Outrunning Failures

From Tech to Real Estate Investing with Alex Kholodenko

• Vish Muni • Episode 30

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Today's guest is Alex Kholodenko.

Alex, Co-Founder of Wealthy Mind Investments, has been involved in over $2 billion of commercial real estate transactions as a Fund Manager, General Partner, Syndicator, and Passive Investor in 60+ investments.

After a successful career as a Silicon Valley tech executive spanning 20+ years, Alex transitioned from active real estate ventures like single-family homes and fix-and-flips to passive syndications, realizing their scalability and reduced risk.

Passionate about financial freedom, he now helps others achieve it through diversified investments.

Based in California with his family, Alex enjoys sports, travel, personal development, and giving back through volunteer work supporting cancer research and feeding the homeless.

wealthymindinvestments

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Creator/Main Host: Vish Muni

Show Advisor/Editing: DBT Marketing

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>> Vish:

Well welcome to another episode of Outrunning Failures. We have an awesome guest today. His name is Alex. I wouldn't I don't want to butcher his last name. Kolo Denko. Right. You got it Alex. So Alex and me we belong to a few mastermind groups and also he's also has a similar background like me, technology background and W2 and now he's a full time a ah real estate investor and also a fund manager and a podcast host. With that Alex, I would let you introduce yourself ah and tell us a little more about how you got into real estate. Welcome Alex.

>> Alex :

Thank you Vish for having me. It's an honor to be on your, on your show and just a little bit about myself. I was born and raised in Ukraine former Soviet Union, originally from Kiev, capital of Ukraine. It's unfortunate what's happening in my country because of the war, but I immigrated in the 1990s and settled down in a Silicon Valley, worked for many years in a tech sector in a software industry, I joined sort of a gold tech crash in the 90s and been always curious about real estate but primarily had been invested in the stock market for many years and after kind of getting sick and tired of job changes and ups and downs of the stock market started to pay more attention to tax benefits and wealth creation and real estate always been sort of my interest until I started to really focus on in the 2012 to UH15 started investing on part time basis. I had my ups and downs, some learning mistakes I made along the way but ultimately I got sick and tired of also being in the corporate world and decided to leave my W2 job back in 2021 and ever since been real estate full time investors and enjoying the roller coaster ride. It's not easy but it's very challenging and very fulfilling and I'm hoping to share some of my learnings along the way with your listeners.

>> Vish:

Well Alex that is, that is quite a journey from leaving your hometown and where you born and raised and did all your schooling and came to US California and that is a big change because you left all your family and all your social circles and you had to reset and start everything from scratch. Welcome Alex and thank you for sharing your journey. So with that at one point you told you're an entrepreneur now and you spoke something about a Roller coaster. I'm very much with you on that front because I was just like you. I was a W2. And I mean, there's nothing wrong with being a W2, but I felt that I was not challenged enough. But, when I became an entrepreneur, I realized, well, I'm challenged, every minute, every call, every phone call. It's never, never, never ever a dull moment. Right. So with that, why real estate? You also mentioned that, it brought you freedom. And also you also studied a lot of people and generational wealth. And with that, so what asset class are you focused on within real estate?

>> Alex :

Yeah. so first I answer your questions. Why real estate? I actually evaluated several businesses before I jumped in and focused on. And I, think one of the reasons I decided to do. I personally always wanted to be involved in some sort of investing, type of business. That's one. Number two is, you know, it's a tried and true wealth building vehicle. you know, there are some ups and downs to any sort of business as you know. but real estate investing has been around for many, many years, hundreds of, centuries. And people, have made a fortune of doing so. And in addition to that, there's tax benefits, that are involved that personally attracted my interest quite a bit because as we all know, it's not even about how much you make, it's about how much you keep. And being a real estate professional specifically personally for me, has been a game changer. When I was on W2, I can only thought about maybe one day I will reach that level where I can make a, decent income and pay zero taxes legally. And I'm a perfect proven example how this can be done. because since 2021, I'm able to qualify being a real estate professional and being able to earn a good living and reduce, my tax exposure has been a game changer. The second question that you answered about the, asset classes, we started as multifamily. I have a business partner, Ashishanan. and since then we, expanded our footprint into other classes such as healthcare, industrial debt funds, even alternative investments, as well.

>> Vish:

Well, that is interesting, Alex. So you sort of, you're not stuck with one asset class. You spread yourself in different asset classes. Now I know you invested in multiple projects as a, ah, have you, has it all been with you and your partner or. let me back up and ask a question differently now from all these investments. Can you share an incident where you failed on any project and how did you overcome that and how you are using it? That's three questions in one and if you have failed on any projects, number one. Number two, what did you learn from that? Number three, how are you using it in your current investments?

>> Alex :

Yes. So I can share some of the examples. As we all know we're going through a pretty big recession when it comes to real ah estate, commercial investing right now. And some of the projects that we've invested and we've done quite a bit of them since 2021 are not performing well. some of them are on the brink of foreclosure. So there could be a way out on some of the investments, we think that knowing what we know now we would probably passed on on this particular investment on one particular investment, because of the bridge loan. as some of the investors know the bridge loans have adjustable time period where the interest rates do really change the dynamic of the mortgage loan could be quite significantly increase the exposure to potential foreclosure. so that's a huge learning curve. Even though there was a rate cap where the interest rates would not have gone up indefinitely, kept going up, none of the underwriting scenarios, not even in a worst case scenario, we could have thought that the interest rates would have gone up almost to double to what the original investment on the mortgage payment monthly basis were. So that's a huge learning curve. the underwriting that we thought was conservative was not. Even though we did involve financial analyst, we have an advisor on board. we visited the asset, the track record of the operator was pretty significant. There was no capital losses, there was no foreclosure and even that unfortunately did not prevent that from huge underperformance and the potential risk that would have caused that. No, we didn't see that coming. Now in addition to that we decided as fund managers, we created SPV vehicle and we invested alongside the main sponsor operator. We have a right to either participate in a capital call or not to participate in a capital call. Okay. And we decided not to participate in a capital call for this particular investment because after looking at the fundamentals of the current investment and current market condition, we didn't think it would be prudent to add additional capital to the investment that could have potentially result in additional loss. Now the capital call was completed, the sponsor did completed the funding that is needed. the asset hopefully will still recover? we don't know. they extended the whole period for another three years. that might result. we're still waiting on final results of how it's going to shake out in a potential low return of capital. But there could still be a potential complete loss to the underlying investments, to our investors. so, another lesson that we learned was, you know, you really need to understand the capital call provisions. in any investment. There are some deals, that some sponsors, not that we are part of, they don't even disclose, in case of a capital call, what kind of a term of an investor happens. So another lesson that we learned was definitely double and triple check, not just underwriting the assumptions because every sponsors that you talk to, they'll say this is a conservative underwriting. So you need to do your own and double check for a capital call provision in case things go bad.

>> Vish:

Well that is interesting, Alex. I've heard so many syndicators going through a capital call, but this is, you're the first one who's educating investors on when one has to look into what, what are the terms and what are the projections and how it's going to affect the deal with that capital and why they really need it in the first place. What happened to the reserves, what really went wrong. So if one is not able to understand all these things, then I think there's something wrong. That's a big red flag right there.

>> Alex :

Yes. Right, agree.

>> Vish:

So in that case, how do you I assume that do you raise capital for these deals or what role do you play in all the syndications?

>> Alex :

So ah, me as a fund manager does more than that. I think a lot of people have this misconception that there ah, are. Some people call them capital raisers only. There are some people that do just do that. But in addition to that there is a lot more involved, being a true professional real estate investor, and fund manager such as you got to do a lot of due diligence on the operator because ultimately when it comes to syndication and passive investing, you are betting on the horse, which is an operator in this case. Once the transaction is over, your investment is done. There's not much you can do as a passive investor. You're a limited investor. So what we do is we do a lot of due diligence upfront on the operator. And the example that I gave you was we could have done more. You know, we could definitely have done more. And even throughout the process of investing, I've heard from other fund managers you need to continually, evaluate the operator on ongoing basis. So we run background checks. For example, some, fund managers don't do that, and it doesn't mean that you will be prevented from a potential loss, but it gives us a little bit of a more peace, of mind knowing that there is no fraud, there, is no, some sort of gray area. Sometimes we ask potential operator partners up front. We're going to run background, check on you. Is there something that we, we need to be aware of up front? We run a financial analysis. We hire, our internal, or sometimes even external financial analysts, to give us another third opinion about the underwriting that we receive, from the operator, himself or herself. we visit the properties, we look at the references. prior to investing. We look at ppm and legal paperwork. There is a variety of maybe 10,000 other line items that you could do before you investing because people trust me and Ashish with hard earned money. So I got to make sure that this deal not only looks for me, but I have all the check boxes, to make sure that I can sleep well and my investors sleep well.

>> Vish:

Well, as a fund manager, you're not only responsible for the deal. You have multiple, you're wearing multiple hats right there. And in all fairness, if I was investing with you, I trust that you do all these things. Okay? Because at the end of the day, I'm only coming on your plane because I trust you as a pilot. That's all. Exactly right. But, if you don't do due diligence, whether that plane is good or bad, when was it last serviced? That is on you because I'm paying and coming no matter what because of you. And with this. So you have a difficult role. And how do you maintain investor confidence after a setback? How do you deal with those things?

>> Alex :

Sometimes, you need to jump on a call and make unpleasant conversations with your investors, even though you don't feel like it at times. I mean you can communicate all day long, via email, which we do. We send periodic updates. Whether it's good or bad. It's our job to report the current status. as you guys know, everybody's listened to. You know, we're just recovering from multiple hurricanes and we have several properties in Florida. Luckily none of them got affected, that I know of. One we still don't know yet. one of them actually in St. Petersburg, but A lot of people reaching out. Hey, what is the status of the apartment building that we invested in? We've reached out to the operator. You know, we're waiting on them. And sometimes there is a missing distributions, there's underperformance, and it's time to jump on a call and explain where we are and what we're going to do next.

>> Vish:

Well, you have a lot, you have a lot of things on your plate right now at this point in time. And with that, I think it's, what I feel is it's Anytime delivering bad news is really painful. But if I, I'm just coming back from a doctor's appointment because I hurt my knee. If the bad news is, if my knee is broken, the doctor is going to tell me it's painful. I'm sorry to tell you your knee is broken. He's not going to sugarcoat that one. Right. It's not going to, make me feel any better. So I'm with you. If there's bad news, pick up the phone and talk to them upfront. I mean, it's better than, sending them in the wrong direction and raising their, expectations. You as an operator, I think that's a big responsibility. That being said, so what does your normal, day look like on any given day? Because I know apart from real estate, you need to have a personal life. You have a family and you have some passion, you have some hobbies. So it's not only real estate. So what is your normal day like?

>> Alex :

Well, you know, real estate is my passion. I think one of the reasons I chose to quit my high, paying W2 Tech job was I was not fulfilled. I like the challenge. I continuously evaluate new deals, new investments, and, you know, some time I spend managing the existing relationships and investors. Right. And if you are lucky enough to find something, that you don't treat it as a job per se, that you get a kick out of it, you get a satisfaction and fulfillment. You're one of the few lucky ones, to call that. And you know, I can honestly say that, you know, in my late 40s, I'm 50, I, was able to do that, you know, sooner, in addition to that, as you know, and we share the stories, sometimes offline. I'm very passionate about the travel. I probably visited over, 40 countries and I continue to do so. I just love to explore this beautiful world. There are so many places that, I have yet to see There are so many places that I would love to see it again. Like Barcelona for example. I visited this year, second time. And I just love traveling. Getting exposed to new cultures, learning more about the history, architecture. I love arts and music and just meeting people.

>> Vish:

Well I think traveling is one of the things me and you have in common because I love to travel because if I do, if I'm not traveling, I feel I'm missing out on something because. Yeah, because as an entrepreneur I think we don't mind traveling and why we. I like real estate is I could do it from anywhere and it gives me the flexibility. And then like you, I'm extremely passionate about real estate because of multiple things and there's no, there's no fixed time for me. There's no eight hour time. I work when I feel like, I take a break when I feel like right. So. And I can start wherever I, whenever I want. There's no fixed, there's no start time, there's no end time. So you being a fund manager you have a on one end you're looking at deals and other end you're looking at operators and also working with investors at any given point in time. So what do you think is more important, Relationships, systems, deals or dollars.

>> Alex :

In.

>> Vish:

Terms of priority systems, systems, people, deals, dollars.

>> Alex :

I think end of the day it's the people that make the world go around and it's the relationship that you have with people because you know sometimes there are some deals that we made in the past we were treated not as true partners. They just needed the money to close the deal and the relationship is an okay state. On the other hand we have some amazing relationship where like we were talking about earlier is sometimes things don't go bad and I'd like to know why. I'd like to challenge them and ask them questions. There are some operators that don't tell you that. There are some operators that are very upfront and they're striving to get better at. So my you know, my long answer is the people in relationships. that's what.

>> Vish:

Yeah. So so far if I look back, whatever has happened in my life has been relationships because, because if you lose a relationship you stand to lose everything because you might lose an awesome deal or you might lose all the money or you might lose your credibility. And having the best systems in the world is of no use if you don't have that relationships.

>> Alex :

So true.

>> Vish:

Right. So it's like it's like if you, if you're if you're going on a honeymoon and the pilot says, well gentlemen, I've got 40 certifications, this is my first day and welcome aboard. How much confidence you have in him. Right?

>> Alex :

Yeah.

>> Vish:

Right. So. So that way it all comes down to your relationships and your credibility. I think I'm with you on that front. And apart from that, Alex, what's going on now? What are you working on at this point in time?

>> Alex :

well like I said earlier, we're constantly evaluating deals. We're just hanging up the phone with a healthcare, company, based actually in Texas, your neighbors in Dallas. And we're excited about that. we are working on relaunching the healthcare fund. we've invested in it last year and out of most of our investments it's actually performed the best. we've been very bullish about it and spend a lot of time researching the operator that could produce additional diversification to our portfolio as we've invested pretty heavily into multifamily. And we love the healthcare sector. You know, as our population gets older and unfortunately gets sicker and needs additional healthcare help. We think that this is the sector that definitely has very ah, good upside and risk protection. In addition to that. One of the reasons why we love this particular sector is a build to suit. So there is a guaranteed triple net lease, tenant, involved with annual building increases. so we're trying to figure out a way how to reopen the fund and offer this particular investment in the new future. This will be 506C for accredited investors only.

>> Vish:

All right, that's interesting and good luck with that. And when do you think the fund starts and when does it close?

>> Alex :

we are hoping to launch in the next month or so. so it should be available in Q4. we don't know whether it's going to be open for extended period of time. Ah as there will be limited allocation given to us and the limited number of assets that will be purchased. These are acute care type of facilities, rehabilitation centers, these are triple net medical office type of facilities.

>> Vish:

Alex, I know you also have a podcast. Could you tell my audience a little about your podcast and how can one reach you?

>> Alex :

yes, thank you for reminding me of that. So our podcast is the same as the company name, Wealthy Mind Investments. I'm a big Believer in the mindset. Tony Robbins has made huge impact in my life, so I try to bring value by inviting, other entrepreneurs to my podcast where we talk about real estate, success and failures and the power of mindset. Because I'm a big believer. If you have the right mindset, if you're success oriented, if you're a person that adds value to, others, they will become successful and ultimately attract, wealth. Because, wealth and real estate is just byproduct of a mindset and taking action and creating value for others.

>> Vish:

Well, that is so true, Alex. And I love that name, Wealthy mind investments. Thank you for sharing that. And, because you could have all the education in the world, but, if you don't take action, it is of no use because applied knowledge is more, important than learned knowledge. But there's nothing wrong with learning. But, most of the people do not take action for fear of.

>> Alex :

Fear of.

>> Vish:

And then that is where the mindset comes into picture. On the other side, the mindset is everything, if you ask me. But without much education or without much, knowledge, having the best mindset would give you overconfidence. But you might mess up. But, so it's a combination of both having and aligning with people like you also makes a huge difference because there's so much experience. So we don't need to make those mistakes, but we might as well schedule a call with you, talk to you and and get to hear from you what you would do in that similar situation. Right? So with that, I need to appreciate and thank you so much, Alex, for taking time from your, from your busy schedule and joining us on this another episode of Outrunning Failures. Thank you, Alex.

>> Alex :

Thank you, Vish Let's keep in touch and take action. Right?

>> Vish:

Yeah. Finally take action.