73. Retiring on Multifamily Real Estate with JD Modrak

April 12, 2023

73. Retiring on Multifamily Real Estate with JD Modrak
Play Episode
YouTube Channel podcast player badge
Apple Podcasts podcast player badge
Spotify podcast player badge
Google Podcasts podcast player badge
Castro podcast player badge
RSS Feed podcast player badge

In this episode, Brock speaks with JD Modrak. JD is currently a director at Kasa and is as close to a VA loan expert as I've found. We talk about MBAs and how the value of an MBA could be offset with drive and experience, his time stacking VA loans and why now may be the best time to use a VA loan despite where interest rates are, and the state of short term rentals - why or why not they may be worthwhile.

Episode Resources:

JD on Twitter


(01:15) - Why JD doesn't want to talk about the Navy (05:37) - Driving aircraft carriers to squeezing more aircraft seats on planes (08:43) - Attitudes perpetuated in the military, good and bad (15:43) - Is an MBA worthwhile? (21:47) - How would JD coach someone through doing the work and skipping school? (25:30) - Paths from business school and evaluating alternatives in the workplace (31:38) - Story of using the VA loan for the first time (43:05) - Stacking loans and rules around VA loans (47:49) - VA Loan caps today (52:57) - Coming to a conversation with a broker prepared (01:01:13) - Must have's when buying a home with a VA loan (01:05:25) - Finding people to have in your court (01:14:50) - Introduction to short term rentals (01:24:06) - Working at Kasa and learnings from working in real estate (01:29:28) - Summary and closing thoughts

The Scuttlebutt Podcast - The podcast for service members and veterans building a life outside the military.

The Scuttlebutt Podcast features discussions on lifestyle, careers, business, and resources for service members. Show host, Brock Briggs, talks with a special guest from the community committed to helping military members build a successful life, inside and outside the service.

Get a weekly episode breakdown, a sneak peek of the next episode and other resources in your inbox for free at ⁠⁠https://scuttlebutt.substack.com/⁠⁠.

Follow along:     • Brock: ⁠⁠@BrockHBriggs⁠⁠         • Instagram: ⁠⁠Scuttlebutt_Podcast ⁠⁠      • Send me an email: ⁠⁠scuttlebuttpod1@gmail.com⁠⁠ • Episodes & transcripts: ⁠⁠Scuttlebuttpodcast.co


Brock Briggs  0:00  

Hello and welcome to the Scuttlebutt podcast. I'm your host, Brock Briggs. And each week I bring you a conversation with an interesting vet. We explore topics from benefits to business that will educate and inspire you and put more money in your pocket. This week, I'm talking with former Navy officer JD Modrak. JD is currently a director at Kasa and is close to a VA loan expert as I've found.

We talk about MBAs and how the value of an MBA could be offset with drive and experience. His time stacking VA loans and why now may be the best time to use a VA loan despite where interest rates are and the state of short term rentals, why or why not they may be worthwhile. If you're looking for more of this content, I write a weekly newsletter every Saturday with content recs, deeper dives and episodes and more. You can find that along with episode transcripts and the youtube channel at scuttlebuttpodcast.co. Please enjoy this conversation with JD Modrak. 

Brock Briggs  

One of the things that I want to start off with was something you said in an email back to me. Actually, you said that hopefully we can keep the first half of this conversation, which was what was pertinent to your background time in the Navy to sub 10 minutes. So maybe let's take 10 minutes talking about why you don't want to talk about that kind of stuff.

JD Modrak  1:36  

Yeah, no, I want to get to the meat, man. Like veterans can, especially myself, we can talk about each other and ourselves all day sometimes, but I don't think that's where I can add value to the audience. I don't think my path in life necessarily has been all that special, either. I've been given a lot of things, you know, whether it was getting into the Naval Academy or GI bills and VA loans and like, I attribute a lot of where I've gotten to either lock or just kind of mistakes, frankly. So, you know, I don't want to spend a ton of time going through my background in any, like deep lessons that come out of that, frankly, if there's any lesson that comes out of my background. It's like, totally okay to have no idea what you want to do with your life. And even if you think you know, not ending up there is totally okay, as well. So

Brock Briggs  2:26  

That is so, so accurate. And it's always funny to me, like talking to people, they come on and I usually overtime, like the introductory segment of the show of like, kind of just at least getting a very, very small glimpse into the background or whatever has, that used to be half of the fucking show, like, edit is just slowly like and I think maybe after hearing it so many times, exactly what you said is like, each circumstance, despite how we like our own main character in our own lives, like, what you have going on probably is not that unique. And that is until like, degrade people. It's just like, hey, like, this is something that happened. And here we are today and what can we do with it.

JD Modrak  3:11  

Yeah, for sure. I mean, the only thing I don't for sure regret about my time in the military, you asked for something I was like, proud of like, I think like and I don't have that many regrets either. But like the friendships and like, the camaraderie like I still stay really in touch with a lot of my friends from especially the Naval Academy, frankly, but also the Navy and grad school, like just veteran connections that I've made every couple of years, I've made a new close friend and you know, my partners in business, our military, a lot of my kind of job opportunities and investment opportunities in life have mostly all come through that's and part of that's because I just implicitly trust vets, probably over trust vets. 

And I just feel like I've had a ton in common with them. And they're really easy to connect to. So like, you know, I still call a lot of Naval Academy buds. And now increasingly, a lot of West Point and Air Force folks and people like that just super good friends and people I want to spend a ton of time with and I'm really appreciative of that. You know, it's something that like, I think a lot about kind of prioritizing versus like, the other things in life like money, career, things like that. But I'm trying to like frankly, purposely take a backseat, priority wise and life going forward. 

Brock Briggs  4:25  

It's another level of rapport that is difficult to replicate. And I think that if you're not using that background, whether it be you know, the Naval Academy is even another level of that. You've got kind of military experience. And then there's people that maybe don't do the military, but they talk about their college experience and their fraternity brothers and whatever. There's all of these different unique differentiators that are kind of advantages in some way, especially in the professional world. People in your pocket that you can call and say hey or like another level of trust that you have that just makes things go fast and smooth when you need them to.

JD Modrak  5:08  

Absolutely. And like people, you know, talk a lot about how veterans aren't a large part of society. But I mean, from a fraternal perspective, they're the biggest group in society, right? Like, I can’t name a group of people that feels like a patriotism towards one another and a fidelity towards one another in a way that's as connected as vets, that's also as large. So I think it's a huge advantage in life. And it's one I frequently take advantage of and try and get back to it same time. So

Brock Briggs  5:37  

Do you enjoy telling people that you used to drive aircraft carriers for a living?

JD Modrak  5:43  

Yeah, dude, why not? Like, it's one of the few things. If you're a SWO man, you don't have a lot to hang your head on. So I try and make the best of every job I've ever had. And frankly, some of them were a lot less fun than the one I have today. And being a SWO is probably closer to the bottom from most of the day to day aspects. And, you know, frankly, I've spent a lot of time recovering from a lot of the habits I learned as well. We used to have a saying,suppose ether, young, you know, in my job after being a SWO after business school was making every aircraft more efficient, meaning squeezing more seats on the planes. And, you know, I tried to find ways to make light of what were not necessarily the most fun jobs at the time. So, yeah.

Brock Briggs  6:26  

So we have you to blame for the lack of, I mean, we meaning everybody above six feet tall, have you to personally blame for why we can't fit our legs in between.

JD Modrak  6:38  

You gotta be like 6’1 plus, but like at United Airlines and I mean, it wasn't my idea. But it like ended up being something I spent all day staring at for 18 months of my life was how to squeeze more aircraft seats on the plane. So yeah, it was that job you were just talking about in that it was the perfect job from a culture perspective. You know it was an amazing company, a work life balance perspective, it was outstanding, one of the best. I had one of the best schedules of any post MBA guy. And the pay was pretty good. 

From an hourly perspective, it was outstanding. And it allowed me to go do you know other things in life, but at the same time, man, like it's funny. I hit a wall, I was like, 40 hours a week is still a really long time. And if you don't love what you're doing, it's longer than you think. And even if you're having a great time with the extra two or three hours a day that you get outside of that, the other eight hours still matter a lot. And I realized that after a couple years, but I'm still super appreciated them, I learned a ton. And it's weird how many airline nerves there are in the world. So I get a kick out of talking aircraft with people still from time to time.

Brock Briggs  7:44  

It's funny, I've been on like this journey of kind of like self-discovery and acceptance and understanding my time in the military. And certainly while I was in and even the following years after returning to get my degree, I was dead set on the fact that it was a time thing exactly how you mentioned. The Navy took so much of my time and my life, it was a 24 hour a day job for the four years that I was in and that just was too much. And you don't have to go down that road very long before you go to school, you go get a regular job. And you're like, you know exactly what you said 40 hours a week is still a lot like that is it's not that much different. And I look back on some of my experience and just think man, I was so dumb to think that that was actually what I was not enjoying about it.

JD Modrak  8:43  

Yeah, I mean, I tried consulting for a minute and I was bad at it luckily. So that wasn't going to be a path for me in life regardless. But the hours were brutal. And I looked at the consulting, work life balance. And I realized like, this is the reason I got to the military. And it's the only reason I'm still confident I would get out of the military again. But to be honest with you, like I think if I had a better mindset while I was in the military, which is not something they coach, well, too, I probably wouldn't have been as miserable. 

I think I would have been much more happy if I just took a different approach and a little bit more of a positivity mindset. And like, the way I approach my peers and like the way I did my job like and frankly, I think in some ways, as well, at least I can't speak for the entire military, like negativity is almost rewarded it at least in the small community and like that doesn't get you very far in the real world. So I think looking back a lot of the reasons I wanted to get out when I was in, we're not good ones, but I'm still good with the decision. So

Brock Briggs  9:41  

Why do you think that that negativity is rewarded? I like couldn't agree with that statement anymore. And I have told this story on the podcast before but I remember so vividly. So many mornings sitting on the ship. And there's a new person down sitting eating chow with us and they're just kind of scared. You know, they have no idea what they're doing. It's a first time on a boat like it's, it just is feeling weird and scary. And people gravitate towards new people to just like, inject them with that negativity. Like, it's just like a disease almost. And they like want them to, like come be miserable toon like the misery loves company idea. Where do you think that that comes from? And like, is there an answer for it do you think?

JD Modrak  10:30  

Man, you know, whatever it is, again, I'm sure it'll be vastly insufficient. I think it's a whole combination of things. The military, obviously, culturally, is always going to be a certain number of years behind the rest of society. And, you know, maybe for good reasons and bad sometimes. I think the positivity mindset is definitely a bit of a newer thing, the prioritization of emotional intelligence is, you know, probably always been an advantage. But it's never been such an explicitly studied part of leadership, I think and it was certainly pretty nascent. When I was in the military and people have just been starting to talk about, you know, it's not very unique from a lot of the leadership traits that the military does train to. But the military definitely allows and at a minimum, it often allows bad behavior. 

And then in some cases, especially certain cultural climates on ships, I think even encourages it. My second ship, I saw the reversal of like, my first ship where my first ship, definitely like screaming, you know, getting spit on because somebody who's so close to you while screaming and I'll never forget my first boss. I think my like, I don't know, first week on the ship, told me that he was not upset with me. He was upset with my parents and some people just shouldn't “fuck”. And I just couldn't believe the way people are allowed to talk to you. And he was seen as like a pretty high performing lieutenant commander on the ship. And, you know, the guy who was another Naval Academy guy a couple years in front of me was like, well, it's all on you now, man. Like, I'm glad he's not gonna hate on me for the next two years. Like he's been hating on me for the last 18 months. 

And it was just like, such a weird mentality and I can't fully explain it. There's like, certainly, a lot of different contributors is the officer enlisted dynamic is, I think, really unhealthy at times. I think that all aspects of the military have this though, in some way, shape or form and misery does love company. And what we're doing sucks, like, it's really not fun. I think it's easier than the army. And the Army is easier than Marine Corps. But all those jobs are really hard. So it's just, you know, the negativity breeds and it has a place to live. And there's not a lot of outlets to get rid of it. So I'm sure it's getting better. And I hope it's gotten better. And it's just weird looking back on it now because it's almost such a foreign thing.

Brock Briggs  12:49  

The few outlets that do exist for angry people in the Navy are usually not good ones. The drinking culture is so bad. And yeah, that's just one there are several of them. But that's the one that's first and foremost on my mind. 

JD Modrak  13:12  

Yeah, there's this weird thing that happens on a ship. You're almost in a new society, right? I think about this all the time with like the fat leonard scandal and like the normalization of like prostitution and like all the weird shit that you see, like a surprising number of sailors get into overseas and they partake in yourself. And like, like the drinking, especially I used to say to people like, man, I've seen a bar at every port. And that was the first half of my career. And I did one deployment, well to my final two deployments, without drinking for the most part. And it was very different, like I saw a really different part of those cities in those countries because my choices had to be different. 

And to enable that and like, frankly, the first non drinking deployment I did was not by my own choice. It was like, I'm gonna get myself in so much trouble that if I don't stop drinking on this deployment, I'm really gonna start risking my career here. So it was just no longer acceptable for a lieutenant to kind of like be going as hard as I was. So I was like, I just can't drink. But yeah, it was pretty normalized like you can get yourself in what would normally be close to felony level trouble important to another. Overseas like even as an officer, frankly and like kind of just at least back then you could kind of just get thrown in your state or for a day have to talk with the captain and everything's back to normal once you’re back at sea. It was kind of weird.

Brock Briggs  14:29  

Yeah. And this is kind of probably the last thing I'll say on the matter. But there's an interesting dynamic from the enlisted side, especially looking at E-7 and above. There is not an E-7 and above who hasn't gone to mast or like the amount of them is so small, that it just like there's something about that and maybe it's just the people who stick around long enough to like, you know, there were few options and so I had to stay in. I don't know. There's a whole lot of things that could be, but there is something to that kind of like, not as bad of outcomes thing. And I think on a long enough time scale, you see and it leads to problems, like recruiting issues. And they're certainly feeling that today.

JD Modrak  15:18  

Yeah, I mean, the military gives you a lot of incentives to get out. And the people who are willing to take the risk on going to gain those incentives are often the most capable. And that's a problem that they I still not, they still haven't cracked. And I think in some places in the world, it's accelerating. So it's a scary place they find themselves with recruiting as their pool starts to continue to shrink, too. So

Brock Briggs  15:43  

You were telling me that you've got some mixed feelings about going on to do your MBA. What are your thoughts about that? Was it worthwhile endeavor? Would you go back and do it again given the choice?

JD Modrak  15:57  

Yeah. So it's so hard to say too, right? Like, you know and nobody can give you like, maybe some people will give you super confident answers in this in the positive direction, likely because they either they're just smarter than me better than me and use their MBA to better effect. I think it depends a little bit on what you prioritize. And if I had been smarter on what I really wanted to prioritize both from a long term life perspective as well as from a what I liked working on perspective, I probably wouldn't end up doing an MBA again. But you know, that as your calculus changes, I think your viewpoint changes in a way you never could have changed when you're like 27 to 32 years old making that decision. I doubt anybody looks back and regret it. I do not regret getting an MBA. 

And I think I'm saying that from a position where I'm enjoying many of the things that came with the MBA, right? Like certain opportunities for jobs and network that I can tap into that writes pretty good sized checks for like my day to day real estate business like that kind of my partner's run. And so it's easy to say I'm not sure I would do it again, what the cost of not doing it again, would be I'm not sure, but I have some friends who are incredibly successful without the MBA and they had two extra years to get there. And they went into some pretty cool jobs that certainly don't require an MBA, like sales. 

And, you know, even in real estate, which is where I'll end up finding myself like my partner who's better and smarter at real estate than I am Andrew Durazo West Point guy. Like, he has no MBA talks about getting one all the time and I don't know why he would want one. He's better at business than I am. And he just has like a real killer instinct. And like, he just knows how to get shit done. And you don't need an MBA to figure that stuff out. It definitely is a nice way to level up and level set a large group of people to a common set of training and expectations. And it's a very useful label. But it's also very expensive. And it's two years of your life. And it's frankly, two and a half years of your life because it's six solid months to prepare for getting one. So, where to get in rather.

Brock Briggs  18:07  

I have found that I'm a very systematic person. And I enjoy recipes for things and have like, been on this hunt for like what the recipe for success is. And you see a lot of the, you know, obviously, that's extremely foolish. And I'm like coming around to like, understanding that that's not exactly realistic. But that's the observation here is like, they're even something as prestigious as an MBA from a really top school that you went to. Like the fact that you can feel that way about it tells me and should reassure people that there are, it just is different for everybody. There are some people that need it and maybe would benefit from it and maybe others that maybe if you've got the drive and the connections and all of those things already. And if you just channel that into something early enough at that time component is a really big deal of that, that it kind of ends up making up for it. 

JD Modrak  19:16  

Yeah, I mean, it's also a nice forcing function, right? It forces you to focus on your like professional career for two and a half years for 40 to 60 hours a week and have no job. So it creates this massive amount of space for you to do that. If you were to focus on any professional career for two straight years for 40 hours a week. And building a career like, I don't care if you want to become an electrician. If you want to be an electrician for two straight years for 40 hours a week, you can probably at the end of that time launch around three to six person electrical company and make as much or more money as any MBA coming out. So I also think that the inputs to the MBA program are self fulfilling prophecies, right? There are 750 MBA, like GMAT scores and they were probably tops in their classes in respective institutions and they were already really good at whatever it was they were doing before their MBA. So like, you know, it's more as much correlation as it is causation on behalf of the MBA, so. 

Brock Briggs  20:15  

Yeah, no, there's so many interesting dynamics there. And you make a really good point about dedicated time and effort like that certainly is no mystery, like, dedicate that time to anything and you'll be really good at it, whether it's school, your professional career or spend 40 hours a week making TikToks. And you'll probably be pretty damn good after a little while.

JD Modrak  20:41  

Especially on the stuff that matters to employers but shouldn’t, so like resumes and interviewing skills, like you spend 200 hours if you do consulting or banking, practicing interviews. Show me somebody who's changed jobs even five, six times in the last 10 years, who has practiced interviews for 200 hours, I doubt it, right? But the MBA leaves you no choice and you have these affinity groups and these study groups that like you get together. You know, I had a marine and a Submariner and we met every day, nearly for three straight months in two to three hours cases, like, those were super valuable practice. 

I didn't need an MBA to go do that, it just put me in the right atmosphere and gave me the time to do it. So the funny part is, like, I'm probably better at getting jobs than I am doing jobs and I have my MBAs thanks for that. So like, they make sure that you're really polished on the inputs to go get those jobs. Whether or not you excel in them, when you get there, it's I think, a lot more based on your background and long term experience and stuff like that, and your EQ than necessarily whatever it was you learned in school. So

Brock Briggs  21:47  

Let's say that you are going to try to poach somebody to one of the things that you just said, you're talking about how it's a forcing function and that like you didn't need business school to go and like study cases for two to three hours a day. But sometimes, like, for those of us, like speaking to myself that are hard headed. I'm doing this graduate program right now because I wanted to learn how to code. I had all of the time in the world before this and couldn't force myself to do it. But I had to, like put myself in a program. So I would learn. And I hate that, like, I wish that I was not like that and had the ability to do it innately. Do you have any idea about what you would suggest about how you could manufacture that without the forcing function?

JD Modrak  22:43  

There's a lot of ways. I mean, obviously, school exists for a reason, right? It's an incredible forcing function. And so are like, you know, bootcamps academy, like the three to six month coding academies, etc. And those exist for numerous different kinds of expertise is but like, you still have to find some form of mutual accountability, these accountability buddies or whatever they're called people who have similar goals, right? Like, I think taking a step back and making sure you're really clear on your goals first, and you're actually going to enjoy what you end up doing. And you say you want to do so like, I think more important first step is actually starting to talk to a lot of the people that are already doing that job. 

I tell veterans all the time that the best time ever, is while you're in school or transitioning from the military to cold call people because like, if you say I'm either getting out of the military or I'm in a grad school program or I'm in an undergrad program and I'm trying to figure out what I want to do with my life. You will get far more responses on LinkedIn from I mean, shit CEOs, even like, than you will ever get to get in your life once you have a job and you're kind of seem to have ulterior motives. But you have no I mean, you have ulterior motives, but people like want to help you when you're in that stage of your life. So you get this like two to three year period where like, you can network your ass off, you have the time to do it. All dumb questions are forgiven. And like, I think starting there is important. 

And then once you are really pretty confident that you found and found one, maybe two paths that you want to go down, finding an affinity group that can kind of help you get there find one or two people who are like, within one to three years ahead of you. Maybe a mentor, that's five to six, but like I even find mentors much further than that, or how do you like they forget what it's like to be 30 years old and no fuck off. So, you know, like finding a mentor, maybe more for the leadership and the life consideration side is really helpful. But for the day to day actions and business stuff, finding somebody a little more proximate to us is helpful. And then having one or two people who want to do the same thing you do and just checking in with them all the time. 

I think it's not a coincidence that in real estate, at least. A lot of the people who are really good at this stuff have a lot of just very loosely built relationships and connections that they're just constantly talking to and learning from. There's not a ton of ulterior motives does it eventually Sometimes turned into a deal. But it's often just like having a well built network that can support you on the business side, but also you just kind of constantly learn from. And it creates like a nice atmosphere where you're constantly trying to learn and get better because people around you are doing the same thing, which is like what business school creates on crack, right? Like, it's just a bunch of people in a gigantic, very well enabled rat race. So you know, you have to kind of self create that.

Brock Briggs  25:30  

What were the one to two paths that you foresaw yourself taking as you're entering business school and how has those changed over time?

JD Modrak  25:40  

And before business school, I invested in and did an internship of sorts of a sustainability startup. Neither the investment workout nor did the long term life path and to sustain like I even went into consulting, thinking, I would do that for a few years and then either launch my own or go into like sort of sustainability approach. And I kind of got turned a little bit. As I got closer to the problem, I realized that I didn't like the industry, as much as I thought I was going to. There's a decent amount of bureaucracy and there's a decent amount of just kind of puffery beyond the actual, like real, hardcore things I thought I'd be able to get involved with if I went that route. After consulting, I had no idea what I wanted to do. 

And that's how I ended up at United Airlines. That was not a natural stepping stone towards anything. It was like, what's gonna teach me the hard analytic skills I need, gonna give me a reasonable work life balance. And by that time, I'd already kind of found the VA loan, found a sort of creative way to stack VA loans with other veterans and buy even bigger assets. And wanted to do that with my side time. So I knew I needed a job that was going to give me the extra 15 hours a week or whatever to work on the other stuff. And I found Airbnb at that point as well. So I knew I kind of wanted to combine this VA loan Airbnb thing. And so by the time I finished the MBA, I was probably less clear on what I wanted to do with my career than when I went in, if I'm being perfectly honest.

Brock Briggs  27:12  

Means you're asking good questions.

JD Modrak  27:14  

You know, it's funny, like, I think one of the worst parts about MBA is that and by the way, I'm not trying to trash getting an MBA. I just want people to be more clear eyed about it. The worst parts to me, though, is that within, literally, I think, before I started classes, I was going to official networking events and getting evaluated by potential employers. My God, like, especially as a veteran, dude, the MBA is this incredible place to go explore and meet people who do things you've never even heard of before. If you are already narrowly focused on one to two industry sets or company types, before you even start school, you lose a lot of the ability to do that exploration. I feel like a broken record saying this, you know, I used to work at service to school. 

And I've said this to so many candidates, like always keep your aperture wide open, like even if you are recruiting for something, be open to other things, take internships that have nothing, you know, during school internships. They have nothing to do with what you think you might want to get into and try a lot of stuff. Because like, you're never gonna get this like two year trial period, again in your life. And like, you know, most of my friends didn't get into top three consulting or baking firms necessarily the first try at least and I guarantee if they never got into one, they don't look back five years later and regret it. It's like, literally it seems like the end of the world then. And it's not. And in fact, they might be doing way more interesting stuff now.So it's funny, like, we keep looking for the next stepping stone the next way to move on up in life. And like, sometimes I think you let the really cool opportunity, sometimes blaze right by you because you weren't looking for them.So

Brock Briggs  28:55  

We're looking for them or they appear in like, unconventional ways or that it kind of looks like it's maybe a divergence of the path. But sometimes, like you highlighted, those are interesting opportunities, too. I mean, I felt very similar to going back to school and being like because I went for finance as my undergrad and was like thinking that I'm going to be this Wall Street Kingpin, you know, like doing the whole thing. And then like my last year, like took this weird class and like coding and I was like, oh, wow, this is like, this is my thing. And it just the entire purpose of like going to college, they talk about this, like exploration and I think that it's even more applicable for vets, especially if they're getting out and thinking or at least I had the feeling of being behind and like being dead set on like, oh, I need to catch up to the other people that are maybe ahead of me as if it's life is this grand competition, you know. 

JD Modrak  29:56  

You know, it's a healthy feeling in some ways, but like if you don't dwell on it too long or have it for too long, it becomes truly unhealthy. You know, like, you're never gonna get over this either. Or at least if you're as dumb as I am, you're not like, you know, I have a peer at work who is better at her job than I am and she's only been there six months. It's pretty easy to figure out who she is because there's only two of us with this job at Kasa. But, you know, she spent a long time at Amazon. I think I'm two, maybe three years older than her. Certainly, like, have a slightly better background and number of schools I went to and probably started managing people earlier. And, you know, three, four years ago, that probably would have really bothered me, you know.

But now, when I look around and I see the job she's doing and I'm just like, I've realized that like, I still have so much catching up to do from both like, maturity and professionalism level of times as well as like, like the rougher edges to rub off. And also just the business world. I'm still not fully grasping at all yet and I've been in it for five, six years now. So it's not something that you just catch up on immediately. And if you never do, at least you had a hell of a good time in your 20s. You know, like, worst case, like, I certainly don't envy the people that did go straight into finance and consulting and just grind without a single metal on their wall to show for it. And you know, they've seen three countries and I wouldn't trade that, you know, so I think it's okay to be behind like being behind means you want to get to the top. If you get detached from the idea of having to get to the top, I think you're a lot better off. So

Brock Briggs  31:38  

A few minutes ago, you were teasing, talking about stacking VA loans. And I think that that teases up the story of your pin tweet on Twitter, which I think would be a good introduction to real estate and hear maybe some of your beginnings. 

JD Modrak  31:54  

I think it's funny, I probably tell the story a little differently every time. Some of it becomes more or less true at some points and probably gets out of order. But yeah

Brock Briggs  32:02  

Like a true Navy story

JD Modrak  32:05  

Yeah, yeah it gets a little bigger. I mean, I met at like a $50 million home that I started with at this point, but no, so I was in grad school and, you know, like, truly emergent friend making strategy versus the very deliberate, right? And we are kind of out having a cocktail, I think one time and we're literally waiting on a restaurant next door, a really great spot in Chicago called Wasabi. And the way it was just like two hours to get this round and man totally worth it, by the way. But my wife and I are having a drink across the street. And my wife strikes up a conversation with a guy who actually just saw yesterday for the first time in three years and we started chatting with him. And we ended up ordering some chicken wings and not even leaving this bar. And we didn't even end up going in and getting the ramen. And this guy was just interesting. He had like a real estate background. 

And at the end of the conversation, he's like, oh, by the way, like I got this rental down the street and my job is real estate job was taking him to LA and he's like, I would love it if like a couple of people like you guys were ever, like, willing to move in. Or if you have some friends in grad school that would want to move in. It's kind of a perfect apartment in this part of town. And we're like shit, we hate our apartment. So you know, we went over, checked it out. And while we're talking to him, he was like, I also got this Airbnb and it's just a rat hole in the basement. And like, I'm like, I know what Airbnb is. I've seen those once or twice. This is like 2014. And I was like, whoa, read that for you. I'm like, I work 35 hours a week, I go to school for 12 hours. And I do homework for 20 hours, like I don't even have like a full time job. And my wife also didn't, she had just transition to Chicago out of the Navy as well. 

So he offered us half of the revenue to manage it. And I was like, we'll even take a quarter because I was like looking at the numbers. I'm like a half it's not even fair. And we started managing it for him. And I just got interested in it. And I was like, I want to run your pricing. I want to do your we guess comps, like I originally it was just arranging the cleaner and like making sure shit was done and like repair down there. I'd done a little bit of property management to that point in my life and was interested in it. And dude, after a few months, like for the following season, I was like yo, Jonathan, can I take over your account just fully next year. And I'll stick with the 25%. I'm pretty sure I didn't even change the percentage on him. And I'm like, I think this thing can make a lot more money. And I'll make more that way. And he let me take over the pricing, which was probably the most important thing and often is the biggest mistake people make in the early stages of their short term rental life. 

And this thing went from maybe doing 12 to 14,000 a year to $30,000. And I'm like Jesus Christ, this apartment is worth $1,000 a month. And if that and it's not even illegal apartment in Chicago. You're legally not allowed to be a landlord in this thing. And I was like, gosh, now this year it's doing $30,000 in revenue, it's paying more in rent this 600 square foot rat hole than the 1800 square foot newly rehabbed two and a half bedroom that I was living in. I was paying like $2,000 a month. I was like this thing is making a ton of money. It doesn't make sense. So I kind of started do the math. I'm like, what would it take to buy a few of these and, you know, did some research on the VA loan and realize that like the VA loan only authorized you at that time. It's different now up to like five $600,000 in Chicago to buy an apartment. And that wasn't enough to get one of these two unit buildings. 

And I frankly wanted like a four or five unit building wanted to like, I just didn't think it was worth running one Airbnb, I was wanting to run three or four or five. So I did some further research and figured out you could like, at that time, you could combine your VA loans. You don't even need to anymore, they remove the caps. And then be eligible for like a $1 million plus VA loan if a partner of mine. So I went to a few guys at booth, found an Air Force veteran who was one of my closer friends, probably one of the first people I met actually at grad school. And he also probably really didn't know what he wanted to do post booth, he was like, for sure going to start some sort of company and ended up starting that company. He doesn't do it anymore, is now an airline pilot. So just as an emergent strategies I had. But we both were like this seems kind of cool. So we did our homework, we kind of just like back then you didn't have like AirDNA and all these things you have now.

But we just kind of like watch the listings in town and saw what they were selling for and don't like us. I mean, now embarrassingly shitty model to figure out how much money they can make. And we found a lender, we luckily kind of came to campus who was willing to like underwrite us on a offer letter. And we, you know, found a place. I think we toured 50 homes,and we got four rejected offers. And our fifth offer got rejected as well. And like a week later, we're driving around seeing more places. I think we were doing this probably three to five hours a week, just touring homes and some guy comes back, he's like, Hey, you're rejected offer last week. Are you guys still interested? We need to tear the roof off. So it'll be a while we got to fix the place up. But the last offer that beat you dropped. And we'd like to take you guys. We'd like your story, you know, you just didn't offer enough. They're like, but we'll give it to you for your offer. 

Now, because we got to make these repairs. And we took it, it was a million dollar place. We were supposed to be putting down $14,000 to buy this place. And it was doing, I don't know, six or $7,000 a month in rent. Our mortgage payment was 2.75%. We're going to be paying like three grand a month, making four grand a month on LTR rents, which is long term renters. Or like, frankly, we're going to turn them into short term rentals, we thought we'd make 10 grand in about three weeks before a close maybe the VA loan thing fell through. It was technically legal. But it doesn't matter if what you want to do with a loan is legal. You still have to find an investor to buy it and no investor is going to, not many investors are willing to give you a million dollar loan for 13,000 down at a 2.75% interest rate. And it’s a multifamily and you've never owned a home before. 

So we scrambled figured out we were in an opportunity zone that enabled us to get kind of a interesting loan product. And that loan product also allowed you to have a second investor on the home. So we begged the selling agent to ask the owners of the home to lend us like 150 grand. And we gave them a kind of a nice interest rate. We did some light research online on sellers financing. And it works like they sweat us out for a week it turned out they're actually just on vacation, they weren't making a decision. They just weren't checking their fucking emails. We're friends with them now. So we know the whole background and we got the sellers note we owed a bunch of money on that every month, I think we owe $800. On that we had to get a new loan at a higher rate. So we have 30 504,000 on that. So we lost some space in the deal, but we knew we were going to do Airbnb. 

So to add insult to injury, I used a self directed IRA to buy all the furniture for the place. So like I had done some research on that figured out that I could like found a business with a self directed IRA. And as long as I didn't own half the business or more I was allowed to use my IRA money to invest in the business. And so we bought all the furniture furnish the place and like frankly, it just killed it for the next couple years it was making. It went from like maybe a 70 or $80,000 revenue building like $110,000 revenue building, which you know, is pretty decent, it's not killer, we turned to units and Airbnbs we kept one tenant in place because we like the guy. He didn't leave until last year the year before we had him for six, seven years. And it worked out really well. We paid off that seller note about halfway into years 50-60,000 extra pay down and then we use the VA cash out which is just an incredible product. 

It's like takes three weeks you submit like six documents. We got a new appraisal done the place increased in value a little bit over that first 18 months and the sellers note we had paid down massively. They looked at our revenues and they're like yep, no problem and they gave us a I think we now do pay that two to seven five rate. And they gave us like, I think we put in originally 60 or $70,000. With that new loan it was a little more expensive. They gave us a check for like 200 something $1,000 with the VA cash out. And we're like, holy shit, we tripled our money in 18 months. And we still owned 10 plus percent of this house based on the new note. And we took that money, we paid off the salaries, and we still had like over 100 grand left, and we're like, alright, let's buy some more stuff. 

And Joey, my original partner and I have been using that same checking account, he bought another VA loan house, because now you didn't need to, they uncapped it. So he bought another four flat, same neighborhood, million bucks, almost exactly, four units doing almost the exact same amount of revenue. And we've bought a couple other assets since raising money with other vets, not purely ourselves. And we're also co invested on short term rental in Nashville. And like, literally, I mean, the dumbest example I can come up with as you got somebody gave you one seed and I plant that seed in the flower pot, you know, the thing grows and I split it in half. And next season, I split both and half the season after I got a pot full of flowers and I haven't put a single other seed into that pot. And so Joey, and I split every investment 50/50. From that initial, I don't know, if 25 grand, we each put in 35 grand we've put in. 

And we now own slices of just in six years of slices I mean, seven or eight properties total. And a couple of them, we own completely together, three of them. So it's been awesome. And like all that started kind of just using the VA loan. And, you know, there's like a couple of things I can cover detail wise that I think a lot of people are fearful of or worried about. But what I'm so curious about now is I'm trying to figure out, like, why more people don't do this. A lot of people use VA, don't use their VA loans at all. And a lot of people use them to buy single family homes. And I think they use them at times when you don't have to. I mean, you don't have a kid yet. And I've been making my wife live in a multifamily for six years now.

And we finally just got our first single family home and like it was the best decision I ever made. I could never save another dime towards retirement. I wasn't particularly good at doing it before. And in 30 years, all these loans will be paid off on these buildings. And they'll make way more than our Social Security or TSP or 401k has ever could pay us. So it's just like an awesome way to keep plowing money into a leveraged but fairly safe asset that you have control over. Like I just I don't want to worry about what fucking Elon Musk said on Twitter yesterday and how that's going to impact by 401k. You know, like, I want to know if you know the evictions going smoothly that I have reasonable amounts of control over and rarely do evictions. But like that's the worst case thing that can happen. He was a landlord. But you know, generally you just treat your tenants really well. They stick around and you make a bunch of money. And it's great.

Brock Briggs  42:59  

We have so much to unpack on that.

JD Modrak  43:01  

Yes, it's a long one. 

Brock Briggs  43:05  

That's quite the story and introduction into real estate. And I can it sounds like that is like a perfectly logical thing to keep pursuing after kind of a first foray into it. So the first thing that literally flew right in the face of everything that I thought about this, about like application of the VA loan. So first, I didn't know that you can one put them together. And maybe that's not relevant anymore because it's uncapped. I want to talk about that in a second. But the first thing you said is that you guys went in on it together. Were you, I thought that the whole point of using the VA loan is so that you can live there. How did you? I guess is there some weird loophole? Or like how is it that you're buying a place, but not living there?

JD Modrak  43:53  

Yeah, no,we live there, man. The basement and my wife and I took the upstairs. So the fourth lab, we found luckily, had like a 2000 square foot house in the back. And Joey lived in the little 600 square foot studio apartment in the basement. We shared the family room, kitchen floor. And then my wife and I had a guest room and a huge bedroom on the third floor, which was certainly kind of lucky. But if you just had a normal dual income household, you easily could have afforded this asset. And you know, you and your wife could live there with three tenants out front. Do you want to do this with three kids running around? Maybe not. But up until you have maybe your second kid you could certainly get away with stuff like this.

Brock Briggs  44:30  

So this was a four unit place and then two of them, you and your wife were in one and then your buddy was in another.

JD Modrak  44:38  

We actually had a full house. It was a three level in the back and then a three unit building in the front. So yeah, we all lived in the same house together postgrads I think like about two years, until the job took us away from Chicago. And the plan was always like, you know, you'll only one of the two people on the loan had to live there. And frankly, by the time we refinanced that stacking thing was gone, so would not have required both of us to live there. We were not sure exactly what we're going to find. You don't really need to do this with partners anymore per se and certainly not partners that are both vets. In fact, that would be silly of you both to you, they wouldn't even let you both use your VA entitlement, which is why Joe sits, went bought his own for flat, live there for a little bit and then flipped it into a rental now.

Brock Briggs  45:23  

And the reason for the four of multifamily is because that is the line of where the VA loan will cover. Correct?

JD Modrak  45:31  

For the most part, I've heard of some rare exceptions to this. But yeah, the four is considered non commercial. And, like I just call it maximizing your VA usage. So like, you can go higher in value than a million bucks. But you still have to cover more of the down payment. You know, it's funny coming back to the occupancy requirement. I think it's actually one of the best parts once you've done it of the VA loans, especially if you end up liking real estate ownership. 

Even if you don't, you're at least dangerous enough to know your asset really well. And know how to fix a few things and no one a contractor is bullshitting you. And so you also are a 100% paying tenant while you're there, right? You pay yourself and you shouldn't be like pocketing that savings. Ideally, you're putting it into account, like most of our cash flow was generated off our rent. We were paying ourselves at or above market rent for the whole time we were there. And we put that in an account, set it aside. We didn't just like you know, live high on the hog.

Brock Briggs  46:32  

Both so you guys were actually using that as like, Hey, we're, you didn't just say hey, we're gonna live here rent free.

JD Modrak 

Yeah, absolutely not.

Brock Briggs  


JD Modrak 

I always pay myself rent

Brock Briggs  

Nobody has pitched it to me that way.

JD Modrak  46:45  

Yeah, I think anytime you do a house hack, you should seek to pay yourself rent. It’s a huge part of creating your cash flow for that asset. Even if you end up using it to buy a commercial, I mean, I would much prefer you to buy another house. But it's pretty hard in a sub four unit house sack to create the cash flow that you want. If you aren't paying yourself rent. You know, if you're like a family,and you're just trying to save some money, maybe you go, you know the equivalent of paying yourself rent and saving for the wedding or the kids or whatever a 529. 

But yeah, we've fully, have always paid ourselves rent. And my wife and I bought another duplex in Minneapolis totally overpaid us the VA loan, though, had an incredible interest rate and rehabbed one of the units. And yeah, we were living rent negative in that duplex after we rehabbed the other unit, but we paid ourselves full market rent for two years. We paid off that rehab in 9-10 months. And then that thing's been making about 30% return for us since we bought it. And it wouldn't have been us any return really at all if we weren't paying ourselves rent. So.

Brock Briggs  47:49  

So how does that now work with you said, I want to hear about like the cat being removed, like what does that mean for anybody that's like trying to use it? I'm like thinking of somebody like, you know, E-4 in whatever brands, they're trying to go buy a million dollar house like that I'm trying to like imagine what that's like.

JD Modrak  48:12  

For sure. So obviously, okay, so caps, the cap you can spend on a VA loan is mutually exclusive from what you're allowed to purchase based on your income. However, in a multifamily asset, 75% of the income that you will get from the units that you will be renting, also count towards your income. So even if you're an E-4 only making $40,000 a year, if you were to go by, you know, listen, you're gonna have to live in Fort Leonard or you can't go live in San Diego and buy a 40 unit. But if you were to live in a more beat up part of the country or one of the many areas where we have a base and you want to buy five or $600,000 asset. Your average mortgage loan broker will tell you, you can afford his $600,000 home. But you can in some cases afford a five $600,000 home if three of your tenants are counting towards your income. 

So let's say every tenants paying $1,000, you make let's call it 3500 a month after BAH. If it's a four unit building and every tenant pays 1000, well take 1000 off that because you're gonna have to live in one of the units but $3,000 times 75%, $2,500 or so gets added to your income. So your 3500-$4,000 a month paycheck goes up to 6,000 or 7,000, you actually probably do qualify for that loan through something called debt to income ratios. And this is something like I'm really curious about people's questions around this. So like I would reach out to like, I want anyone who has questions about these things to kind of reach out to me. I want to start consolidating all this and think about how to organize this. One of the things that confounds me about VA loans. You can google almost any question about a VA loan and you're like 75% chance of getting a complete shit answer. 

And it's because you have these two things that happened, like, all the sites that give information out are full of fucking ads. And they're like, really hard to parse through. And then you also have all these mortgage brokers, which is why I don't want to be mortgage broker. They have an incentive to get you to buy a VA loan. And I think that they make a lot of money on every loan type that makes a broker a different amount of money. And listen, I'm not criticizing VA loan brokers because some of them are good friends, and some of them are awesome people. But like VA loans are one of the most profitable forms of loan. And so the brokers will tell you what they need you to know, in order to get you to use the VA loan. And I always find their information to one not be cited based on regulations, and to the regulations to not be incredibly clear. And so different lenders will actually behave based on the rules differently just because a lender, let's say it's a bank, which is like a pure player lender. 

Just because the lender could give you the max VA loan doesn't mean they will. They may apply their own sets of rules against it. So for instance, one of my favorite mortgage brokers is a close personal friend, his name's Tim Perman. He runs a mortgage broker, he called brokerage called up equity, awesome veteran owned company. They do a ton of great VA loans for vets, but like he has probably uses one of maybe the I don't know. He says there's probably three to five places out there that will lend a multimillion dollar loan for a single family veteran. So you, you know, he just put that into a house last week for 4 or $5 million. And I think they put a few $100,000 down which listen, I'm not pitching anybody to go that route by any means. But 90% of brokers or more will not lend $4 million on a VA loan. 

But there are some who will. So sometimes it's just a matter of getting the right resources. I'll be honest, like, I almost hate going on record about this, but I don't give a shit. I've been out Navy Federal USAA so many times and they have some of the most ridiculously shit requirements. They have some of the worst interest rates and they have some of the highest fees. And it's a shame because like, where to 90% of veterans probably go when they want to get a VA loan. It's probably those two institutions. And they're not, they have really massive overhead and they're not offering great loans to veterans. So listen, I'm not a broker. I'm not here trying to sell any brokerage services. But I'm just trying to figure out how to like, lower the friction and increase the understanding and get people to do this, take that first leap. A lot of people are aware you can do it. But like there's so many fears around.

Brock Briggs  52:27  

How does a vet that's wanting to get a VA loan to come to a conversation prepared with a broker? Like knowing how do I know that Navy Federal is giving me a bad loan? How do I know to come and say like, oh, you know, you can offer me more than that. Or this is what is allowed? Or is it just a knowledge thing? Or I guess how can we be showing up to those conversations educated about it?

JD Modrak  52:55  

I think there's a couple ways, like you got to know somebody who's done this before and can give you the reference and like, this isn't even foolproof, let me qualify and can give you a reference to someone who it's like, especially I think, like, I mean, there's another guy I love. JD Kamin does like, I mean, I almost hate to give the guy more business because he's crushing it doing this, but like, great guy. And he like he just doesn't fuck around. He's not going to give you like a lot of brokers and, frankly, smartly so for their own bottom line, read somebody, try and understand their level of sophistication and quote them accordingly. And that's a lot of people in sales. Like people like JD Kamin, Tim Perman and UpEquity when you when it's a veteran going in, they're not fucking around, they don't want you to go bid them out. 

But they're also just not going to give you a rate. That's all that negotiable because they're coming in pretty low. They're not trying to make a ton of money on you. It's already a profitable loan that they're selling anyways. So if you can find somebody that's like, listen, I've already done a lot of this before. There's three brokers that I generally go to where I know I really don't need to bid them out anymore. And if I do bid them out, I'm almost insulting them in this point. And it almost never works. They're usually so cheap and they've brought their fees down so far that I wasted my time to go bid them out. If you don't have somebody that you either trust to make those introductions for you or you just want to learn yourself, I actually advise everybody to go get a bunch of quotes. 

When they first start doing this because you gotta develop the vernacular, you gotta ask a lot of questions. You gotta know the difference in all these fees and why they're being charged and whether they're negotiable. And like a lot of these fees and things like that can be just waived. I mean, my broker, my favorite broker is a non veteran and I've probably sent him an email a dozen times saying the same thing. Hey, Russell, I see all the fees in the Closing Disclosure. I just wanted to make sure that was gonna get wiped out and every time his response is the same yesterday. Now I have to put all those fees in 48 hours before close, like I'm gonna wipe them all out, but I have to put them there to make sure I don't over quote you. It's just a compliance thing. 

And like my friends laugh at me at this point, because I always forget and I always send them that email. But like, all those fees could show up if you don't know what you're doing and you can pay him 2%-3% of your loan value if you let people nickel and dime you on the fees and originations and everything. So I think it's definitely worthwhile to take the harder route though. I remember my first call with a commercial broker, and I was sitting there scratching my head. It wasn't long ago, by the way, it's like three years back four years back. And I just, I had no idea what was said in the conversation. And today, I understand like 50 or 60%, what a commercial broker gets on the phone. I mean, like, I can ask a lot of questions. I can sound somewhat smart. And but I'm still not there yet. 

And like, frankly, the only way to keep getting there is to keep calling more commercial brokers and learning about the different. Like, it's not all about rate. It's just like any negotiation, you can win on price or you can win on terms, sometimes you can win on both. And sometimes you want to find a balance but as you get smarter, you realize that the length of the loan, some of the terms and especially with commercial VA. You can get a lot of things that are more valuable to you than just the rate or the fees. But with VA, it's relatively straightforward. We get legalities around it. But there's a lot of places for them to hide fees, especially within the interest rate.

Brock Briggs  56:16  

My wife and I, we bought our first home about a year and a half ago. And it's a daunting process. And we went through Redfin, which was by large, a really good experience. And like, it was very digital native, we had a great realtor through Redfin, who I could tell had our best interest and like, was really good. But as we were going through the process, there were so many of these situations that came up and he's like, you know, well, this is just the next thing that you do. And like not knowing any better, you're just kind of like, oh, I didn't realize I can actually go get other quotes from other places to compare. This is not just like, oh, you have to use this person. A lot of times, the realtor has recommendations, and you're writing off of them, essentially, when you don't know better.

JD Modrak  57:11  

Absolutely. I mean, like, So full disclosure, there's not many ways I'm aware of I can make money in this “business” or the time I'm going to spend, but one of them I'm sure I can, is by being a realtor in Chicago and specializing in finding homes on behalf of vets. Like one thing I should mention right now, like, we've toured 50 fucking homes and lost four offers in a row, frankly, five offers and the fifth one finally got approved. Right now, you will be like, you'll probably towards Hana homes and go one for one. It's the best time since I've been doing this and probably the last 20 years to use the VA loan because you do not have the same competition that you had anywhere in the last 10 years, frankly.

Brock Briggs  57:50  

Is that because of interest rates?

JD Modrak  57:51  

Yeah, for sure. Yeah. And like, listen, the interest rates are not ideal. I'm not a sage, I don't know if they're gonna go back down or not. I think that you should still buy a deal at the right price. And make sure that you can indefinitely afford your payment and have some space between the rents and your payment and you're going to make good money on it regardless. But at the same time, we're still buying assets, assuming or hoping at a minimum, not assuming necessarily hoping that rates do go back down. And, gosh, if you buy a good investment and then your rate goes down by a couple points, it turns into a great investment. You can't do it, assuming that's going to happen per se or guaranteeing that's going to happen in order for it to turn into a good investment. 

But they say you'd marry the house, you date the rate. You gotta be careful, like history doesn't say that it's necessarily true, that rates are gonna go back down. So you gotta make sure it's a good purchase in the beginning. But yeah, I think there's an imbalance especially in the environment right now, rates being high isn't the only factor, you have rates that are high and like a lot of people that are attached to higher prices. If you are a vet and you have some combination of tax breaks, which you can get like, I don't pay property taxes in Illinois at the same rate that everybody else does. And so that's a huge advantage. And on top of that, I have a way better interest rate with my VA loan. 

So I have a huge strategic leg up against your average buyer so I can afford to pay a little bit more, if I'm using a VA loan. And now, frankly, before VA loans, one thing I will be clear about a lot of sellers and a lot of brokers do not want to use them because they're more complicated and people are scared of them. And I think the key is finding a good agent that can talk to the pitfalls of the VA loan structure and offer that mitigate some of those pitfalls and also just educates the other, the other agent on the other side and maybe even the sellers about why you can make this transaction smooth despite the the VA loan and some of the things that come with it.

Brock Briggs  59:44  

You were saying that you using a VA loan, you have a lower interest rate. Is there something systemic that's driving that or is it just like what specifically is bringing that about?

JD Modrak  59:57  

Yeah, there are lower risks due to the insurance types on them. So VA loan is just, not to get too basically or anything but VA loans does not mean the VA is backing your loan and actually lending you the money, right? And you probably know this, but it's a form of insurance, just like private mortgage insurance and you're paying up front end fees. Ideally, you know, if you have like a light disability rating, even a 0%, you can get those fees waived, they are pricey. But you are not having to buy your mortgage insurance real time and have that payment every month in perpetuity or until you get enough equity in your home. 

With an FHA loan, I think that PMI never turns off. And they're also awesome loan types. But also because of their federal backing and insurance types, they just get better rates. I also think that, you know, like I said, I'm not a broker, but I think there's actually some federal statutes around the max rates that can be charged and they're for a little bit more affordable. There overall, like almost always a half point behind what you're gonna go online and see online Nutri or something like that. This definitely assumes having slightly above average credit, etc. But if you go to a conventional loan, you're almost always going to pay a higher interest rate than you do VA or FHA.

Brock Briggs  1:01:13  

You mentioned or you kind of teased this for a second there talking about how a disability rating can help you get out of some fees. And maybe this will be one of them. Could you give us like, two things that like to do as a vet going into use a VA loan? And two things maybe that you should absolutely avoid and like or maybe it's a question to ask or like, what are the two first years and the two for sure, do nots?

JD Modrak  1:01:44  

I feel like going through this first answer is such a cop out. But man, I would never go into an investment of this size without talking to a bunch of people who have done it before me. And that's where I want to help people to come into play. But there's a lot of people like me that have done this. So finding the people, you know, like I actually probably should tweet about this stuff more. I just don't find it as a huge veteran audience on Twitter. But you know like I think, getting some conversations and some reps in. I've done these a dozen or two times over the last couple years. I love doing them. And inevitably, afterwards, I'll send you my model, my due diligence sheet, the due diligence sheet that includes explanations on what you should check for. 

And you just start to build a list of resources as well as like people that you can just shoot a text to when you come to a stopping point that deal and you want some advice. I think that's the first big one. The next one is, I think, really being deliberate about how you especially if you're not familiar with your market, being deliberate about how you select your agent and how you select your mortgage broker. So we already talked about the mortgage brokers, the broker part but the agent part is really important. And somebody came to me and they said, you're in Chicago, do you mind like selling me a home in Evanston? I'd have to probably help me buy a home in Evanston. I'd probably have to say no, especially if it was a 434 unit VA loan. You have to know the market you're buying. 

And even if you're buying a smaller asset like that compared to normal commercial Investments because it's so important to know the comps, it's so important to know the relative values of homes relative to how much they make in cash flow. And if you don't understand the relationship with called the cap rates between income and price in those areas, you can make some really bad decisions. And one of the hardest things to recover from is paying too much for house. And that's actually exacerbated one of the worst parts about the VA loan, ironically, as sometimes some people's favorite part is that it's high leverage. So if you make a bad decision, a VA loan amplifies that bad decision. So I think that when you use a VA loan high leverage, dude, we've made the big like you said, you went with Redfin. It's funny, Joey and I went with Redfin. And they were more nascent company back in 2015-16. 

But we went with Redfin. And we said, we're going with Redfin because we know that their agents are not paid on commission, and they're generally far less experienced than your average agent. So we know that we cannot make any excuses. Like basically we have to learn everything ourselves and check everything ourselves because we know that this is a junior agent. And by the way, all agents are different. So like, I don't care what company they work for. You can get good ones, bad ones anyway. But Redfin was like known to have really junior people at the time and the guy was younger than we were. And been in the business two years, we sell multifamily. Like most brokers are in there for decades doing that. So we're actually ended up being a great agent, great guy walked us through the process quite nicely. But we checked everything. We took everything with a grain of salt and went and got a second opinion on it. 

And that really helped us I think, learn of layer two deeper than we normally would have had to. But in hindsight, I probably wouldn't have done that. I think it was actually a bigger decision that I was given a credit for it. And if I could do it all over again, I would go to somebody who already owned, either already had owned or already sold a ton of multifamily assets in the very tight zip code that I wanted to be in because I want them to know about everything coming on the market. And I want them to know like the back of their hand all the comps and all the nuances between those comps sold to make sure I'm getting a good to great price.

Brock Briggs  1:05:25  

Other than like, spending a bunch of time and like maybe turning that into your career to kind of like you have here. What is a way that we can get plugged in with people maybe in the area if you're moving to a new area? I don't know if I would recommend real estate Twitter to anyone that's a very dark place. That's obviously one’s last resorts but like, good resources on maybe finding and connecting with people that have done that.

JD Modrak  1:05:55  

Yeah, for sure. I got it, you know, I feel like my experience with this is so painted by just Chicago. But one thing I would say is that nationally, there are some awesome Facebook groups for veterans about real estate. One of my favorite is actually not veteran centric. But one of my favorite Facebook groups is called Living off Reynolds. Kirby Outwell runs that he's a West Point grad, one of the smartest guys I've met in real estate and also one of the nicest, coolest people. And man, he just lives and breathes helping people figure out how to buy in house hack and do real estate and he runs an awesome Facebook group. You don't have to live anywhere specific to do that. Now, if you want to get really specific and learn the area, some veteran groups, specifically, our affinity groups to help you find agents, I still think you should find someone you really trust who's done this before. 

And help them run you through a checklist of things to ask that agent. Because I'll be honest, a lot of these affinity groups are built off referral fees. Nothing wrong with that. And it's probably part of how I make my living as well. But it's not enough, you know, as a naval academy person, like, I want to trust every Naval Academy person I meet, but I still would do some due diligence. And make sure I'm asking them some questions and having some people help me build the list of questions on how to evaluate that agent for fit. And, you know, I think at the end of the day, some really basic things you can do is say, how many VA loans have you closed? And if especially if you're speaking to VA, how many closes in the last year or two years that you know, they're not that frequent? 

Can you introduce me to your last two or three VA buyers? Ideally, one or two of them having bought in multifamily if that's what you're getting into and then call those people and talk to them and learn about their experience? I think that's really important. There are also just a set of questions you can build from both offline and like maybe Brock, you and I can like put some stuff together. But like, I think that we can templatized this kind of thing. So I would love to hear from people if there are questions they specifically have on resources they would want and lists of questions they would want to help evaluate this, maybe even it's a Q&A. It's like, what is the question you should ask? We can provide that. But then also, what are some of the outlines of what a good answer sounds like. What do you want?

Brock Briggs  1:08:15  

Yeah, I'll definitely put it out there on Twitter and newsletter and all that good stuff, and maybe source some good, like, kind of intro questions, because this is all good stuff. And like very concrete, actionable things. There's kind of I feel like if you're in the military, there's like that one guy like that everybody knows that the command that's just like crazy, the crazy real estate guy that's always talking about like house hacking and everybody just like doesn't listen to him. And then all of a sudden you like get out and you're just like, oh, wow, like I totally should have done that. Like that guy was on to something and so you might have been that guy.

JD Modrak  1:08:55  

No, I wasn’t. I was pretty late to the game with everybody, not story but I think I'm about what I could have done with my money differently as a junior officer that didn't involve as much Vegas or the bars of San Diego. So

Brock Briggs  1:09:08  

I had a very early guest to the show, talked about like how he literally as like a junior officer, you get like a huge cash thing from Navy fed. And he's like, oh yeah, I took like 20 grand of that and got my brother's 20 grand from his and we'd like went and bought this like 10 unit multifamily thing. And literally like you're one I have like, you know 50 units and like their first year and and I'm just like, I literally was living on $600 just like buying beer on the weekend like this is what was I doing?

JD Modrak  1:09:43  

You know, it's crazy. It's like also made this much more competitive space and made it almost more important to do your diligence, to be honest, but I think about the amount of resources even just five years ago but much less 10 or 15 that you had online. Like there's a few places I wouldn't get my information TikTok being the number one like I'm in short term rentals as a full time job, right. And the TikTok content that comes out is laughable to me. But yeah, I think everybody thinks it's easier than it is. But and that's not true, right? But on the flip side, there's a hell of a lot better information out there. And it is truly easier than it used to be. 

And, man, yeah, you're right. I wish I could use that loan I got from Navy Federal on something a little different than when I used it on. So that would be awesome. I think about that all the time, actually. Because my real estate partner, Andrew, man, he started buying stuff when he was a first lieutenant. So you know, an  O-2 and the guy's probably got about 100 units now. And he owns half of Homer. So like, just fully outright or a third of them. You know, he's got a couple dozen down in El Paso, his first duty station and they're great. They're great little cash flowing assets. And somehow he did it in between deployments to Iraq and Afghanistan, you know, like he figured it out, it wasn't as hard as we thought it was, I think so.

Brock Briggs  1:11:07  

Stuff like that, I have to like constantly remind myself, I'm like, we're all on different timelines, you just learned a little slower. You're coming around to the game. Everything is going to be okay. Because it just is very easy to get hung up on like, should have, could have, would have. 

JD Modrak  1:11:21  

You know, it's funny, like, I wonder a lot about what am I going to stop because like, I want to leave my full time job to like kind of stop, you know, climbing the ladder during the rat race. And, like, when is enough and like, dude, it's got to be some time before 100 units. And for some people, I think it's like 1000 units. And I don't quite understand that I don't understand what the thrill that chase is, like, you're gonna retire with way more money than you could probably spend if you just learn how to live a reasonable life. 

So all that said, basically, I think you could start 10 years from now, do this for five to seven years and be fine. Obviously, the earlier you do it, the less long you have to do it for. Because I think I could never buy another asset again and at least put a bunch of kids through college or something and mostly have enough money to retire. And that's I'm pretty lucky because I was a decent saver through deployments and maybe not as an ensign, but as like a JG lieutenant and since then. But the 401k savings I did the TSP then was not as material as what I've been able to do with real estate and mostly because of the launch, you know. So

Brock Briggs  1:12:32  

I think that that is a good insight there as well as kind of understanding that your wealth building years are later than I think you think. I think it's very easy. And I've found myself catching myself thinking about this, too, is like, beating myself up because I was contributing to my 401K or whatever, when I was 17 years old was my first job. It's like, you know, everybody says, like, start as early as you can,but like, nobody actually does start that. That's all coming from people that like, you know, I wish that I would have done this little earlier. So

JD Modrak  1:13:09  

50% of Americans have a negative net worth, man. Like if you have a positive net worth, not including your home, by the way. That's one point I really want to make, like nothing kills me more than people saying, oh, I'm paying my 3% off loan early. Like that really drives me crazy. If you're under 50 years old and nowhere near retirement, please God, if you have a 3% loan, put that money in a 4% like interest bearing account and make money on that. Like go fucking pay off your loan early. Like there's good debt and there's bad debt. Really high leverage debt is not even if it's collateralized against the home is not necessarily good debt. But lower leverage debt with very low interest rates is great debt. It helps you lever up your returns and is very stable. 

Most of the people that lost their homes buying a lot of property during the great financial crisis had variable rates. Many of them had multiple mortgages and a lot of them had something called balloon payments. And balloon payments can really screw it creates a lot of risk in your loan structure. That is not what you get with FHA and VA loans. They're very long term, always the same payment loans. And as long as you're really staying attentive to your asset and managing your cash flow and keeping your place rented out in full then you start with maybe six or seven months or build up to six or seven months of mortgage payments over time as a cushion. If you ever have an eviction or something you're going to be totally fine. You don't need to go pay that loan down faster and paying it off earlier. You can recycle that money, plant some more flowers in the box versus like keeping the one flower you have perfect or growing faster. So 

Brock Briggs  1:14:50  

The world of short term rentals has gotten like extremely popular over the last couple of years. I would be curious to hear what your like personal feeling outlook is about what that's going to look like is. I feel like if I read one more article about short term rentals, like the entire country, almost the entire country's living situation and short term rentals. What do you think that that looks like next couple years? 

JD Modrak  1:15:13  

So I mean, full stop short term rentals are here to stay, I believe. And so our medium term rentals, I call them. I actually think medium term rentals are in some ways are more interesting because I think they actually have some real themes going on in society with like, digital nomadism. But it goes way beyond that. People are much more mobile now and will need to become increasingly mobile. And that means this attachment to 12 month leases for 95% of our occupants in the country is probably not a good one. We will end up having to get more flexible, furnished living. And I think a lot of people in our generation don't really value like having furnished homes or don't really value furnishing their own homes and having your own furniture, especially until your third year or so. 

So I think there's a real market there. What is not a good assumption is like there's two huge dynamics that just kill me in short term rentals. One, I think a lot of people believe that these COVID trends that have happened where like, you know, the desert parts of the contrary, your Florida's of the world, are just indefinitely good investments now for short term rentals.So believing that where the wind happened to be blowing fast for a second is where it's always going to be blowing is very dangerous. So what that means is, I think anytime you buy a short term rental or buy an asset to turn it into a short term rental, you need to have a backup plan.That's why I started with the big boring long term rentals, man and because they're all now long term rentals, again. Frankly, I just didn't want to deal with. It's a lot of time out of your day to manage short term rentals, it doesn't make sense to just have one or two, you might as well do 10. I hate to say it. 

But once you're doing that, it's like 20 hours a week. And yeah, it's more efficient and you're making a lot more money, but like, you can't have kids and stuff like that. So it's kind of this catch 22 I think, if you don't have a backup plan, you're taking a huge risk, vacation rentals. And I make a big distinction between short term rentals and vacation rentals. They're obviously like, they all have 90 degree angles and like they're kind of in the shape like this, but they're different. Because vacation rentals don't have backup plans. If short term rentals in that area become less hot or they become oversaturated, you're not flipping that into a long term rental that covers your mortgage payment. And that's really dangerous. But short term rentals in more like less vacation heavy markets or in more urban markets that have infinite or insatiable tenant demand are much safer. You have some upside. 

But there is like real the second point is there's real costs to that, like the big one I want people to be aware of serious long tail risks to short term sell. Your tenants can burn your place down, but your insurance company will pay for that. If a short term tenant burns your place down. Airbnb may or may not pay for that. And even bigger question with VRBO. Your insurance companies certainly will not pay for that unless you buy specific short term rental insurance, which gets expensive. There's some other things you can do to mitigate risk. They're all expensive. As you start to mitigate that risk down your margins go through the floor. I see a lot of the gurus talking about I can make twice as much or three times as much on short term rentals as you can on a long term rental. It's absolutely not true. After your costs, I think the best short term rentals out there after costs are maybe doing two to two and a half. 

And that is generally a very expensive asset and a pretty vacation heavy market, which means two things. You probably can't afford it and to that asset has no backup plan. So you're being rewarded for the risk you're taking not because you're some genius. The ones that are in my opinion, a little smarter that do have backup plans, you're lucky to make a vow after costs 50 to 60% margins, which means you're making probably in the neighborhood of 1.2 to 1.5x long term rent, which is not bad. Listen, all day, you know, if you want to do all that work for an extra one to $10,000 a year, whatever that is no problem. And it may be a good idea for you. But the average short term rental owner these days is probably making like if you were to track how much work you did. And you divided the amount of money you made on it for that year, you're probably making like 30 to $60 a month, that's not bad. 

But it's not like some game changing amount of money and you're sweating. It's not like a low impact business. There's plenty of work to be done. It's funny, I threw like my dad's house up this week for the PGA tournament. And I got a booking like one day. It was ridiculous. And it was a two week booking and that's for three times more than I told my dad to expect to make. And now I think my dad thinks like that short term rentals like he should just move out of his house, right? But it's the fucking PGA Championship. There's six total rentals in Rochester, New York available because there's no money to be made in Rochester, New York on short term rentals really. There's a few people making a go of it there. And there's not many people that know they can throw their apartment up, like or their house up like people do for the Superbowl, right? So it did really well. 

But now my dad, like I literally have aunts, uncles, cousins, who are all talking about doing short term rentals. And it's just at this point, I probably have five or six family members and 30 friends who do them and not all of them are doing as well as others. And certainly, like the word is out. When that happens, it's like, what's the the market in the Dutch rose, the Dutch market where everybody starts buying roses or patent like, you know, drives up the price of flowers. Like if everyone's doing it, it may not be as sustainable as a game as you think it is. Because you all start to compete each other out. You know, we have our short term rental in Nashville that we bought that was way too good to be true a few years ago and frankly, it would have done that revenue for a few years and then COVID hit. So you know, it survived COVID. We made some money. And it had a pretty good year this year. It probably made about two and a half times our mortgage payment.

After costs, I think, you know, on paying our manager, I think we made a nice 60% premium on our mortgage payment. But like, by next year or the year after, I'm fully confident that we probably would have been better off selling this asset because there is like 1000s of units of short term rentals coming online in Nashville. And Nashville is a great market like but every year, every month, probably 100 units are coming online. Sonder alone, which is company I used to work for has probably three to 500 or four veteran units coming online. When we launched our three or four bedroom product, there's probably I don't know a couple 100 of them available in town. By two years from now there's going to be 1000 plus of them if for any given weekend, maybe more. It's you know, we're gonna get kind of watered out of the market. And it's not always getting there's not always going to be this good. 

So if you want to go do own, I strongly suggest you're familiar with familiarize yourself with the backup plan or don't mind that owning an asset and an area where you want to go visit it and you can afford the mortgage payment and not make as much money. I think they'll always cover their mortgages or whatever, but it's going to turn into a slog. That $30 an hour might be $20 an hour in a few years. It always varies a lot by the area, but it's just you know, having cleaned up after a meth lab now, having cleaned up after a whole lot of parties involving human excrement and drugs and things like that. You know, it's fine to do that as a day job, right? And I get paid okay for it but, man, it would suck to have that happen in your own house, you're own vacation rental. And it does, you know. Airbnb doesn't want you to know about it, but some pretty bad things can happen. So you got to go in and kind of clear it. 

Brock Briggs  1:22:52  

I think you call that a couple interesting things there. One, despite like whatever trends might be happening, you still need to make sure that the numbers pencil and not be betting on any trends and then like saving you or bailing you out and then two, understanding like, if the numbers look so good, like what are you being compensated for that isn't like you know, explicitly stated there.

JD Modrak  1:23:19  

Yeah, thanks for summarizing. I'm pretty long winded, especially when it comes to short term rentals because I think I've been doing it a while now. And I think everybody thinks it's a lot easier and a lot better than it is and when you're forced to put a profit and loss statement against it and you're not just doing the work yourself, you're forced to hire employees to do it. You start to see very quickly and you have to have insurance for everything that like the game is not quite as profitable as everybody wants believed it was you know. It's still a great play, I will still probably proactively occasionally buy them myself but it's certainly not something I plan on making like a one off living on but there will be people who crash into this space it's not going anywhere but it's not as easy as I think the guru's make it sound, so.

Brock Briggs  1:24:06  

What is something that you have learned during your time at Kasa that has helped you become more effective in the real estate world?

JD Modrak  1:24:14  

Tons, man. It's probably the best job I've ever had. So you know, there's a future of work element to Kasa that's really interesting. We are a fully remote workforce and man, operations. I'll never forget my better bosses in the Navy told me to go down to my spaces, right? And I lost a lot of weight, spent a lot of time walking throughout the ship looking at everything. You can't do that in a highly remote workforce and so it's been really interesting having to think about that problem and figure out how to keep engaged, build culture with and like kind of check on but not do so in like a creepy Amazon, Big Brother way what your people are doing. 

I don't think we have it solved yet by any means, but it's been a pretty interesting problem. We're also, I've learned a lot about the right way to approach like kind of a business plan, like Kasa has done some things that are rather smart from a risk mitigation perspective and how we structure our agreements. So, with a lot of the Guru's in Airbnb will tell you that, oh, just you don't even need to own an asset, just go sign a lease. Well, when COVID hits or something else happens, or people just decide they don't want to go to Myrtle Beach anymore because they can fly to Rome now, you know and I realized that the people that go to Myrtle Beach are probably not the same people that go to Rome, but you know

Brock Briggs  1:25:34  

They definitely are not. 

JD Modrak  1:25:37  

Yeah, okay, fair. But like maybe the people that were going to Destin in Miami are now going to Rome, right? And when those peoples do start resuming their normal travel patterns, you know, and the zillion seat miles that used to fly to China every year return, people's patterns will virtually mean and I think that a lot of these people that sign these long term leases, they're gonna pay them indefinitely. And it doesn't matter how much money they make every month on your short term rental, whether they're making a profit or loss concept, just taking more of a pragmatic approach when times are really good. We share those earnings with our partners. 

And when times are tougher, we share those tough times with our partners as well. And we have a little bit of a strategy that doesn't force us to like, have to make these massive payments, even if we're not making enough money to cover them. The good news is that often when I think the short term rental cycles are down, our partner cycles are down too, meaning they're their best alternative, the tenants that they could go get, are not making them full market rent anymore, either. So our partners are okay with taking on the downside. So we've just structured our business in a pretty good way that I think will make us more sustainable.

Brock Briggs  1:26:51  

That's really interesting. Yeah, the changing environment of work is like, I feel like polarizing, both ends of the spectrum. Not in like a personal way. But like it's driving the remote people one way and it's driving the in person people the other way. And it's kind of it feels like it's drawing a line. And I'm not sure how realistic a hybrid model really is long term. I feel like you're going to be one or the other.

JD Modrak  1:27:21  

It's weird. It definitely creates like a similar to an officer enlisted line right at a company, you got your field team and you got your kind of pie in the sky headquarters team. I think we do a lot to try and make sure that those lines don't become really solid. We spent a lot of time in the field. I don't get to do as much as I used to. But I think it's still important to really spend a lot of time getting out and learning the obstacles people are seeing in person. I'm not one side of the fence or the other. 

And whether or not remote work is a good thing. Kasa has always been remote since I joined and pre COVID, they were remote. I think there's a lot of advantages to it. And it's great for talent and traction. You know, a lot of my friends think that it's better to work in person with people, I certainly enjoy working in person with people more. But it's pretty nice to grab a cup of coffee and go up to work and save an hour and a half drive a day. So there's two sides of the coin, you know.

Brock Briggs  1:28:18  

Absolutely agree with that. I'm a big fan of the coffee and the dredge up the stairs to the office.

JD Modrak  1:28:25  

Yeah. And you know, once that kid comes along, man, you're gonna really appreciate the remote gig, I think for a few months. So

Brock Briggs  1:28:34  

I certainly think so. My wife is going to be doing like remote school and I'm like working remote. And I'm kind of have been realizing like later in the year, this year that I've been missing people and kind of wanting and thinking about it. But that was kind of the nail in the coffin of like, ah, you know, that ain't gonna happen now. But yeah, we'll see.

JD Modrak  1:28:59  

I think you do. If you get caught in a remote job, especially this is really felt during COVID. You have to find ways to force yourself out of the house. And make sure you're getting out in the society and spending time with people you enjoy spending time with. It's really important.

Brock Briggs  1:29:14  

If you had to summarize one big takeaway that we could learn from you and implement in our lives today. What do you think that would be? 

JD Modrak  1:29:28  

You know, I think that, you know, I probably don't do a good job. I'm sure I don't do a good job boiling this down, though. The further you get into something, probably the more complicated it sounds to hear you talk about it. ButI think viewing homeownership and viewing debt as a positive way and ideally multifamily homeownership as a positive way that is in your control to kind of give yourself a secondary hedge for your retirement is really, really important or is a really big opportunity at least and it's worth investigating. I don't think everyone has to do it by any means. But I think there's nothing cool there, then, you know, managing an asset, developing relationships with tenants and at the same time building some long term wealth that's completely within your own control.And there's just a really great feeling about it. And I encourage everyone to at least give it a look, if not get to try it once.

Brock Briggs  1:30:26  

JD, this has been a super fun and insightful conversation. I know, I've learned a ton. And we'll have many follow up questions, I'm sure. What can myself and/or the audience do to be useful to you? 

JD Modrak  1:30:38  

Yeah, seriously, just reach out if there's any questions or, you know, if anybody wants to just grab some time and talk me through their fears or, you know, whether it's questions, fears, next steps or like, let's build a game plan together. I want to learn how to start doing this in better supporting people and doing it one on one. And I really want to get people from that zero to one that zero to that first. Especially vets, I want to get them from that no assets to that first multifamily asset. 

And even if you think you're far away, the most important time to start planning whether it's for a wedding or buying your first house or buying a multifamily asset is multiple years before you actually do so. So even if you think it's far away, grab a hold of me and we'll see if it might be a little closer than you think or like lay out what might have to be true before you think you're ready to get there. So I would just love for people to grab time with me, honestly. So I can learn further about the questions they have and opportunities that I have in my communication about this stuff.

Brock Briggs  1:31:39  

Fantastic. It's not often you would get somebody beating down the door to say come talk to me, so I'm sure that there will be some calls there. JD, I really appreciate your time. Thank you so much.

JD Modrak  1:31:50  

Yeah, cheers. Nice to see you, Bock. Thanks. Good luck getting all this down, man. I appreciate it.