Currently, what we see the majority of right now is people that want to invest in the space and then they invest either through a retirement savings account or just their cash portfolio. The mechanism is not new or niche. It’s just the wrapping of it, if you will, is new. And so as educated investors and people in real estate start to learn more about it, we’ll start to see a lot more traffic in this space. The biggest mistake that is made in this space is not owning the underlying property. Both assets are growing, right? One’s cash based and the other one is equity based as time goes by and improvements are made. Currently, the largest operator is a franchise based operator. They have approximately 200 units. So if you look at 200 units at 10,000 unit, there’s a lot of room for-

What’s going on guys? Welcome back. Robert, first off, thank you so much for taking the time to join us here today. I want to start with kind of having you explain what you’re doing, because I think it’s very important that the listeners understand what it is that you’re doing and how that they can get involved with it. But if you don’t mind kind of sharing a little bit about what you’re doing in the real estate space, I’d love to let you take it away.

Well, Noah, thank you for having us. So us at Kmine Capital, what we do is raise money through a private credit fund. We then deploy that credit towards the real estate asset class of dog boarding kennels. So you can think of dog boarding kennel as a motel. There’s approximately 10,000 of those units across the US. They’re open 365 days a year. They have multiple amounts of doors throughout those kennels. So you have some kennels that have 50 doors, you have some that have a hundred doors. But what it is, is really a motel for dog. It’s recession proof because people don’t go to motels because they want to. They go to motels because they have to and people bring their dogs to boarding kennels because of vacation, work, funerals, if you will. And so it really services a community. That community in the United States is approximately 70 million households and so we focus in on that asset class. Up to this point, there really hasn’t been any institutional credit outside of the SBA that funds that. And so we’ve stepped in that process to do that.

Awesome. And I know it’s an interesting niche. For people that are listening, it’s basically … So you talk about the motel aspect of it. What was the main problem that you were trying to solve when starting this business?

So the main issue that we tried to solve, and it was really our issue, is when we looked at getting into buying boarding kennels as an asset, a real estate asset to have and to hold, was the financing that was available. Either it was owner financed, but now that the property values and the business values are increasing, that’s a bigger hurdle than it was in the past. And then the only lending facility outside of that was the SBA, an SBA 7A loan or an SBA 504 loan or a combo of those. And then the SBA has a hard stop at $5 million. So by today’s dollars, that’s one and a half, maybe two kennels, maybe two and a half kennels at most, and then you’re done. So if you wanted to put a portfolio like you would do in single family residence or storage, you’re kind of cap and so we looked around and said, this is a profitable business. It has high EBITDA margins. It’s cash every day. It’s just a niche, if you will. It’s a $25 billion niche inside $150 billion space, so not so niche. And then we just went about building out a credit facility to service our own needs and then expand that to everybody else that’s interested in this space.

Gotcha. If someone is interested in getting into this space and joining what you’re doing, what would that person look like and what would they need to have do in order to work with you?

So the first thing I think there’s probably two if you break that down. You have obviously a dog owner or dog lover who’s experienced the dog boarding kennel experience, if you will. They go on a Friday, they drop the dog off, they pick the dog up on a Monday, they write a check for three, four, $500. They understand the process, right? And then they look at that as, oh, that might be a business. It could be an owner operator business or it’s a absentee owner where there’s a kennel manager and you’re just basically the bank and you improve the systems that are within that kennel. And then you have on the outside is just somebody that is looking to roll up properties, has familiarity with storage or multifamily or Airbnbs where you can put a bunch of them together. You have some type of management layer over the top of that and then when that increases in value to a point where you want to sell that or exit, you have that opportunity. So we see both of them. Currently, what we see the majority of right now is people that want to invest in the space and then they invest either through a retirement savings account or just their cash portfolio.

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Why do you think so many investors overlook this sector of the niche?

Again, you’d probably break them into two deals, right? One, they step over it, right? They don’t see it. It’s not something that’s sexy and spoken about constantly on Facebook or Instagram or YouTube channels. Those are kind of congested with fix and flips and ground ups and multifamilies and storage and glamking now is one of the other ones, right? And they gravitate towards that. They gravitate towards what they know. And then I think the other part is you have to have some type of connection to dogs, right? And then you see it. And then from that point … And that’s what we’re seeing on our side. Like I said earlier, there’s 70 million households that own dogs in the US, approximately one and a half dogs per household. And that’s really where we see the traffic coming into us is people that have experienced the dog side of it. We don’t think that’s going to stay very long as with podcasts like this and others that we’re doing. It is a space. It has a high EBITDA. It’s a income producing property. It’s a dual asset property where you have underlying real estate and the business that sits over the top. So the mechanism is not new or niche, right? It’s just the wrapping of it, if you will, is new. And so as educated investors and people in real estate start to learn more about it, we’ll start to see a lot more traffic in this space.

Gotcha. And if someone does end up working with you, what would that partnership or agreement look like?

So we have two opportunities. They invest in us in a fixed term fixed rate basic promissory note, which is commonplace again in real estate. We do a three-year fixed term rate program there, or they borrow money from us to own and operate their own kennel.

Gotcha, gotcha. Okay. What mistakes do you often see people make in this sector of the niche that you think could be really easily avoided?

I think the biggest mistake that is made in this space is not owning the underlying property. So leasing a facility on top of somebody else’s property, you are at the mercy of them changing their mind. And you have a community that you build in and around your business. And that’s one of the bigger aspects of the businesses is it is a community. So if you have 50 doors, you have about a thousand people within that community that use your facility. They may use it once a week, they may use it once a year, but you’re catering to them or you’re servicing that program. So I think the responsibility of owning the property underneath the business is the biggest mistake.

And to the real estate piece of it, on the property underneath is going to probably go up in value. So it’s worth it on that end too, for sure. Yeah.

And if you look at this, Noah, the majority of these have … It’s a very interesting setup, right? So you have the buildings for the kennel operation, right? So say the motel sitting on top and you have a larger property because you have dogs running around. And then you’ll have a residential, single family resident house on that property as well. So it’s not even just the underlying ground. You have another rental unit if you want. Sometimes that’s owner operated and they live in that, or they give that as an opportunity to say a kennel manager, much like you would see like in a horse stall program where you’re boarding horses and then the ranch manager or the stable manager is living on the property. It’s very similar to that. So there’s a lot of opportunity on that, but you’re right, both assets are growing, right? One’s cash based and the other one is equity based as time goes by and improvements are made.

Yeah, you make a good point. I mean, whether you rented the house or gave it to them as kind of part of their package or part of their salary, if you could, it definitely could work for sure. In this space, what separates the top operators? For example, in residential real estate, there’s a lot of people that do a lot of deals and there’s a lot of people that do one or two deals a year. Is it similar in this space? What separates the top operators from maybe people that just own one or two of them?

Capital, capital, access to capital. And so you see in this space, so there’s approximately 10,000 units across the United States, and you can see all of them because they’re commercial operations. So they’re licensed. So if you do some homework, you know where they’re at and what they look like. And then from that point, it really becomes getting access to capital and making a offer like you would in any other real estate transaction, you’re sourcing, if you will, right? And then making a deal for people that are at the tail end of wanting that business anymore or are looking to cash out. But if you have capital, you’re going to make waves in this space. Currently, the largest operator is a franchise based operator. They have approximately 200 units. So if you look at 200 units out of 10,000 units, there’s a lot of room for opportunity in here. And that’s why we gravitated towards a credit facility. If we can offer ourselves the opportunity to purchase because we have cash in the bank or capital in the bank, and then if there are properties that don’t fit our buy box and others would like to do that, then we become a quick source for capital.

Gotcha. So going to the capital piece, because I feel like a lot of people that may be listening on the investing side, capital’s capital, right? Whether you get it for this or get it for residential, where do you find to seek the best forms of capital? And I know the dog piece is really touching to a lot of people, and that’s kind of where most of it comes from, I would assume, but kind of where do you see that capital coming from?

So you hit the nail on the head first, right? I mean, you have a large pool of investors that are connected. And so what we’ve seen recently is about an 80% participation rate through female investors, which is unique to any space. And that is because they have a pet at home or a dog at home that they believe is their child. Men believe that those dogs are their kids as well at home, but they’ve already been in real estate investing. And so that is where we see the biggest connection. And then with the rollover now of self-directed IRAs or investment, it really allows for the non-accredited investor to have a bigger piece of the pie. And then obviously the accredited and institutional investor coming in. So we concentrate on the non-accredited investor with a low entry point of investing and then rolling over, we have a self-directed desk within our business that helps them roll over those self-directed IRAs into investing into our program. And then the accredited investors come along just like anybody else. They see an opportunity, they do their due diligence, and then they make a commitment.

Gotcha. And where are your biggest locations?

Currently on where … So we concentrate on four regions, the Great Lakes region, New England, the Southeast, and then the Southwest. We stay out of California and those areas, we stay out of Florida. It’s highly competitive. We stay out of Texas. It’s highly competitive. Actually, we’re closing the deal in Texas here recently just upcoming, so I guess that’s going to change. But we try to concentrate where there’s vacation, if you will, and then large populations of single family residents.

So when it comes to finding the location, you talked about vacation. When you talk about Pennsylvania, you talk about kind of the northern part that gets cold, they’re going to vacation down. That’s kind of what you’re seeing is most of them, especially this time of year, is trying to escape the cold.

Yeah. Or the kids are home from college and they want to go skiing, or they’re going to visit family members somewhere else, or they’re trying to get out of their area in the summertime because everybody else has come into their area. And so we look at it on the duality of it, right? Highly populated in the on season, going somewhere else on the off season. But if you really look at it, it really is, if there’s a strong residential area, single family residents, a large portion of those are going to have dogs. And so if they go away on business or they have to go away for the weekend or they go visit their kid at school, not a lot of accommodations for pet friendly, if you will. You see some Airbnbs that offer that and they have a step above others and that tag that people can go to, but really you’re servicing the community. We look at it as a community-based business and we try to tell our operators that it’s like leaving your dog with a family member when you go away.That’s what the person wants is to have no concern. They drop the dog off on Friday. They don’t have to worry about Molly for three or four days. They pick her up, she had a bath, might have a ribbon in her hair, the experience was great for you, the owner, and then you’re going to repeat. And so-

Because when you say motel, for me, I’m not thinking motel super nice, but when you say it for a dog, how nice are the facilities themselves? Because you talk about not worrying about it and the river and in the hair makes you think it’s a super nice facility. And it may be, I’m just curious because when I hear motel, I don’t think of a five star place. I think of a motel six on the side of the freeway. How nice are the facilities compared to if they were to take them to a, I don’t know, some sort of doggy resort or something?

No, you have it right there. So I mean, there’s pet resort or pet luxury resort now or a kennel. But the reality of it is it really is exactly the same, right? The dog goes there, they’re staying in a space, it’s clean, there’s no worry about an altercation with another dog so it’s safe, right? They’re well cared for, they’re fed and then they’re taken back to their home. We look at it as a motel because it’s much more of a utility than it is a luxury. You can say it’s luxury to the dog, but nobody’s going and just saying, “Hey, Molly, you really need a weekend away. Let me go take you to pet resort ABC and you’re going to get a spa treatment and you’re going to have a cabana on the beach.” That ambiance is for the owner. Just like dog food or just like any of the things that we do for our pets, it’s for us first. We feel good about doing it and then we do it, but the dog doesn’t know any difference. As long as it’s clean and it’s safe and it’s comfortable, then it is the same exact experience. You may have video cameras and you may have extra playtime or such, but it really, the bare bones of it is exactly the same. It’s a utility.

Yeah, that’s fair. That’s fair. You make a good point there. I ask everyone that comes on here, I think the word success is a very interesting word. I think that everyone’s got their own definition for it. Everyone strives for it differently. Everyone reaches for it differently. How do you define the word success in your life? How do you measure it? And then how do you strive for it every single day?

So success for us is all about the process, right? So we have a process. We want to be able to be the easiest credit facility to deal with in the United States for this asset class. And we go about doing that by having the capital available and then knowing the industry down to the smallest and biggest thing possible, and then acting on that in a transparent manner. And if we do that, then we become the go- to facility, if you will, for either financing or purchasing these businesses. And then we keep those jobs in the community and for us, that’s success.

Awesome. I do have a question about the investor themselves. So let’s say I want to invest, I have a Roth IRA, I’m going to invest, let’s just say $20,000, whatever the number is. And then I have a dog, just so happened that you have a facility in my area and I want to take it there. Does my investment cover putting my dog in there or do I pay on top of the investment?

You would pay on top of the investment because we would want to secure your capital, right?

Gotcha.

And so we would hope that you understood and went to the facility that you’re invested in, but we treat those two as separate entities. We respect both parts of that party. We want to give you the best experience possible for your pet child, if you will, when they come to the facility. And then we want to make the most out of your investment in our vehicle. And so we separate those two.

Awesome. Awesome. If someone is interested in learning more about what you’re doing or listen to this podcast and say, “Hey, I want to get in. ” Where can people reach out to you? Where can people learn more? And if someone is interested in investing, where can they go?

So they can go to canineinvestments.com and read about what we do if you’re a borrower, if you’re an investor, if you’re just curious about the space, and then reach out to us there to have a conversation. If you’re on Facebook, it’s K9 Capital Fund. We’re on LinkedIn. It’s K9 Investments. We publish a considerable amount of articles on the private credit space and this hospitality space, but really we’re one of the only ones. So if you tie in K9 Capital or K9 Investments, we pop up and then just shoot us a quick note and we’d love to have a conversation and tell you a little bit more about what we’re doing and the space in general.

Awesome. I love it. I love it. Any final words to the people listening, anything you think we missed or I missed that you think they should know about before kind of digging deeper?

I would say, I mean, if you’re in the real estate space, invest in what you know or what you experience. So if you’ve gone to an Airbnb and you really like the experience or you think you can do it better, that’s a good place for you to look to invest. And we look at the same thing on K9 Capital is if you have a dog and you’ve taken them to a boarding kennel and you feel like you want to invest in real estate or your IRA is not, your legacy IRA is not doing as well as you think it could, then give us a look and then we can talk about how to make that a

Lot better. Awesome. I love it. Robert, thank you so much for coming on and yeah, everyone, thank you for listening.

No, I appreciate it. Thank you.

My pleasure.