From Rocket Science to Real Estate: Chad Zdenek's Incredible Journey of Reinvention and Success

Today’s guest is Chad Zdenek.

 

Since beginning investing in Real Estate 7 years ago, Chad has grown his General Partner portfolio to $150M. 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.

 

Show Summary: 

In this episode, Chad Zdenek, a licensed general contractor and former CEO of Mobile Illumination, shares his journey from being a rocket scientist to running a lighting business with his brother. He discusses the challenges they faced and the strategies they used to scale the business. Chad then talks about his current focus on real estate and the dedication required to scale his business properties. He shares his experiences in the real estate market, including a challenging project in Orlando where they had to renovate a property and increase occupancy. Chad emphasizes the importance of having the right team and being in the right market for success.

 

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Intro [00:00:00]

From rocket scientist to lighting business [00:00:59]

Scaling a lighting business and reinventing the company [00:05:02]

The dedication required to scale a real estate business [00:07:32]

The challenges of scaling a business [00:09:12]

Choosing real estate as a career path [00:10:24]

Entering commercial real estate as a solo general partner [00:13:20]

The challenges of taking over a class C property [00:17:54]

Renovating and marketing a 200-unit building [00:19:44]

The success of the project and the role of location [00:22:43]

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Connect with Chad: 

Facebook: https://www.facebook.com/CSQProperties 

Instagram: https://www.instagram.com/csqproperties/ 

YouTube: https://www.youtube.com/@csqproperties

Linkedin: https://www.linkedin.com/in/chad-zdenek-9153ab4/ 

TikTok: https://www.tiktok.com/@chad.zdenek

Why Entrepreneurs Should Invest in Apartments Guide: http://bit.ly/3gU3ipW

 

Connect with Sam:

I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.  

 

Facebook: https://www.facebook.com/HowtoscaleCRE/

LinkedIn: https://www.linkedin.com/in/samwilsonhowtoscalecre/

Email me → [email protected]

 

SUBSCRIBE and LEAVE A RATING. Listen to How To Scale Commercial Real Estate Investing with Sam Wilson

Apple Podcasts: https://podcasts.apple.com/us/podcast/how-to-scale-commercial-real-estate/id1539979234

Spotify: https://open.spotify.com/show/4m0NWYzSvznEIjRBFtCgEL?si=e10d8e039b99475f

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Want to read the full show notes of the episode? Check it out below:

Chad Zdenek (00:00:00) - And anyone who's kind of grown and scaled something they know, like there's always a time period before before you reach the goal, right? Where you just you just got to bust bust chops. And for me, it's actually one of my core values is grit. And and that's something that's always rung true to me. And right now, like, I'm in that gritty time period in real estate.

 

Sam Wilson (00:00:21) - Welcome to the How to scale commercial real estate show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big. Chad Zdenek is a licensed general contractor, a professional engineer, a former CEO of Mobile Illumination. He's a triple master's degree graduate. And Chad has a million other things going on as well. Chad, I'm excited to have you on the show today. Thanks for. Thanks for coming on.

 

Chad Zdenek (00:00:49) - You bet, Sam. Glad to be with you.

 

Sam Wilson (00:00:51) - Absolutely. Chad. There are three questions I ask every guest who comes to the show in 90s or less.

 

Sam Wilson (00:00:55) - Can you tell me where did you start? Where are you now and how did you get there?

 

Chad Zdenek (00:00:59) - Sure. So technically, I started out as a rocket scientist working on the space shuttle main engines. I got there by studying civil engineering and structural engineering and eventually transitioned into running a business with my brother, which we ran for 15 years, built it up to about 75 employees, three warehouses, sold it in 2018 and went into real estate full time. And that's what I've been doing ever since.

 

Sam Wilson (00:01:25) - That is a wild, wild journey. Just a little bit. You've told me right there. I mean, it's like every child's dream, right? Like some of them would be an astronaut someday. I'm gonna work on the space shuttle. Like, that's at least it was for me as a child of the 80s. Like, oh, my gosh. Like, you know, space. That's really cool. Why did you quit that and go into doing business with your brother?

 

Chad Zdenek (00:01:47) - Yeah, so that's a good question.

 

Chad Zdenek (00:01:48) - And it really comes down to like my passion. So I've, I've always been an entrepreneur at heart. I've founded or helped found eight different companies. And even though I worked at Rocketdyne, who was purchased by Boeing, Fortune 100 company, huge company, obviously a lot of systems and processes. It just wasn't really me. I'm really an entrepreneur and so I wound up leaving that to go work with my brother on a business he started. I was getting my MBA at UCLA at the time and using his business as my my pet project, if you will, focusing on entrepreneurial studies, and then eventually joined him to help scale that business. So. So yeah, that's kind of how it started out. But it was rocket science work is super technical, really fun, but a little too much bureaucracy for me. I'm just I'm a more agile entrepreneur at heart.

 

Sam Wilson (00:02:43) - Wow, That's that's wild. So you and your brother had a company for 15 years that you sold in 20 1875 employees. What industry was that in?

 

Chad Zdenek (00:02:53) - It was a lighting business.

 

Chad Zdenek (00:02:55) - So primarily we actually focused on Christmas lighting, installation, service removal for large homes, big projects like Universal Studios, the Forum. If anyone's here in LA and all the any celebrity you can think of, we did their home here in LA. Largest home was 52,000 square foot actually. So we're talking like really big houses. Average might have been 10 or 15,000 square foot places. Um, and, and yeah, so that was the business. But we also did landscape lighting and wedding lighting and things like that.

 

Sam Wilson (00:03:28) - That's, that's a very, very nuanced.

 

Chad Zdenek (00:03:32) - Yeah.

 

Sam Wilson (00:03:33) - I mean, so you, so you grew that and then there was an opportunity to, I mean after 15 years, you guys said, hey, we can 75 employees inside of a lighting company like you think of that. We said, oh, I do Christmas lighting or I do holiday lighting or whatever it is. It's like, you know, I think small in that, you know, it's like, Oh, okay, cool.

 

Sam Wilson (00:03:49) - You know, you guys probably do lights for a few weeks of the year and then you're done. But you guys grew this into a I mean, that's a pretty big company. Like, was that the dream all along?

 

Chad Zdenek (00:03:59) - Yeah. Yeah, it actually was. And we started out literally, it was just my brother and my sister and a couple of helpers. I was on the back end of that kind of doing the business side of it, if you will, the strategy. And then. And then I left. I left Rocketdyne to go work there full time with my brother. And here's a kind of an interesting tidbit. You know, you talk about entrepreneurs taking a leap, right? We all always at some point generally, you got to take a leap. And for me, I took a 50% pay cut to go work with my brother. And and he gave me half the business and promised to pay pay me that 50% pay cut was more than he was paying himself. Wow. So we both really had to compromise.

 

Chad Zdenek (00:04:44) - I mean, you know, the business is really small at the time. But yeah, we basically scaled that over 15 years and built it into the biggest lighting company in LA.

 

Sam Wilson (00:04:53) - That's awesome. What would you say is the number one thing you did to effectively scale that business?

 

Chad Zdenek (00:05:02) - So what was unique about it was and certainly in the beginning when we only focused on holiday lighting, we could really take off like half the year. We were just like working on the business, right? So half of you're working in the business when it was really busy time for us and the other half of the year was working on the business and we we literally reinvented the company every year and so much so that it kind of became a joke to the employees. We we paid them really well. We try to really take care of them. So we got a lot of people come back every year and they'd always come back say, okay, well, what what company is it going to be this year? Because it always changed so much.

 

Chad Zdenek (00:05:38) - And we invested a ton of time into developing systems and processes and that made a really big difference. And just knowing that, hey, each year we wanted the company to be different and how could we improve? And that's really how we ended up scaling it.

 

Sam Wilson (00:05:54) - It sounds like you kind of had baked in opportunity to review and work on the business versus working in the business.

 

Chad Zdenek (00:06:02) - Yeah, for sure. We, you know, like a lot of people, you know, we were obviously we weren't the first ones to this industry. There was a ton of players in the in the industry. And it's kind of like people you might think of that, you know, they might have a crew or maybe two crews if they're larger, they work a couple of months of the year and then the other month of the year they either took off or maybe they worked other jobs. But we really approached it like a business, a much different approach. And we were able to scale a lot more than these other companies.

 

Chad Zdenek (00:06:30) - And I think that really made a difference. And that really was a mindset knowing that we wanted to grow something to be big and we didn't want to be small and we we worked hard in the off season. That's what we did.

 

Sam Wilson (00:06:44) - Well, how do you find time in your business today? I mean, I think that's the the the one thing that anybody that's scaling a business or scaling a portfolio struggles with is finding finding that window or dedicating that window of time to work on systems, to work on processes, to work on building the back end of the business and not necessarily doing the business. How do you how do you incorporate that same idea into what you're doing today?

 

Chad Zdenek (00:07:10) - You know, that's really, really tough. And I don't have a magic solution for that. I'll say maybe the magic solution is maybe like Wizard of Oz. When you find out who's really behind the wizard, right? It's like and I'm happy to share with you guys like, I'm busting my butt right now on my business properties.

 

Chad Zdenek (00:07:32) - You know, I probably work maybe 80 hours a week right now. It's a it's a ton of time you got to put into it. And anyone who's kind of grown and scaled something, they know, like there's always a time period before before you reach the goal, right? Where you just you just got to bust bust chops. And for me, it's actually one of my core values is grit. And and that's something that's always rung true to me. And right now, like, I'm in that gritty time period in real estate. Right. And I know you know this, too, right? It's a lot harder right now than it was a year ago, a year and a half ago. Like we're in the trenches right now. Right. There's a lot of moving parts in these real estate deals right now. There's a lot of deals that can go sideways if you're not staying on top of it. And it's just a different environment with the way interest rates have gone. So I'm basically I'm working a ton right now to stay on top of things.

 

Chad Zdenek (00:08:24) - I'm still trying to scale my, my, my business properties. But the magic solution is not don't give up. You know, have a lot of grit. Understand? Like you got to understand anyone who's been anyone who you look up to and like be doing big things and like, wow, how do they do that? They've been in the trenches, right? I mean, look, I've started eight different companies, right? You think I know it by now, But, you know, I'm working 80 hours a week right now. It's it's crazy. And that's because I really want to get this business to to have a lot of scale. And I've got pretty ambitious plans for it. And right now I'm just in that in that trench mode where I really got to work pretty hard to get it done.

 

Sam Wilson (00:09:02) - You know, And I'm okay with that because I was I was talking to somebody about that recently because I'm I'm with you in a very similar spot in that we're just we're grinding it out right now.

 

Sam Wilson (00:09:12) - And it's it's hard work. It's hard work building the systems, building the people. It's I mean, think I told you before the call, I mean, I've been on my desk since 4:00 this morning. It's like you wake up or you crawl out of bed, you're like, I'm going to the office. I'm to put on the pot of coffee and we're walking to the office. I don't want to do that forever, but I'm okay with it for now. It's like, all right, so maybe maybe the next 6 to 12 months are really, really work hard. And I think we've I think we've kind of been sold this idea of like, oh, build your systems and then your company just takes off and then but it's like, you know what? There's I think there's a period for everyone where you just got to grind it out. And it's not ideal for a long term. I mean, you have how many kids? Five. Five kids, right? I'm not I can't quite catch you with that many.

 

Sam Wilson (00:09:57) - I don't want to. I got three and that's enough. But it's like, you know, you don't want to miss out on those things either, watching them grow up. So it's not a it's not a forever solution. But I think there's periods of scaling businesses where it's just like you just got to put in the time. Yeah, let's talk let's talk about your real estate business. Then we talked about the lighting company, how you grew that, which is just an amazing story in and of itself. Why did you pick real estate and then what's that journey been like for you?

 

Chad Zdenek (00:10:24) - Yeah. So. So real estate's been something I've always really wanted to get into. I was in construction for a few years beforehand doing construction management for large commercial properties. Like you mentioned earlier, I got my general contractor's license, so I've always I've always had an affinity for construction. I've been fairly involved in it. But that's like very transactional, if you will, right? There's not there's no real investment in that side of the business.

 

Chad Zdenek (00:10:50) - But if you look at a lot of people that have been successful in the real estate space, a lot of it is with real estate investments, right? And so I'd always wanted to get into that. And when I was selling the business, I really wanted to take a pause and figure out what I wanted to do before just jumping into something. My natural reaction was just jump into it, get it done and move forward, right? But I knew that this would probably be like my third and kind of final phase of my career. So I really I took some time. I had a year and a half transition out of that business to figure out what I wanted to do. And I had a really strong urge to get into real estate. Like I said, I was in construction beforehand. I had done some real estate investments on my own beforehand, and so that's when I found syndication and multifamily primarily, although I do self-storage as well. And that's where I decided to go into that because I just I knew a lot of people that had been successful in real estate and and you don't really kind of see it until you're in it.

 

Chad Zdenek (00:11:50) - It's kind of like maybe riding a bike, like you say, okay, that kind of looks easy. But until you actually do it, you don't really know. And the same thing happened to me in real estate, right? Like, and it really clicked when I got my first tax return back and I had all this money back from from depreciation write offs. I had the leverage from the banks and, and I saw these, these, these investments that were doing really well. And I had all the upside from the leverage. And I'm like, wow, this is how people actually do it. And it really clicked for me. Like, I kind of knew it. But like once you experience it on your tax return, it's pretty rewarding. And then and then look, we mean we unlike you, we do a lot of Class B and C properties. We fix them up. I love doing that part of things. I love construction. I like making things better for tenants and and that's kind of a rewarding part of the experience as well.

 

Chad Zdenek (00:12:39) - And, and we're doing good things for communities. So it kind of all fits into me as a person. And, and this will be my my third and final phase of my career. But but I love it. I don't know if I ever retire. I love what I do. But I tell you, I do not want to be working eight hours a week the rest of my life I'm with you. If having that to be a kind of a short, shorter time frame. But for now, it's a lot of work.

 

Sam Wilson (00:13:01) - Yeah, absolutely. Absolutely. What did you do to break into commercial real estate? Because it sounds like that's where you started. You didn't take the traditional path of buy a single family home by 20 single family homes, decide that's not what you want to do, sell them off and then go into commercial real estate. It sounds like you went straight into commercial real estate. Is that a fair statement?

 

Chad Zdenek (00:13:20) - Yeah. Yeah, it is. And not only did I go straight into it, but I went straight into it as a solo general partner.

 

Chad Zdenek (00:13:26) - So my first syndication I did on my own, I did everything from A to Z, and again, it was a ton of work, but but I learned a lot because I had to do everything myself. I had ten investors on that first deal. I raised $1.2 million and and bought a ten unit apartment building here in LA. And I had a think about a 500 K CapEx budget for that. Um, so, so it was, it had a lot of moving parts, um, smaller building. But I did everything on my own and it was a great learning experience and that was my first foray into, into real estate.

 

Sam Wilson (00:14:07) - That's awesome. And is that where you stayed or have you taken a different path to where you are now?

 

Chad Zdenek (00:14:14) - Well, on the theme of scaling. I know, I know you like to talk a lot about this as well. And obviously I scaled in my last company. I wanted to scale in real estate as well, so I did several deals on my own with with limited partners and then and then began partnering with other syndicators to do larger deals and also out of state deals.

 

Chad Zdenek (00:14:34) - So I live in LA. My all my initial investments were in Southern California. And then when I partnered with other syndicators and began doing larger deals, I also did that out of state to try to diversify a little bit out of California and was really able to to scale that part of the business to where now I do anywhere from 200 units, 280 units somewhere around there are the property sizes that I do now with several general partners and, you know, a lot more limited partners, but just bigger deals.

 

Sam Wilson (00:15:13) - How how has that what you look for in a general partner changed? Maybe then when you first started partnering with people, the parameters changed it all for you.

 

Chad Zdenek (00:15:26) - I'd say I'd say they haven't changed a whole lot. And maybe that's the conservative side of me in terms of, you know, I'm an engineer, so I do have a little bit of paralysis by analysis, by nature. So I'm a little slower to to make these big steps or certainly like working with other people. Um, I got to be pretty comfortable with that.

 

Chad Zdenek (00:15:48) - So in the beginning and even to today, a lot of it is relationship based, right? So you get to know different general partners, you watch what they're doing, you interact with them, you might even invest with them as an LP initially. I've done that as well. And and you go through those steps and you can really get to know somebody and then you start to really trust them a lot more and you've got some experience watching them. You might have invested with them and then you're ready to do a deal together. I also I run background checks and all the GP's I work with just as a sanity check, even if I know them. It just kind of gives gives that extra cushion in terms of comfortability. But really I don't think it's really changed how I've done it from from the beginning till now. I still do the same kind of general process.

 

Sam Wilson (00:16:37) - That's cool. I love that. That's good to hear. That's good to hear. I wish I had that same story. Not that any of my partnerships have gone directions.

 

Sam Wilson (00:16:45) - I didn't wish for them to go, but certainly my my processes have become more refined. I'm I'm less of the engineer and more of the go get it and figure it out once, you know, build it while we're flying it, which is not a good approach necessarily that I'd recommend. Certainly that process is far more refined than it used to be. But either way, I'm always curious to see what people have to say in that regard. We we talked about this before the show kicked off, and I really want to make sure that we highlight and hear the story behind this because we're recording this. Oh, today is July 11th, 2023. So I don't know when this will come out probably in the next 60 days or so. But you guys own an asset. I think you said Orlando. Is that right? And tell me tell me the story on this, because here just to give a little preview, I'll tee it up for you then you can take it from there. But for our listeners, you've taken it from 70% occupancy to a 92% occupancy in the last six months.

 

Sam Wilson (00:17:39) - So if anybody's listening to this, this is in a more challenging season, I think, for multifamily properties, not the not to mention the class of multifamily property that you're doing this in. So tell us about that asset and how you guys accomplish that.

 

Chad Zdenek (00:17:54) - Sure. Yeah. And that's been a lot of work and it's a good case study. Certainly a challenging time to do that, that type of a lift right now. But the premise of that was that we bought a Class C property in Orlando, needed a fair amount of work, nothing too crazy, but but needed work. And we had an issue to where. When we took it over from the seller. Um, they basically, believe it or not, the seller literally closed the door on the, on the, the leasing office for like six weeks before we took over. So we did all the due diligence brought in. We even did third party due diligence, ran, walked. Every unit did what you need to do and then, you know, decided, yeah, this looks good, let's move forward with the LOI, blah blah, blah.

 

Chad Zdenek (00:18:43) - And, and they, they closed shortly after that period. They literally locked up the office and didn't do anything. No work orders, didn't even didn't even collect rents. I mean, it was like really, really bad. I'd never seen something like this before. And so when we finally took it over like we were, our occupancy was already way down. And from where it was, people weren't paying rent. I mean, literally we walked into a crap show and, um, and we could have gone after the seller, right? I mean, we had every right to go after the seller, but, you know, none of us are litigious type, and we just kind of buckled up and hunker down and went after it. So what we did, we brought in our own construction crew, put them up on on site. I think we had 7 or 8 guys and put them all up on site. We had a bunch of extra vacancies we weren't expecting. We had to get rid of a bunch of more people that we weren't expecting and and we went to work and we renovated.

 

Chad Zdenek (00:19:44) - We renovate. There's a 200 unit building, um, garden style, I think about 20, 26 buildings. And um, and we went to work and we renovated over 100 units. But what happened? So we basically, we kicked butt on construction. But what happened was our, our marketing side on the lease up side was behind for how well we were doing on the construction side. So we got so far ahead. Vacancy was way down. Like I said, we even might have been like 68%, 70% like like pretty low. And I think we took it over. It was supposed to be we bought it at like 90%. It dropped to 82% when we finally took it over. And then obviously with cleaning out some evictions, we dropped from there. And so it was a very, very difficult project. We actually had to swap out the property management company, um, part way through which anyone who's done that mid deal like that is not fun to do, especially on these larger projects.

 

Chad Zdenek (00:20:47) - And but the premise of the problem was we, besides what the seller left us with, we got really far ahead on construction and the marketing and lease up didn't keep up. And so we basically as a team, we took over the entire marketing department. We still at that time we still had the original property management company or our original property management company, which was new to the property, still running. But we took over the whole marketing department and we really hit the marketing pretty hard and finally we got the marketing catch up, catch up with us. We we got rid of the property management company, eventually brought someone else on and like inside of like 6 or 7 months we got it to 92% and which was a really, really heavy lift. And I'm pretty proud to say like we did that without like price concessions, right? We, um, we had four and you know, this, I mean, you do a lot of asset management. We had four asset management calls a week and, and it was all hands on deck.

 

Chad Zdenek (00:21:50) - There was 4 or 5 of us that were just really involved all the calls. And in the midst of all that mess, we had to swap out a property management company. I mean, it was it was so much work. So much work. But but we did it. We did it. And in this environment, I think that's pretty tough to do and it's something I'm pretty proud of.

 

Sam Wilson (00:22:11) - It's tough to do. I mean, one, it's tough to do. It's tough to do in this environment. Would you say would you say that the market or the or the Orlando market in and of itself helped kind of where that as it's in a more clear way because that assets in Orlando was that helpful in getting that filled just because there's better a better tenant base looking for things like would that do you think you could have pulled this off somewhere else, do it the same amount of tenacity and effort, or did the Orlando kind of tailwinds help?

 

Chad Zdenek (00:22:43) - Yeah, it totally helped. Right. And it kind of goes back to the basics, right? Location, location, location, right.

 

Chad Zdenek (00:22:50) - We're in a good location. It's actually about ten miles north of Orlando, Altamonte Springs. But yeah, it's it's a good up and coming area, a lot of population growth. So so yeah, we definitely had those tailwinds for sure. And there's no way we could have done that if we were like in a flat market or stagnant market, right? We would have had to do price concessions or something like we'd have to get creative some other way. But, but we're in a good market. We're able to do it.

 

Sam Wilson (00:23:17) - Yeah. And that I mean, that goes back to the three fundamentals that we always talk about, which is team first, market, second deal third, because you totally, you can't change the first two once you've closed. But the third the deal you can change. So that's you're in the right market with the right team That's really cool. Again, not to take away from the incredible amount of effort that you guys put into making that happen, but you guys got the first two things really right and so obviously you can change the deal.

 

Sam Wilson (00:23:45) - Post-closing And that's exactly what you guys have done. So very, very cool. Chad I've loved this. I've learned so much from you here today. There's been a blast having you come on. Just hearing your story from being a rocket scientist to then doing a lighting company, growing that, growing eight different other companies, five kids at home, grinding it out and real estate kind of carving your own path and figuring this one out as well. I'm super excited to be able to put this episode out there. Thank you again for coming on the show today. If our listeners want to get in touch with you and learn more about you, what is the best way to do that?

 

Chad Zdenek (00:24:16) - Yeah, best way would be properties. Com or anywhere on social media is just at Ksdk properties at Ksdk properties.

 

Sam Wilson (00:24:25) - We'll make sure we include that there in the show notes. Chad, thank you again. I do appreciate it.

 

Chad Zdenek (00:24:30) - Go, bud. Thanks, Sam.

 

Sam Wilson (00:24:31) - Hey, thanks for listening to the How to Scale Commercial Real Estate podcast.

 

Sam Wilson (00:24:35) - If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories. So appreciate you listening. Thanks so much and hope to catch you on the next episode.