Episode 122: Former Rocket Scientist Closing $53 Million Multifamily Deals w/ Chad Zdenek

Chad Zdenek is the founder and CEO of CSQ Properties. He is a Rocket Scientist, turned Entrepreneur, turned Real Estate entrepreneur. His career has spanned 25 years but the last 7 years he has built a multifamily and self-storage portfolio over $40M through syndication and personal investing. Today he invests actively and passively in multifamily and self-storage projects across the United States. He is also one of the rare investors who invests in CA and outside of CA.
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Hey, everyone. On this week's episode of the Prereal Podcast, we're joined by Chad Zdenek. He's the founder and CEO of CSQ Properties. Chad was a rocket scientist turned entrepreneur. Unbelievable insights. He really walks you through. And it was a real life story of how someone who had no experience in the real estate industry outside of contracting, who was a rocket scientist, gets involved. And recently, just ten years into his career, twelve years into his career, just close on a $53 million multi family in Orlando. So from no experiences at all to $53 million acquisition on one property, Chad Zdenek, founder and CEO, CSQ Properties. You don't want to miss it. Are you ready to bring your real estate game to the next level? My name is James Prendamano. I'm the CEO and founder of Prereal. And over the past 25 years, I've closed over a billion dollars in transactional real estate. Each week, a meeting with outstanding investors, highperforming individuals, and visionaries operating in real estate space. These are the people that are actually out there in the real estate game right now getting it done. This podcast aims at bringing anyone's game to the next level. This is the prereal podcast. Welcome, everyone, to the Prereal podcast. We're joined today by Chad Zdenek. He is the CEO of CSQ Properties and founder. Folks, this is one of the stories that we wanted to share. We're so excited to talk to Chad of someone that was involved in the periphery, on the third party side of real estate and transactions, not as an investor, and has gone full tilt in from rocket scientists to a recent acquisition of $53 million multifamily property in Orlando. And I'm being literal when I say rocket scientist. Chad, thank you so much for taking the time and joining us today, man. I'm really excited to connect with you. You bet. Thanks, James. Glad to be here. Yeah. So, literally, when we say rocket scientists, you work for Boeing. From what I understand, you were on a show on that Geo. This is your world. This was what you were doing for a career. You had your GCC license for 25 years plus. Where's the pivot for you? Where's the moment? Or what's that story about where you said, you know what, this isn't for me anymore. I want to get into the real estate side of things? Sure. Yeah. So I was a structural engineer working for Boeing on the space shuttle main engines program. I did that for seven years. And I did some structural engineering consulting and general contracting construction work as well. And for me, it happened, the switch, when I always knew as an entrepreneur, always knew I wanted to run my own business. And my brother started a lighting business, which he kind of recruited me over to go work with him on. And it was at the same time we're actually both at UCLA, so both of my brothers were playing football at UCLA. I was getting my MBA at UCLA, so it's kind of rare to have three brothers at UCLA at the same time. We had one year where all three of us overlapped, and my MBA was focusing on entrepreneurial studies and using my brother's business as kind of my pet project. And eventually the business started growing, and he recruited me over. So I left Boeing. He promised to pay me more than he was paying himself. I wound up taking, like, a 50% pay cut to go work there and leaving Boeing and working with NASA and all this stuff that had a pretty good appeal to it and to just start a really small company. But we grew that. We grew that to about 75 employees, three different warehouse locations here in La, the biggest lighting company here in La, doing mostly Christmas lighting, event lighting, landscape lighting. And then in 2018, my brother bought me out, took over the business. And I'm like, I got to get into real estate finally, because we worked with all these really wealthy clients, and a lot of them made their wealth from real estate. And so my brother and I had wanted to do that for, like, ten years to get into it, but we just never did. And I'm like, you know what? Now is my opportunity. I'm going to jump into this thing full time. I started CSQ Properties, which stands for the challenge status quo. And I did it. And I just started doing my own local syndications here in Long Beach. I was a solo GP doing everything from A to Z, which was really time consuming, a lot of work, but I learned a lot and then started partnering with people out of state to do bigger deals. And that's more or less what I do. Now, I know you're in New York and me here in LA. A lot of legislative issues, especially during COVID and it's gotten a lot more difficult from a landlord's perspective. So right now, I'm doing a lot more stuff out of state with partners. Yeah. So a lot I want to unpack there. It sounds like the initial pivot for you was the switch from Boeing to your brother's company, which then became a partnership between the two of you. What's the draw? What is the poll to take you from a company like Boeing taking a 50% pay cut in salary? Why? Candidly, what was the poll there? Yeah, for me, it's really who I am as an entrepreneur. I've always been entrepreneurial. I've started or helped run six different businesses now, and that's me in my true self. And I love Boeing, worked with incredibly bright group of people, did some amazing things. So that had appeal from that standpoint. But I'm an entrepreneur, and so for me, I always wanted to do that. I always wanted to bet on myself. And there's a lot of red tape in these big companies. They do amazing things, but the red tape can be very frustrating, especially for a guy who's got an entrepreneurial mindset. So for me, that was the main driver to leave. I've always been okay with risk when I'm betting on myself. And yeah, I took a huge pay cut, but then in the end wound up doing way better and just take a little time to get there. So it's interesting. I was just on an interview with a candidate who doesn't notice yet, but we are most certainly going to the tender an offer as a manager and one of the companies. And the part that sold me on this candidate in particular was what you just described. They are in the corporate world now, and while they are doing very well and there is a certain allure to it and they're excelling in that world, there's that piece missing. It really does not most of the corporate structures do not allow for, nor should it entrepreneurs to completely flourish in the way that we need to flourish. Right. It's hard to explain it, but if you've been there, you know exactly what I'm talking about, exactly what Chad's referencing. So for you, you figure, I'm going to bet on myself and I'm going to kind of rip the bandaid off, if you will. You're out in Southern California now, correct? That's correct. So look, over the last ten years, because before that, legislative risk didn't appear in our SWOT analysis, didn't appear in any analysis or on any metrics that we would analyze in running through deals. It just wasn't a significant enough thing to contemplate here. And over the last ten years, we have seen this move up that list right to the point where we just did a special election episode last week. For this exact reason, legislative risk is now the number one thing that we take a look at for deals here in New York. So could you share with the audience and look, folks, the legislation is often well intended. We've said this 100 times before. We don't necessarily think that there are folks out there that are just creating difficult rules that are really impacting investment in these communities. We think that they are the voice for who they feel need the representation at this point in time. But it has gotten to a point where I can tell you we have decentralized we are now investing out of state, almost exclusively. What are some of the things that you've seen come down the pipe out there, chad, that for you guys was, okay, we need to start placing our dollars in other states. Yeah. Before I get there, I think it's important to realize you're right. I totally agree. They have good intentions of passing this legislation, but with all good intentions, there's unintended consequences. And that's really what is the heart of what's driving our decisions between you and I. We're coming to the same decisions in two different parts of the country, opposite parts of the country for that matter. So for me, going through COVID owning properties here in Long Beach, I'm under the jurisdiction of the county of La, not the city of La. It was very intentional for me not to do syndications in the city of La. Although I do own my own investment properties in the city of La. I did not syndicate those or bring other investment money into that, in part because of some of those uncertainties, but it's brutal. We still have in La, we still have an eviction moratorium going on right now. Right now, it's slated to end the end of January 2023. As we're filming this in the fall of 2022, it's still going on. And the city of La just passed a rent freeze that's going to continue on through all of 2023. It's really almost become a misnomer about property rights, right? I mean, they really have impacted property rights. So they say, okay, you can't raise rents for four years, right? But what have they done to your maintenance costs? What have they done to any of your property management expenses, construction expenses? None of that is capped. The only thing they've capped is the profit side of your income statement. And the expense side, as we all know, has been going crazy with inflation. And so they're literally tying the hands of property owners, which in my opinion is not right. And I don't feel comfortable investing my money in that sort of situation. Certainly don't want to bring other people into that. We're investing in business friendly sites. States like most of the country is right now. There's a reason why these states are booming, and that's where we're putting our investment dollars, and it is going to have unintended consequences for these areas where investments are leaving. So for us,