, what were some of the sources that you have utilized to find some of these off market deals that you successfully purchased?
Kevin:
You know, that’s, that’s a great question. So the way that we’ve found them is, you know, a couple of different ways we’ve gotten leads from insurance agents attorneys, CPAs can give, give you great leads. I’ll tell you a fun story. Again, I mentioned my partner and his, his you know work with with doing the back office accounting. A lot of his clients are property managers. Many of them are properties you know, people who’ve, who’ve broken off from the bigger companies that are starting their own property management company. And he had a gal that was in the Nashville area who, who broke away from her company. And she said, Mike, I wanna manage a property for you. And he said, well, okay, go find one. And she was able to find an off-market deal for us that we were able to secure, actually, we were able to do seller finance on that property as well.
Kevin:
And about 260 units. And it’s just been, been a phenomenal property. So that was one source of being able to find an off-market deal was through property management company. But the majority of our pro of, of our off-market deals come from brokers. In particular you know, if you develop those relationships with those brokers, we, we closed that first deal that I mentioned, and once that broker knew we could get a deal done we, we became one of his preferred buyers. And so anytime he’d get something that would come in that was off market, or sometimes even pre putting it at you know, before putting it on the market, he’d let us take a look at those. And, and we’ve been able to buy, I think probably four or five additional properties through him that were off market. So brokers has been the main things, but property management companies, insurance companies, CPAs, attorneys, all of those can be great sources for, for off market properties.
Charles:
So with with some of these off-market deals, I imagine you’ve, you’ve gotten, or you’ve spoken to these owners previously about owner financing. Have you, how have you created deals, if any, with owner financing and how’s that process go if you had, like, through a broker? Cuz now you’re not direct to the owner, let’s say.
Kevin:
So if we, if we work through a broker you know, it, it, if it’s, so let, let me, let me cover a couple of things about owner finance first of all, so we never come out with that being our first option. Yeah. You know, sellers are not really excited about doing <laugh> seller finance, so we never come out with that to begin with. But as, as, as facts come available and as we get down the road in the negotiation process and we learn certain things we can then say, okay, you know, this might be a candidate for, for owner finance, for example, the deal that we did out, out in the Nashville area, it’s actually in Kentucky just over the, the the border mm-hmm. <Affirmative> this particular property was managed the, the individual had bought it, had paid cash for it.
Kevin:
So that’s an important thing. If you’re gonna do a a seller finance, generally they need to own it free and clear. That’s not always the case, but generally they need to own it free and clear. So he had paid cash for this. He had just finished remodeling and he bought it for about 40,000 a unit. He wanted to sell it to us for 60,000 a unit, but he had his family managing it. And because his family was managing it, he wasn’t a professional management company, he wasn’t using a professional accounting software. He didn’t have really good financials that he could take out to a broker and, and list this property with a broker. So he had a problem he couldn’t really go out and, and list this as, as a normal owner would. And so because of that we said, well, hey, listen, we, we, and also if you, if you don’t have great financials, you you can’t get funding.
Kevin:
You can’t get the bank to loan any money on it. So you know, the option is, you know, e either owner finance or, or rent it for another six or 12 months the right way and get the proper data on it. We, we purchased a nine unit, a small motel out in Pahrump, Nevada. We had a specific use for it that we were gonna, that we were able to repurpose it and, and use it for for residential. But this, this, that property was, was, it had been on the market for a while mm-hmm. <Affirmative>, there weren’t a lot of uses for it. It had sat you know, the owners owned it free and clear. And so as we began to find this out in a, in the negotiation stages, we were able to say, Hey you know, are you willing to carry the note? And you know, that’s, that’s generally how we, and the brokers will generally let you deal directly with the owner when you’re, when you’re negotiating that or you just, you know, do your offers and send to the broker and broker, give the owner and you just go back and forth several different times and in turns on the, on the loi. And, and that’s how we’ve been able to do it. It’s been, it’s been a great, it’s been very successful for us.
Charles:
Yeah, that’s good. It’s great information about not coming outta the gates with owner financing. I think a lot of new investors will do that, that only want to do owner financing deals. And it’s like, well, you know, you build rapport and then you talk to them about it. Well, you know, what are you going, what are you doing next? And kind of feeling ’em out a little bit, I think is a lot more of a effective method of getting to the end goal of owner financing potentially
Kevin:
Ab Absolutely. You know, we have a 240 acre master plan community up in e from Utah that we’ve that we’ve been been working on. And we’ve accumulated a lot of land and a lot of it has been farmland and prob, you know, a lot of, lot of those deals that we’ve done, we’ve probably purchased from 10 to 12 different owners to be able to accumulate that land. Many of them were farmers. And as we began the, the negotiations and the talks you know, the question was, you know, if you got a large sum, if you sold all this money and got a large sum of money in the door, how’s that gonna affect your taxes? You know, if, if we were to pay this over time and you could recognize that revenue over time, would that be a better, better situation for you with your taxes as opposed to having a big chunk of change come in, you, you know, and, and they don’t wanna do a 10 31 exchange.
Kevin:
This is property that’s been in the family for sometimes two generations, maybe even three generations. And, you know, they’re, they’re ready to, to, to, to liquidate the land and, and use the, the, the funds for other things. And so you just, you just ask a lot of questions and, you know, for most of ’em, it, you know, it was gonna be a big tax issue if they got a big lump sum. So they were willing to, to let us stretch it over time and, and pay them over time. So that was and that was great for us because you know, we had to come up with less investor dollars to be able to, to take down that large amount of land.
Charles:
Yeah, that’s great. That’s an awesome use of owner financing. So with, with going into development you know, your firm purchases a lot of value add properties while also developing properties. And I think I saw it, it was about half your properties in your portfolio of comprised of development deals. So it’s definitely something that you’re very strong into. Is your company focusing more on developing projects now versus acquiring projects? And why So if that is,
Kevin:
You know, great question. We’re probably about 40% acquisition, about 60% development for a time there. Crisis per door were getting so high that we could, we could build. You know, for example, there was about a 500 unit property that sold not far from my home in, in Henderson, Nevada. And it went for, and it was a 1990s product and it sold for $297,000 a door. Wow. And my goodness, we can, we can build this product brand new for, for, for less than that. And so that’s when we began to take the, the, the shift towards development. So my partner handles more of the development side. I handle more of the value add side. But I will say that development development is a lot more difficult and there’s a lot more risk with development than there is with value add.
Kevin:
If you’re buying a value ad, you’re buying a cash flowing property and you know, there’s less risk if you’re buying, if you’re doing a development, you’re buying land, you’ve gotta get it entitled you’ve you know, then you’ve gotta get your debt and, and all your other things and, and, and, and equity put together. And so the risk is higher, so the returns have to be higher for the investors as well. And there’s a lot longer lead time. You know, it, it may be 36 months or even longer before you get that property built, get it stabilized and you and your investors have any cash flow in any, any, any funds for coming from it. So you’ve gotta have capital to be able to do all the architectural and, and get the entitlements done. So it’s, it’s a, it’s a lot longer road it, it’s hard road. It’s there’s more risk involved in development, but there can also be, be greater rewards. So we kind of do both here at Camino Verde Group value add and development, both
Charles:
When you are, let’s say like underwriting between development and acquiring a property, do you, what kind of, let’s just say basic you know back a napkin, what kind of return premium do you want to see on that development deal versus a value ideal where it’s probably cash flowing day one when you buy it? Right.
Kevin:
Great question, Charles. So we don’t generally present anything to our investors unless we project a 15% i r r on value add mm-hmm. <Affirmative>. So if it’s a value add, we want, we want to be able to, in our underwriting project a 15% i r r to our investors before we present it to them on a, on the development side, that’s, that’s more it needs to be above 20% before we present that to our investors. And we prefer to be in the mid twenties as opposed to the low twenties. Now, not every deal we do, you know, hits the, the mid twenties, but I i, if we’re gonna do a development deal, it’s gotta be able to project a 20% i r r to investors or we aren’t gonna, we aren’t gonna move forward with it.
Charles:
Yeah, I definitely agree with that. I’ve just seen some development deals that get close to that 20 or even in the high teens and it just looks like they’re really stretching for a deal and it’s not something for the risk you’re taking, you want more of a return on that, you know what I mean? Exactly.
Kevin:
Yeah. Investors deserve a greater return cuz there’s a greater risk on it.
Charles:
Yeah. So Kevin, what are some common mistakes you see real estate investors make over decades of being involved with this?
Kevin:
So you know, mistakes that I see is, yeah, I think people can sometimes move too rapidly, make decisions to quickly fail, to do thorough due diligence. I also see, you know, sometimes folks being not being conservative in their underwriting, you know, especially, you know, we’ve, we’ve got these huge rent rent increases that we’ve experienced over the last two or three years. And, and some people are underwriting to that. Those, you know, increases are still gonna continue at, at at, at, at higher rates. We tend to be more conservative. We know that those rent rates aren’t gonna increase that quickly in the future as they had in the past. So we tend to be a little bit more conservative with with our rent increases. So those would be the, the mistakes I’d see is, you know, not, not doing complete due diligence and, and not being as conservative as they ought to in their underwriting.
Charles:
Yeah, yeah. Have people underwriting what they did two years ago. They’re still using those rent increases in today’s numbers is something you see a lot. Or they’re not doing the increases in insurance, for example, expenses that you know, that hey, that’s gonna be going up much higher than you’re expecting.
Kevin:
Absolutely. Insurance has gone up dramatically,
Charles:
Hasn’t it? Ins all parts of the country. I mean, I’m down here in Florida, but I mean, I’ve seen properties double digits in other parts of the country as well, you know, when the s come up. So it’s just something you have to keep an eye out when you’re underwriting. Right. So Kevin, I like when I get successful people on the show, I love asking them how their relationship towards money has changed over the years, cuz probably where you started out, it’s probably a little different than where you are now, right? <Laugh>?
Kevin:
It is. That’s a great question. You know, when you’re starting a business or when you’re starting out in life, you know, cash flow is very important. You know, we, I’ve, I’ve, you know, married and have kids and now grandkids and, you know, being able to support and fund and give them the lifestyle that you want is, is very important. So, so when you, I think when you’re starting out, you know, money and cash is, is important to be able to accomplish your goals for you and for your family. But as, as you grow and as your balance sheet grows and, and your bank account grows, that, you know, that’s always the, the, the, the, the primary importance is taking care of your family. But as, as, as you become more successful at what you do, I think the focus changes to how can I now, how can I now help the community and help others?
Kevin:
And so, you know, I guess my, my attitude towards, towards money and cash is now it’s more how can we use that to, to benefit other folks and to, and to do good for other people. Most of the deals that we do, I’d say almost every deal that we do has some sort of social good connected with it. For example, we have one property that’s got a, a master lease on it with a veterans organization and, you know, they’re great tenants. And we lease it to ’em for less than market rate just because, you know, it’s, it’s, it’s got a social good, it’s got a, cause, you know, we’ve got these veterans who, who, who, you know, dedicated a large portion of their lives to defending us and our freedoms and, and we want to give back. And so, you know, most of our properties, we, we always wanna make sure, look, we want to have a nice, safe place that’s affordable where people feel safe. So you know, I I think now at this point in my life, it’s how, how can we give back? How can we bless others? You know, where can we, you know, what, what organizations and charities can we help to, to to, to move society forward and make things better for, for all people.
Charles:
That’s great. What do you think are the main factors that have contributed to your success over the years? Kevin?
Kevin:
You know, great question. And I would say two things, great mentors and hard work. We have had some incredibly good mentors in, in this in, in, as since we started this business. A group that we worked with out of Austin, Texas that helped us acquire this property in the Nashville area and, and mentored and we’re, you know, he, he, you know, one of the gentlemen was on the phone with me, ev every week for a couple of months just teaching me about the business. And so great mentors has been a wonderful thing. And, and because we had great mentors, we try and give back, and now we try and mentor other folks as as, as was done for us. So mentoring is, is incredibly important. Surrounding yourself with good people, and then you just have to work hard and not give up. It’s a hard business. It’s a great business, it’s a great business, but there’s but it’s also a hard business, so you just stay at it. And, and if you, if you get hit a few bumps in the road, don’t give up. Just keep going after it. And persistence and hard work and it’ll pay off.
Charles:
Kevin, how can our listeners learn more about you and your business?
Kevin:
So, Charles, I can go to our website, which is www.caminoverdegroup.com. And I would be delighted to get emails from anyone. I, my email address is [email protected].
Charles:
Well, Kevin, thank you so much for being on the show today. Looking forward to connecting with you here sometime face-to-face in the future.
Kevin:
Great. Charles, thank you very much for inviting me. It’s been a pleasure.
Charles:
Have a great rest of your day.
Kevin:
All right, thanks, you too.
Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.
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Kevin Romney is the founder and managing director of Camino Verde Group, a firm he founded in 2019. He is responsible for underwriting, acquisitions, financing, legal and corporate operations. He acquires value-add properties and manages the repositioning and asset management. He develops properties from the ground up, including the buildout of co-living properties in Southern California and the development of the master planned community, Ephraim Crossing, in rural Utah.
Prior to creating the Camino Verde Group, Kevin founded The Romney Group in 1989 and remained president and CEO of the company until he left to create Camino Verde Group in 2019. At the Romney Group, Kevin owned and developed commercial property and managed retail, office and medical projects. While at The Romney Group, Kevin was also CEO and president of Paramount MultiServices, LLC, in which he built a group of call centers serving several Fortune 500 companies throughout Texas, New Mexico and Nebraska and grew sales in excess of $9 million.
Kevin started his career at Ernst and Whinney. He holds a Bachelor of Science degree in accounting from Brigham Young University.
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