WS1564: Why Being An Entrepreneur Isn’t For Everybody | Jake Pence

EPISODE 1564

[INTRODUCTION]

Jake Pence (JP): At first, I felt like everybody should want to be an entrepreneur, right? Like everybody should want to start their own business and do their own thing and go that route. And what I know now is that is an absolutely ridiculous idea, not everybody should. It’s not for everybody.

Sam Rust (SR): This is your daily real estate syndication show. I’m your host Sam Rust. I’m excited to welcome Jake Pence to the show today. Originally from Central Illinois, Jake went to college at the University of Illinois, where he studied finance with a concentration in real estate. During college, he purchased his first investment property and interned for several private equity firms in a variety of roles, including property management, asset management, and acquisitions, Jake decided to start his own firm Kaski immediately after his college graduation about three and a half years ago. Fast forward to today, Jake and Kaski are located in Nashville, Tennessee, and have roughly 20 million in assets under management, including a small business portfolio. 

Jake, welcome to the show today. Thanks for joining us. 

[INTERVIEW]

JP: Yeah. Thanks for having me on, Sam. 

SR: So I’m curious. You grew up in Illinois, you went to college in Champaign there. What led you to pick a concentration in real estate? What is your family history? What kind of started you down that rabbit trail? 

JP: Yeah, so when I was in high school, my uncle, he owns a small portfolio of single-family homes. So he’s got about 10 single families. And again, when I was in high school, he basically used me as cheap labor on his portfolio. So you know, we were out there on the roof in the summer, and on those hot days, we were doing remodels and doing a lot of those more handyman type of roles. And candidly, I was not very good at what he was asking me to do. And he knew that, right? But his ultimate goal in mind was to start introducing me to real estate and entrepreneurship and investing in some of those different things that maybe aren’t as common in a place where you know like I grew up, and that’s ultimately what it did. So then that started me down the path.  And then when I was looking for what I wanted to study in college finance, the concentration in real estate just seemed like a natural fit. 

SR: So during college, you interned for several different firms. And what about those experiences prepared you for where you are today, and also push you to start something on your own instead of joining up with a firm? 

JP: Yeah, so they were without a doubt the springboard for my career, I was very fortunate in getting the opportunities that I got, quite frankly, I just stumbled into him, I didn’t do anything in particular, that maybe, you know, allowed me to get these great internships like I happened to be in the right place at the right time, and then took advantage of those opportunities. And what it allowed me to do was, It exposed me to a lot of different aspects of the business. 

So at first, I actually was applying for an investment management internship there in Champaign, and I didn’t get the internship position, but that same company had thought about starting a property management position. So what they did was they allowed me to run with that property management position. So you know, at first I was doing renewals, handing out five days. I mean, I was really in the weeds there for quite some time. And then that role grew into more of an asset management type of position where I was setting rents, and looking at budgets. I was responsible for a lot of the KPI evaluation for a company that owned several thousand units, then that, again, that role then grew into more of an acquisitions type of role. 

That’s where I was helping them then underwrite new opportunities and look at new markets. And really, those were all building blocks upon one another, you know, the second internship, it exposed me to Nashville, which was how I ended up in Nashville, and it gave me a more on-site property management role. And that’s been, I would say, very, very helpful up to this point in my career now because when I’m dealing with our property managers, I’ve been in their shoes, like I’ve been the one delivering bad news to tenants and raising rents, and you know, doing those different things. So I truly know what I’m asking of them. And I feel like they can appreciate that. And that leads to a better relationship. 

And ultimately, like I said, those internships springboarded me into wanting to go do my own thing because I felt like I had seen enough parts of the business. And at that point, I had also purchased my first investment property too. So I had some proof of concept. I felt like I had enough knowledge and a strong enough skill set at that point to try to go put my own deals together. And ultimately, for me, it came down to I felt like immediately after college was going to be the lowest risk, highest reward time to go out and try my own thing. 

And, you know, I had the opportunity to go join those companies. But when I was thinking about it, at the end of the day, I could never get the position that I ultimately wanted to get because I couldn’t be the person in charge. They have their own founders and their own exec teams and you know, I wanted to build something on my own. So just a combination of a lot of those experiences and then feeling comfortable with my downside when it came time to actually start the business.

SR: Makes a ton of sense starting really any small business endeavor, it’s best if you go in realizing that there are going to be things you don’t know. And you’re going to learn along the way. That’s part of the journey. 

I assume that you knew there were many things you did not know about commercial real estate when you started your own business. You were comfortable with the base education that you had both through your degree and your practical experience. But if you could point to anything in particular that you’ve learned over the last four years or so, three and a half years that you didn’t know, when you started, what would be one of those things? 

JP: There are tons of things, as I’m sure you can imagine, right? You know, if I had to pinpoint one in particular – when I first got into this business, and this is more entrepreneurship in general, and then I can give you a real estate answer too. 

But at first, I felt like everybody should want to be an entrepreneur, right? Like everybody should want to start their own business and do their own thing and go that route. And what I know now is that is an absolutely ridiculous idea, not everybody should. It’s not for everybody. Frankly, there are days where I think maybe it’s not for me, you know, but like, that’s just part of it. And that’s been an area where I feel like I’ve generally thinking about entrepreneurship and giving people advice in that regard. I mean, it’s something that always comes to mind.

From a real estate perspective, I think I knew it was gonna be challenging to raise capital, I knew that was gonna be my biggest obstacle while I was first getting started. And I was right, it was. But I think that I’ve really learned a lot about how capital flows over the course of, in relation to the economy, right? In relation to what my investor bases consisted of, right? 

At certain times, there are some groups in my investor base that maybe aren’t as active as others. And what’s the cause of that, and really, just getting a good understanding of how capital ultimately is allocated? I think is has been a definite learning experience for me. But there are lots and lots of things that I’ve been able to soak up over the past couple years.

SR: You mentioned beginning your entrepreneurial journey, recognizing that it was kind of an asymmetric risk-reward profile for you coming right out of college. But I would imagine that the same profile that made you want to start a business also made it a little bit harder to attract investors. Obviously, you’re on the younger side, you would have been fresh out of college, how did you overcome that hurdle if you’re meeting just somebody random in your community, and trying to raise money, their first thought is going to be how much skin do you have in the game? And just by definition, you’re probably not going to have a lot of actual cash. How did you address that? How did you overcome those hurdles and try to raise capital?

JP: As you mentioned, that was the major challenge that I knew I was going to run into. So while I was going to start the business, I felt confident that I was going to be able to address that because of a couple of things. 

So, first and foremost, I was able to land my first investor, my uncle, who I had, you know, been out and help in those days in the summer and done a lot of work for him. And he was at a spot with his single families where it made some sense for him to maybe refinance and free up a little bit of equity. And we bought some other deals together up to that point. So I was able to kind of land him as my first investor. 

And then what I did was, I went through my Facebook friends, and I basically made a list. I broke them down into three buckets. So the first bucket was people that I knew well. And then I knew had money. People that I didn’t know as well, but I knew had money. And then people that I knew well, but maybe didn’t have the money yet. 

And what I did was I then just started making my way through that list. So I started with people that I knew well and had a good relationship with already, whether that was through, you know, growing up in a small town where everybody knows everybody, or whether that was through relationships I built in college, like whoever it is, I had that connection to them. I felt comfortable going to them immediately and saying, “Hey, here’s what I’m up to, here’s what I’m doing.” And I felt like I had a good enough track record and other aspects of my life to where they would at least give me a shot or hear me out. Right? And that was how it started for me. And I got a lot of nos right in that first group of people but I was able to get just enough yeses to get me started. 

And then from there, it’s mostly grown through referrals. And you know, now I’m at a point where that second portion of my list where it was people that I knew not as well but that I knew had money. I’m starting to make my way through some of those relationships now and really starting to build those out. But yeah, I just tried to be very thoughtful and intentional with how I was going to approach these Investors and make sure that kind of didn’t waste that initial outreach and wanted to be productive. 

SR: That makes a ton of sense. That’s a really practical systematic approach that I think a lot of our listeners who are wanting to break in could use. Oh, my goodness, all of us are most people have a Facebook profile, you might actually be on the younger side of people who have a Facebook profile. 

But utilizing those connections, that part of your network and being able to build really your first database of investors out of that. You said you’ve raised about $5 million. You know, how much of that was maybe from your original tranche of investors, and how much of that has been from growth over time, as you’ve done more deals?

JP: Very few of them were from that original kind of group, right? So this isn’t some rich uncle story, you know what I mean? But it’s, it’s one of those deals where we were able to go in and do a good job for that first group, build the relationship, really build trust, and then they felt comfortable referring us to others. And then it’s just this grown from there. And now we’ve tapped into a couple of different, I guess, demographics, you could say. 

That’s been an interesting process to like learning how, for example, farmers in central Illinois, like learning how farmers in central Illinois operate differently than attorneys in Chicago, what their preferences are, and what their liquidity is like, throughout the lifecycle of the year. And it’s been able to, it’s definitely grown into more than what I had anticipated. 

SR: You mentioned learning a lot about capital flows and how that matches up with cycles and the economy. What does that practically mean for you? What’s a specific tidbit that you could share with us related to capital flows? 

JP: Yeah, so an easy example would be, I had a group of investors that what they were doing was they were selling, they worked for a large corporation, and they were selling their company stock to then put that money into real estate. Well, during the kind of 2021, their company stock was at all-time highs. So they were happy to sell and liquidate and then deploy that back into real estate.

Well, then we were going to do a deal in early March of 2022, which coincided with the time when the stock market started taking a tumble. And all of a sudden, that group, which really made up the large majority of my capital sources at that time, they were no longer interested in selling their stock, nothing about their appetite for the deals had changed, they just simply did not have as much liquidity as they’d once had. 

And that was a really an eye-opening experience for me because really, it showed me that I needed to diversify my investor base, too. I can’t be so tied in with just maybe one group of individuals. I need to have multiple sources of capital because, at the end of the day, I think that’s really what separates people in our business – it’s the ability to always have access to capital. You know, and that’s just something that I’ve had to learn the hard way at times.

SR: You had a post, kind of go viral, on LinkedIn about a year ago, it was kind of a 2021 year in review. And, for whatever reason, the algorithm picked it up and looked like it did, maybe over 350,000 impressions. What did you learn from that experience? And how have you utilized LinkedIn moving forward? 

JP: Yeah. So what I learned was that I don’t want to be an influencer, and go with all the people that hit me up when something like that happens. But yeah, for whatever reason, that post got a lot of traction. And what it really did was it introduced me to a lot of people that I probably would not have otherwise come into contact with. And there’s been several relationships that, you know, I’ve spawned from that post that now are a pretty integral part in my business. For example, the person that does all my insurance, you know, some of the potential co-GPs, like there’s been a handful of people that I’ve been introduced through to through something like that has been very, very helpful. And then what it’s done now is it’s turned my LinkedIn, it’s somewhere between a combination of a cesspool and an absolute weapon of, you know, that I can use as needed. 

I’m still trying to navigate that right and figure out how to use it effectively. Because again, I’m not the type that posts on social media very often, but now with my LinkedIn the way it is, I can make a post there, and I know it’s going to get traction. So it’s just figuring out how I want to play those cards the right way. 

Yeah, it was something it was an interesting couple of weeks there. I mean, I gained a lot of respect for the influencers out there who are always getting that type of traction. I can only imagine what their inboxes look like. 

SR: You say you don’t want to become an influencer. I think there are a lot of people that want to become influencers. Why have you made the personal choice that you don’t want to do that? 

JP: I would say it’s a combination of things. I mean, it’s just not really my personality, right? Like I’m not, you know, it’s just not the type of, I’m not someone that likes to always be putting content out, like doing that type of thing. It just not really doesn’t resonate with me as well, for whatever reason. 

And then at the end of the day, I felt like, because there’s a little more to the story. So when I first started my business, I was told that I needed to do those things to be successful, right? Like I needed to build a brand. I needed to have a YouTube channel and do all that stuff. And I did that. 

And what I found was, I didn’t enjoy that process because it is a process like even you know, the making of a podcast like this, there’s a lot that goes into it. I think people maybe don’t truly realize, and then, you know, I felt like, it was taking time away from my actual real estate endeavors to where I wasn’t going the influencer route, in a productive enough way to justify the time that was spent. And maybe I just didn’t stick with it long enough, I don’t know. 

But I wasn’t seeing some of those returns that maybe come from doing something like that, where you’re able to really build an audience and then convert that audience and whatever it is, whatever way it is, you want to convert them. Yeah, it’s just not my personality. And I didn’t want it to take time away from what I’m actually doing in real estate, where I’m trying to find deals and raise money and do those things. I thought I could do other things instead, to accomplish the same goal. 

SR: I have a lot of respect for the people who both are doing a lot in the real estate space or any other space for that matter, and take the time to share what they’re doing and become influencers that way. But there’s a lot of folks that are as they would say, in Texas, all hat and no cattle that are selling courses are just kinds of trading off of fame. And that’s something that I think both of us would find really unattractive and really not interesting. We want to go out and can be builders and doers in the real world of real estate, not just the theoretical on the Twitter pages or LinkedIn homepages.

JP: Absolutely. I actually think I probably use the exact phrase I don’t want to be all hat, no cattle when it comes to this type of stuff. Like, you know, I have seen people that maybe I felt embodied that a little bit, and I just didn’t want that to be my long-term career arc, if you will. 

So yeah, it’s different strokes for different folks, I suppose just as it wasn’t something that aligned with what I wanted, you know, Kaski to become and what I wanted my own personal brand to become you know, I still always try to make myself available to anybody, like, you know, I joke about my LinkedIn messages in the inbox, right? Because I mean, it really is a cesspool, but like, I go through it, and the people that aren’t just sending me spam., I really do try to get back to everybody and schedule time to talk and do those things. But it’s just not a situation where maybe I want to always be putting content out all the time, like making myself available in that way. 

SR: So when you evaluate your own personal skill set, what do you think you do better than the majority of people in real estate? Or what gives you a unique edge as you’re out competing in the marketplace? 

JP: Yeah, that’s a great question. I think that and this might be an unconventional answer, I think that I’m extremely practical. And what I mean by that is when I’m evaluating deals, for example, like, I’m gonna look at it from a very practical lens, like, I’m not gonna go try to make a deal work just because I need an acquisition fee to keep the lights on, right? Like, I really tried to think things through thoroughly, and then ultimately decide what the best path forward is. And that just simple fact, that like, being practical has been very helpful in building relationships with brokers, with property managers, lenders, doing all those things, and then actually building those relationships beyond just like an initial introduction, and being thoughtful in how I approach those things. 

So yeah, maybe that’s an unconventional answer. But I think it served me well up until this point by not trying to maybe stretch myself too thin in certain ways, or being overly aggressive about certain things. You know, I really just try to avoid shooting myself in the foot at all times is something that I try to embody. 

SR: Being grounded is very, very important. I was browsing your website, and you guys have quite a number of target markets, kind of in a band from Illinois, down through Indiana, Kentucky, Nashville, and obviously in North Carolina. What drives your selection of target markets? 

JP: Yeah. So it’s a combination of things. I mean, first, obviously, you want that market to have sound fundamentals right? So you want there to be people that aren’t leaving. Like you don’t want to invest in markets where there’s a mass exodus going on. You want people to be there. You want there to be a good set of jobs. You want there to obviously be like a supply of apartments so that there’s actually the opportunities for you to buy things. 

So just the same type of stuff that probably, you know, everybody looks at when it comes to evaluating the market. There are other things to me that factor into it too. It’s where can I realistically build valuable relationships. And for me, we’re able to span the Midwest and southeast because I’m born and raised in the Midwest and have a bunch of connections already there. It’s very easy for me to live in Nashville and still do business back in the Midwest, because of the relationships that I built before I moved here. 

Because what I found was right, when I started Kaski, I moved back in with my parents, I was living in central Illinois, and I was trying to build relationships with brokers down here in the southeast, and in Nashville in particular. And that was very, very challenging because I didn’t have some big track record to come in and say, “Hey, you know, I’ve got 10,000 units, send me deals.” You know, like, you know, that wasn’t me, like now it’s much easier for me to call a broker in a different market. And you know, at least give them the answer. But that was a real challenge at first, so built those central Illinois connections and Indiana, and then when I moved down to Nashville, I found it was much easier to build relationships when I was in a person unable to actually get together with these folks.

And just another, I guess, example of how I tried to be practical about it was a lot of the different brokerage groups, you know, you’ll have your senior brokers, and then you’ll have your junior brokers. Well, your junior brokers are typically going to be people in their early to mid-20s, a lot of times not too long out of school. And I found a lot of common ground, I guess, with a lot of the junior brokers and was able to get together with them, and really build good relationships with those guys and girls. And then that has been able to translate to seeing more opportunities.  You know, I think it would have been a challenge for me to go straight to the head brokers at some of these shops and really gain any traction, and ultimately Nashville. 

To get back to your question on the target markets, Nashville serves as a hub in many ways. For a lot of these different markets down here. There are lots of brokers who live in Nashville, but they work these other places. It’s easy for me to build that relationship because they’re here like I can go you know, once a month, I host a little happy hour type deal to where I invite them all to it right and invite other people to it. And that’s how we get together and can easily stay in touch and do those things.

[END OF INTERVIEW]

[OUTRO]

Whitney Sewell: Thank you for being with us again today. I hope that you have learned a lot from the show. Don’t forget to like and subscribe. I hope you’re telling your friends about Real Estate Syndication Show and how they can also build wealth in real estate. You can also go to LifeBridgeCapital.com and start investing today.

[END]