How Vertical Integration Scaled This Real Estate Firm to $5 Billion AUM with Kip Sowden & Doug McKnight – EP 294

June 11, 2026

Interview with Kip Sowden & Doug McKnight

How Vertical Integration Scaled This Real Estate Firm to $5 Billion AUM with Kip Sowden & Doug McKnight

Achieving success in real estate isn’t about predicting the future. While many investors have spent the last few years waiting for certainty, some of the best operators in the industry, including today’s guests, have been quietly positioning themselves to acquire high-quality assets at significant discounts and prepare for the next market cycle.​

That’s why I’m excited to welcome founding partners of RREAF Holdings, Kip Sowden and Doug McKnight. With nearly 80 years of combined investment experience spanning multiple economic cycles, they’ve built a vertically integrated real estate investment and operating company that has grown from $100 million in assets to nearly $5 billion. Their disciplined approach and commitment to long-term value creation have helped them navigate market downturns while continuing to uncover opportunities others overlook.​

In this conversation, we discussed why today’s market dislocation is creating some of the best buying opportunities in years and why the quality of sponsors matters more than ever. They also reveal the reasons why they’re bullish on build-to-rent communities, mobile home parks, distressed acquisitions, and the lessons they’ve learned from navigating decades of market cycles.

In this episode, you’ll learn:

✅ How Kip and Doug used vertical integration to scale RREAF from approximately $100 million to nearly $5 billion in AUM.

✅ How RREAF’s vertically integrated operating model helps them identify opportunities, manage risk, and outperform competitors across multiple real estate sectors.

✅ How changing housing preferences among younger generations and first-time homebuyers are creating new opportunities in build-to-rent communities, mobile home parks, and other residential real estate sectors.

Featured on This Episode: Doug McKnight & Kip Sowden

✅ What they do: Doug McKnight and Kip Sowden are founding partners of RREAF Holdings, a real estate investment and operating company that has grown from approximately $100 million in assets to nearly $5 billion through a disciplined, vertically integrated approach to investing. Together, they bring nearly 80 years of combined investment experience and their firm operates assets across multifamily housing, beachfront hospitality, master-planned communities, build-to-rent developments, and outdoor lifestyle properties throughout the United States.

💬 Words of wisdom: “Data’s important, and a lot of people collect data. We have learned how to use it and stay ahead of any issues before they come up.  Those systems that we’ve put in place that have allowed us to grow as we have and to make fewer mistakes.” – Kip Sowden

🔎 Where to find Doug McKnight & Kip Sowden: Website | LinkedIn | Facebook | Instagram

Key Takeaways with Doug McKnight & Kip Sowden

  • How Doug and Kip Built RREAF Holdings
  • Finding Opportunities During Market Dislocations
  • The Power of Vertical Integration
  • Why Drive-To Leisure Hospitality Is Thriving
  • Huge ROI From Buying Distressed Multifamily Assets
  • Catering To Today’s Leisure Traveler in Real Estate
  • Why Mobile Home Parks Are So Resilient
  • Where Real Estate Opportunities Exist Today
  • Adapting to Housing Trends for First-Time Homebuyers
  • Why the Sponsor Matters More Than the Deal
  • How to Learn More About RREAF Holdings

How They Scaled From $100M to $5B

Inspiring Quotes

  • “Data’s important, and a lot of people collect data. We have learned how to use it and stay ahead of any issues before they come up.  Those systems that we’ve put in place that have allowed us to grow as we have and to make fewer mistakes.” – Kip Sowden
  • “We’re big believers in our own operators being property management.” – Kip Sowden
  • “Being vertically integrated too, I think, allows us to mostly outperform our competitors because we control all aspects of a transaction from the very beginning.” – Kip Sowden
  • “We really saw an opportunity in secondary and tertiary markets as it related to multifamily.” – Doug McKnight
  • “Whenever we’re meeting investors, whether you invest in RREAF or you invest with somebody else in real estate, the number one most important thing you can do is get to know your sponsor.” – Kip Sowden

Resources

Want My Team’s Help?

  • Tax Strategy Masterclass
     Learn the 28 most effective tax strategies the wealthy use to save thousands.
    lifestyleinvestor.com/tax

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Read the Full Transcript with Doug McKnight & Kip Sowden

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Justin Donald: What's up, Doug and Kip? How are you, guys?

Doug McKnight: Hey, Justin.

Kip Sowden: Good, Justin. How are you doing?

Justin Donald: Good. Good to have you both on the show. Kip, it's good to have you back on the show. And then, Doug, it's great to have you on for the first time.

Doug McKnight: Well, thank you. We're honored to be here with you, Justin.

Justin Donald: Yeah. This is going to be a nice, fun one-two punch. I think about a couple of the guys that I have the utmost respect for, not just in the investment world, not just in real estate, but just the way you live your lives, the way that you carry yourselves as individuals. I just think the world of you both, and it's an honor to have you on the show.

Kip Sowden: Well, appreciate that.

Doug McKnight: Very kind of you, Justin. Likewise. And we feel the same way.

Justin Donald: Well, you guys have just a storied career, each of you. You've been in the investment space, I think, Doug, for 38 years, and Kip for 40 years. I mean, you guys are very seasoned at what you do, and that's one of the things…

Kip Sowden: Grow.

Justin Donald: Yeah, maybe that too.

Kip Sowden: I'm saying it. Grow.

Justin Donald: I wasn't going there. I wasn't going there, but what I will say is I talk to people about the importance of finding industry experts that have the expertise through longer periods of time. In other words, through economic downturns, through recessions. So, you guys have both made a career of that, and so I'm excited to kind of get into your backgrounds and get into like where RREAF Holdings even came from. You guys started back in 2010. And, Kip, I know this was your baby, your vision, your dream, and you've assembled quite the dream team. But from my experience, an outsider looking in, but I've also been inside. I've been in your corporate headquarters. I've seen you guys interact. You guys join us at our events, our Lifestyle Investor live events, and our retreats. You guys just work so well together, and I'm excited to kind of hear how your shared values and philosophies on investing really kind of made this partnership so strong from the beginning.

Kip Sowden: I appreciate that. Justin, you're right in that RREAF, as it is today, really launched in 2010. But the roots go back to ‘85 with me in commercial real estate. And that's why, I guess, that's 40 years. So, embarrassingly, that's an accurate number. I started after graduating the University of Texas in Austin in ’85, actually, went to work for Lomas and Nettleton in the real estate investment banking division. And then in ‘87, I came back to Dallas and started a commercial real estate company. And where we are today at RREAF has been roll-ups from that company. Doug and I met and really got together at my wife's grandmother's 100th birthday party.

Doug McKnight: 2005, we first met.

Kip Sowden: 2005.

Doug McKnight: Yeah.

Kip Sowden: He is part kind of family, so he just…

Doug McKnight: Yeah. We're brothers from different mothers, we like to say.

Justin Donald: I love it.

Kip Sowden: We were sitting at the same table for that event, and I'd just flown in from Dallas. He likes to tease me, and I came busting in a few minutes late.

Doug McKnight: No, you were real late.

Kip Sowden: That's the way I remember it, but.

Justin Donald: That's funny. My wife and I have a similar view, where I'm like, "I was barely late,” and she was like, "You are so late.”

Doug McKnight: It was almost staged, Justin, like he wanted to make an entrance, you know?

Kip Sowden: And Doug, before RREAF, you're getting into real estate as he has today. I mean, he was 30 years in the bond trader.

Doug McKnight: Yeah, I was.

Justin Donald: Well, you guys both kind of got started in investment banking then. Just not for you on the bond side. Yeah.

Doug McKnight: He was on the top side of the funnel creating all the deals that created the bonds, and I was at the bottom of the funnel trading the bonds. And it's kind of unique that when I retired from investment banking, I went back to the top of the funnel, which is kind of cool. But my first day on the bond floor was Black Monday. So, I turned 22 the day before.

Justin Donald: That's a crazy day one.

Doug McKnight: Yeah. On Monday morning, the 19th of October of ‘87, I walked out on the bond floor, and wow. I had never seen anything like that, of course, and had a great career. I retired in ‘15. I stayed a partner at my firm, but I was a passive partner, and then we ended up selling to Stifel. So, my firm is no longer, but I teamed up with Kip and our other partner, founding partner, Mitch Provosty, our CFO, and I just was honored to really just be invited as a partner with Kip and Mitch.

Kip Sowden: I mean, Doug actually started out investing as LP equity in a number of our deals, and I think got a good taste of it and decided he really liked that business. And let's see if we can't grow something even bigger and better.

Doug McKnight: Yeah. I enjoyed diversifying away from that W2, believe me.

Justin Donald: Oh, I'm sure.

Doug McKnight: It made a lot of sense.

Justin Donald: Don't let anyone downplay you here. Most people don't even realize the bond market is much larger than the equity market, right? That is one of the largest markets. But let us, at the same time, not forget that the largest market that exists is actually the real estate market.

Doug McKnight: Amen.

Justin Donald: Somewhere between $300 trillion and $600 trillion, depending on what report you're looking at. I think it's hard to get an official number, but I mean, it is light years larger than any other asset class, at least in the present day. And so, I'm excited to be able to dig in on some of this. Actually, I'm really curious, like back when you launched RREAF in 2010, and I know you both had experience prior to that, but what did you believe about the future real estate that maybe wasn't obvious to the broader market yet? And later I'm going to ask you about today's market. So, let's start there, and then we'll kind of fast forward and say, “Hey, what about today?”

Kip Sowden: I'll say that when RREAF was initially launched, kind of thinking through what the next evolution should be for us in the ’09, early 2010 timeframe, we really believed that we would see RTC too. Banks were struggling at the time, and real estate was facing some headwinds. When we launched RREAF, it had a tagline under it and said real estate node acquisitions. We went and met with somewhat, Doug, 80, 100 different community regional banks?

Doug McKnight: At least.

Kip Sowden: Throughout the south and southeast. We'd gone on these long road trips, set up these meetings at the banks, and they would allow us to go through their portfolio. I mean, we looked at non-performing, sub-performing, their REO, and we went out and looked at the assets and underwrote their borrowers, and we'd get off the market valuations, and we'd be sitting across from the president of the bank and there was still a gap between where we saw the market and where the FDIC was requiring those banks to actually write those loans down to. Time, a lot of these banks are tier one capital ratio was at 2.5% to 3%, and they were not forced to really mark their assets down to where the true market was at the time. Over time, their capital ratios increased a little bit. Our phones started ringing, and we just started buying assets. And that's really the beginnings of RREAF.

Justin Donald: Yeah. Well, I love hearing that, and it's interesting to hear how you got started and what a great opportunity to be able to negotiate with some banks with some assets that they clearly don't want, that they took over, right, you hopefully can get for pennies on the dollar? By the way, I know you're doing that today because I just talked to you guys about some deals that you have based on that same formula, which is really cool.

Kip Sowden: It does. It's worked out real well for us, so we're not really changing that formula. I think you probably know in our acquisition groups and our five verticals, I'm happy to walk you through those.

Justin Donald: Yeah, expand on those. I want everyone to know them.

Kip Sowden: We're set up really in six verticals. Five are for-profit. The sixth is our nonprofit. The five for-profits, multi-family vertical, where we're buying existing multi-family assets throughout the south, southeastern part of the United States. I think today we own some 55 communities, about 15,000 units. As a company, we're completely vertically integrated. Everything is in-house. We have our own property management company, RR Living. They manage our 15,000 units, but they also manage another 5,000 or so of our competitors. I mean, they're really that good. They're trained to manage cash flow, not just the top part of a P&L where they get paid off of that but also manage expenses and really create value.

Justin Donald: Well, I got to chime in real quick, Kip, because I was blown away with your guys' software, like what you guys have done internally to manage, and for it being so good that you could white-label it out to these other groups. It's incredible. But I remember even seeing like the pinpoint accuracy of like, “Hey, this unit in this particular one of your hospitality groups on this specific day, where are they? Does it have an occupant? Does it not? Are they paid up? Are they not?” And you could do that for every single unit across your entire portfolio, most impressively in real time,

Doug McKnight: Right.

Justin Donald: It is mind-boggling just how systematic you have everything built and how you can aggregate data. I mean, the reporting you have to have at any given time has to be just a whole another level of anything you've ever seen with any other group you've worked with or interviewed prior to you building it in-house.

Doug McKnight: I'd love to be able to say, Justin, that Kip and I are the masterminds behind building that, and we're just software tech gurus. We had absolutely nothing to do with it.

Kip Sowden: We knew how to hire those tech gurus.

Doug McKnight: Yeah. We have some software engineers that are on staff, and now we're layering in AI, of course. That has been one of the big catalysts for our growth is to be able to have the capability to really analyze every single facet of the 95 different companies that we own.

Kip Sowden: Yeah. I mean, we went from 100 million to a little almost 5 billion in eight years.

Doug McKnight: Nine years. Eight, nine years. Yeah.

Kip Sowden: Data's important, and a lot of people collect data. We have learned how to use it and stay ahead of any issues before they come up, those systems that we've put in place that have allowed us to grow as we have, and to make fewer mistakes, if you will.

Justin Donald: Well, as a guy that knows a thing or two about property management, we've built our own team. I've outsourced to other groups. I've been an LP in deals. And to me it's really important as an LP to recognize which groups are doing it in-house, which groups are passing it on to another operator, and how good is that operator. I mean, I've looked at a lot of groups. I have been invested in a number of different companies, and you guys were next level. I mean, I was just not just impressed, but totally blown away with your operations, so.

Doug McKnight: Well, thank you.

Kip Sowden: I appreciate that. Well, we're big believers in own our operators being property management. We're not fans of third-party property management companies. We don't use them. So, each of our verticals, we have in-house property management companies that we've built and trained we call it the RREAF Way. And we've got big books that explain the RREAF Way, and they're literally updated monthly, and it's just 40 years of mistakes that we've made.

Doug McKnight: The mistakes are put in red so they don't happen again. That's right.

Kip Sowden: So, they don't happen again. That's exactly right. But being vertically integrated too, I think, allows us to mostly outperform our competitors because we control all aspects of a transaction from the very beginning, and the due diligence, the underwriting. Property management companies come in, our asset managers come in, our construction teams come in early, early, early in the process. And it does allow us to, I think, transact more quickly than our competitors can. And as a result of that, sellers will get certainty of execution. It's unusual for us to buy something that's actually been listed for sale.

Justin Donald: Yeah. Well, and there's the data that you can glean from the other groups that you're managing. You guys, like anyone else, are going to rely on market data. And there are a bunch of groups that do it. A few that do it really well, where you feel like their information is trustworthy. But to me, like none of them are real-time, like they're all a little bit off. So, I feel like you're getting, actually, real-time data at a greater scale than just your properties as a comparison. And I think that data is very important.

Doug McKnight: That's a very good point because we did and still do subscribe to a lot of third-party data platforms, but the problem was none of those platforms did everything that we needed them to do. So, therefore, our team went and built what you saw, and then we still use some of those third-party platforms to feed in some of that data. But then a lot of it is just candidly proprietary, so it certainly allows us to stay on top of everything going on. But there's a lot going on here, believe me.

Kip Sowden: Yeah. Our second vertical is our beachfront, hospitality, and resorts vertical. In that vertical, we're buying existing hotels in iconic locations, obviously on beaches. Today, we own two hotels on Panama City Beach, one on Pensacola Beach, built a high-rise on Pensacola Beach. We ended up flagging that a Marriott product, and we completed it in July of ‘23, and in ’24, it was voted one of the top five new resorts to visit in the USA. So, that was nice.

Justin Donald: Nice.

Kip Sowden: Cocoa Beach, Hudson Island, Surfside. What, Doug?

Doug McKnight: Amelia Island. St. Simon's Island.

Kip Sowden: Yeah. We own St. Palms Resort on St. Simon Island. And today or this month, we're closing on the little hotel in Destin, Florida, on the beach, one of two hotels on the beach.

Doug McKnight: I was on site last week.

Justin Donald: That's fantastic.

Kip Sowden: Location, location, location, location. But again, property management, asset management, construction oversight management, it's all in-house, legal, even title company, even insurance agency.

Doug McKnight: Kip was telling you about working with those banks in the early days. And that actually is what launched the beachside platform. The beachfront portfolio was acquiring hotels in iconic locations directly from the lenders that had to take back the assets. There are great stories there that I can tell you, but the bottom line is a lot of the assets, especially the legacy ones in that platform, we still own. We've returned equity multiple times. There's no reason really to sell them. But that really is kind of what jump-started RREAF, and then Kip mentioned existing multi. Kip, if you'll let me segue just a moment because Justin asked us about what we saw back in the market back then from an opportunity standpoint. We really saw an opportunity in secondary and tertiary markets as it related to multifamily.

Institutional capital was not going there. They weren't there. The checks were too small. It was too granular. A lot of the assets were maybe a little bit older for them, for institutional capital. We saw a void, and we really launched multifamily in earnest because that was probably back ‘14, ‘15, ‘16 when we started that platform. And we've continued that. Of course, today it's the largest platform in our portfolio, but we still like those secondary markets. There's a tremendous amount, even though institutional capital is now there, Justin, you and your team, y'all know a little bit about our bank-owned program we're doing right now. There's a lot of opportunity there, but certainly it is nice when you can get in front of institutional equity in a particular sector.

Justin Donald: You guys are super kind to us because you're offering us kind of first dibs as a Lifestyle Investor community on some of these bank-owned assets, which we really appreciate because I know you're getting them for pennies on the dollar.

Kip Sowden: Yeah, I could expand upon that a little bit.

Doug McKnight: I just hung up with one of your members to hop on this call, so.

Justin Donald: Love it.

Doug McKnight: That was what we talked about.

Kip Sowden: Yeah. And in our multifamily vertical, prior to ‘25, the last three acquisitions were big portfolios that we had assembled multiple properties, multiple owners, multiple states. All three of them were over 500 million, but involved TC 21, 21 assets, HPX 10 Assets. Sunbelt 12, 12 assets. Since ‘25, all of our acquisitions have been one-offs, large one-offs, but they've been coming to us from these bridge lenders. These bridge lenders will contact Jack, who runs our acquisitions group, or Melanie, who runs our living, our property management company. A lot of times, I'll call are living to come in, take over the property management, and we have the reputation of being able to manage up and fix assets. And probably 75% of the time, we end up just buying the asset.

Justin Donald: Wow.

Kip Sowden: And so, when you think about it, I think our last six acquisitions have come from bridge lenders where we're buying at or below deck, which means that, sadly, the prior sponsor's equity was wiped.

Justin Donald: Wiped out.

Doug McKnight: The LPs were wiped. Yeah.

Kip Sowden: You know, we're buying it 65%, 70% of what they bought that asset for in 2021, ‘22, with a great, great basis. And they're going to be in locations that we already dominate. We've got a lot of assets and a lot of knowledge. And so, not only does our living come in and just day one increase the cash flow because of the way that we operate, but we implement our capital improvement program with our construction team, change the complexion of that particular asset, and it's really worked out well for us.

Justin Donald: So, we talked about really how vertically integrated you guys are. You’ve got $5 billion in assets under management. So, what advantages does this structure give you in today’s environment, today’s market?

Kip Sowden: I do want to point out quickly that you’re right, we have five verticals, the beachfront, hospitality resorts, multifamily, the RREAF communities, which is our master plan communities, highly amenitized, highly programmed, large, large projects, building cities. Then we’ve got our ground-up extended-stay hospitality, vertical RREAF outdoor communities. But they’re all tied together in the sense that we are really focused on all things residential and drive to leisure hospitality, catering to middle America, the largest population base in the country.

So, there is that underlying theme on everything that RREAF does. And we also believe that that theme, those verticals are very recession resilient. And that’s why when we launched RREAF in 2010, that’s where we really focus. In the past, I’ve done office, I’ve done industrial, I’ve done retail, I’ve done big community regional malls, extended storage, mini storage and the like, but I think garden-style apartments in high growth areas, I think will always do well. We expanded into BTR, build-to-rent communities, and then some for sale that we’re doing in these big master plan communities. And then all things, drive to leisure, people are going to vacation.

Justin Donald: Yeah. And so, what do you see as the larger lifestyle demographic shifts that are happening that give you conviction in the drive to leisure space?

Doug McKnight: Well, you know, in fact, a great example is the little hotel we’re buying in Destin. It’s a great example, where it is going to be purely a lifestyle experiential asset. That’s what people want. The big, the Four Seasons, The Ritz-Carltons, the Montage, all that, they’re nice, but today’s leisure traveler wants something to be experiential for their family, for their children. They also want affordability and phenomenal locations for middle America, and that’s exactly what that platform provides.

Kip Sowden: Yeah, something unique.

Justin Donald: Well, and it opens up a larger percentage of the population that is actually going to use it, right? If you’re talking about the higher end, that’s a small percentage. And by the way, they may do well, but you’re opening the playbook to the vast majority of the demographic that fits your market.

Doug McKnight: That’s right. It’s all about that experience. And that’s why if you look at the statistics in the drive to leisure space, you’re seeing a huge spike in the boutique approach. Not a big flag, not a big brand, but something that is very bespoke. So, we are going through right now, as a matter of fact, rebranding some of the legacy assets to put even more of an experiential boutique approach because that’s what the today’s traveler wants.

Kip Sowden: Yeah, when we’re buying these older motel properties on beaches, that really has a very, very large capital improvement component with a heavy emphasis on the guest experience. I mean, in some cases, we’ll put lazy rivers, resort pools, family entertainment centers, sometimes restaurants. So, it’s really creating that experiential family friendly, drive to leisure bespoke. I’m throwing out all these buzzwords, but they all really fit well for that particular platform. That’s what it’s all about.

Justin Donald: Let’s also talk real quick, because I’m thrilled that you guys are looking to get into mobile home parks. That’s an asset class that you really hadn’t touched before. You’ve either closed on some or you’re very close to closing on some based on just some conversations we’ve had. And you’ve given me a chance to look behind the curtain and share some thoughts on what you’re building and your team which, by the way, you’ve got a great team and I’m excited for this vertical. I know it’s inside of one of the five, I mean six, counting the philanthropic one. But I do think this is a huge move if you’re looking at that affordability and even the niche, like you guys are going to go probably a higher end community than what a lot of people investing in mobile home parks are going to go. But this opens your playbook quite a bit.

Doug McKnight: It does.

Kip Sowden: I think that that space fits within the RREAF umbrella very, very well. When you think about the beachfront hospitality resorts were buying from non-institutionalized, a lot of mom and pop owners, and then coming in, doing renovations and institutionalizing and scaling, and I think that the mobile home industry lends itself to that. Few big players, but not a lot. We’ve got the right team in place. As you know, we got a couple of guys, I think, from Equity Lifestyles to come over and lead that division. And Doug, correct me if I’m wrong, I think we’ve learned today, we’ve got now five new parks under contract.

Doug McKnight: That’s correct. We do.

Kip Sowden: Really expanding that segment within RREAF.

Justin Donald: Well, and it may be more than five parks. I think it’s five portfolios, isn’t it? Isn’t it more than five parks?

Doug McKnight: Well, yes, technically. It’s not five portfolios yet, but it is multi-portfolio, but we’re underwriting quite a bit more. I like to use the word, Justin, that you can relate to all too well because you’ve been in the space for such a long period of time. We always look for resiliency and I think the resiliency of the MH product, it’s so sticky. I like to say, right?

Justin Donald: It is. It really is.

Doug McKnight: And so, from a resilience standpoint and from a solid return standpoint, it’s tough to beat. And we recognize that sort of as an expansion of our rental residential focus. It’s just a natural fit. I mean, it’s gone from existing multi to BTR to town homes to RV parks, and that have really become a little more longer term stay than transient. And now with MH, I mean, it sounds like we’re doing a lot, but it really is a common theme, as Kip said.

Kip Sowden: Yeah, I think each of the verticals, they complement each other, the asset managers from multifamily to beachfront hospitality and resorts. They’re communicating and talking about what each of the groups are seeing within their portfolio, and I think it does help us manage better.

Justin Donald: Well, and I think for most groups, they would not be able to get into all the verticals that you’re getting into. It’s because of your in-house property management, the systems, high quality team. Like there’s reasons that you guys are outliers in the fact that you can do that because most groups, when I hear like, oh, we’re moving into this asset class, but we’ve spent our whole career over in this asset class, that gives me some pause. But when I look under the hood and I see how detail oriented you guys are and how it is, it does lend pretty well to what you’re already doing. And generally, in markets you’re already in, it seems pretty smooth.

Kip Sowden: That’s right.

Justin Donald: Now, I do want to talk about today’s market. This to me, like the dislocation, the opportunity, contrarian thinking sometimes helps you get ahead, right? So, with higher interest rates, with tighter lending, with valuation resets, where do you guys currently see the greatest disconnect between fear and actual opportunity in real estate?

Kip Sowden: Yeah, I mean, I can have said much different ways, which one thing that we’re seeing a lot of today and is in our RREAF communities and the master plan communities, and then particularly the BTR, the build-to-rent developments that we’re doing. I think we’re doing 149 home development in Roy City and we’ve got another 300 homes that we’re likely to start in the Waxahachie area, just south of DFW. And what we’re seeing in that space is with where first-time home buyers and where interest rates are today, a lot of them are being priced out of the market with our families that would prefer not to lease in a high-density multifamily asset. They want the big backyards or backyards and they want to be in specific school districts. Our BTR space, we’re only buying in areas where the ISD is a blue ribbon, top-rated school district. That’s one of the main criteria.

But in addition to the first-time home buyers being priced out of the market, we’re seeing a big shift in young people. And a lot of young people getting out of school are more transient than Doug was or I was when we grew up. And that home ownership is not as necessarily…

Doug McKnight: Yeah, Justin, I like to say that when I was a kid, like a lot of us that are older, you’re not as old as we are, but when I was a kid, my father taught me, son, three of the most important decisions you’ll make in your life is your faith, your spouse, and your house, right? Because home ownership to my dad’s generation was huge, right? To my generation, it’s huge.

Justin Donald: Part of the American dream.

Doug McKnight: But today’s generation coming up to Kip’s point, it’s just not a priority. They look at it almost as opportunity loss, opportunity cost to tie up that capital.

Kip Sowden: Yeah, I mean, they want to try before they buy and they want to have the flexibility to move somewhere else to another city or different area of it.

Doug McKnight: We have to be able to pivot to that and cater to that, and that’s what we’re constantly on the lookout for, is kind of where the things are. Honestly, I don’t believe it’s a trend. I believe it’s somewhat here to stay. Home ownership becomes more affordable than it is now at some point, that’ll happen, right? We’ll catch up to the lack of supply and we’ll catch up to that huge historical gap we have right now between the cost of home ownership and the cost of renting an apartment or a BTR. That will come back in line.

But I still believe that fundamentally, we have a change culturally in this country when it comes to the residential space and we have to be able to adapt to that. And I believe we have. In fact, we’re already there and we’re certainly ready to capitalize on it.

Kip Sowden: You may or may not know, Justin. I mean, getting into that MH space, I mean, that was a bit of a pivot for RREAF Outdoor Communities. When we actually launched RREAF Outdoor Communities, we launched it with the acquisition of five RV parks in three states with the idea that we were going to take our hospitality expertise, overlay them to these RV parks, expand them, create these horizontal resorts, and quickly learned that that could be a good business. You go to time in exactly right. And there was more risk. And we didn’t see the rewards to really equal taking that risk. So, we envisioned that whole platform to really layer in the MH space.

Justin Donald: Yeah, I love it. And I like that you guys are paying attention to these trends or just complete shifts. I talk about this all the time. The greatest wealth transfer in the history of the world is underway as we speak. And over the next 10, 15, 20 years, you’re going to have somewhere between $75 trillion and $105 trillion, $106 trillion. I’ve actually heard transferring hands and it’s like, well, it’s not complicated to figure out where the best returns are going to be. It’s going to be what they do. They control the money. So, how do they live what we’re talking about right now? Home ownership rental, how long? What do they like to do for recreation? Where do they want a vacation? What do they do for fun? How do they shop? What are their likes and dislikes? I mean, that’s the market niche to really get to know. So, I like that you guys are paying attention to that.

And then one other thing that I think is so important, we talked about this at ad nauseum in our due diligence vetting deals course, which is you have to know the sponsor. And I know you guys are big on this. It’s all about the jockey, not the horse. I mean, the horse is important and it’s got to be a good horse, but the jockey is so important. So, in today’s environment, what separates strong operators from those who may struggle over the next few years?

Kip Sowden: We say whenever we’re meeting investors, number one, whether you invest in RREAF or you invest with somebody else in real estate, the number one most important thing you can do is get to know your sponsor. And that means, what is their track record? How long have they been in business? In our case, we’ve been blessed. We’ve exited quite a few deals, round trip them. I think we’ve exited some 800 million. Average return fully diluted to our equity investors has been better than 20% total rate of return.

Justin Donald: It’s incredible.

Kip Sowden: Yeah, and right at a 20x, on an average hold of three and a half years, and we’ve been through many, many cycles. And I’ll tell you that our average hold of three and a half years is not going to hold because we’re going to transact when it makes sense to transact. And because we’re not fund base, we’re not forced to sell in a buyer’s market. And we’ve been in a buyer’s market last three years and we’ve been buying to the extent that we can.

Now, we’re coming out of that and we’re kind of seeing a neutral environment today, and I think we’re going to, late in ‘26 or maybe ‘27, go back into a seller’s market. But we’re going to transact when it makes sense to transact. Perfect example, in ‘21, we transacted $1 billion across the five verticals. In ‘22, we transacted $1.3 billion. In ‘23, it was $250 million. There just weren’t trades and we certainly weren’t sellers and hard to pry deals because a lot of owners that were not forced to sell, they wouldn’t sell. So, we picked up a few deals, good buys.

Justin Donald: And that’s good discipline. I just want to point out that a lot of groups kept buying at high prices and they’re paying for that in a bad way. Like a lot of these deals you’re getting now are the people that actually bought them in ‘23. And you guys were disciplined and you stuck to your investment criteria, and so, it was a down year for acquisition, but you weathered the storm brilliantly and now you got cash and you can buy these deals that are floundering.

Kip Sowden: Yeah. We didn’t sell anything in ‘23 or ‘24. Maybe one or two deals in ‘25, but we’re going to buy in a buyer’s market. We’re going to sell in a seller’s market.

Doug McKnight: I was just going to add to that, during that lull, I’ll call it, where we were able to tap the brakes intentionally, we took that time to actually grow the company and we expanded our staff, we expanded our technology and to gear up because since we are so gray on top of the head, we knew that it was a cycle and we knew the cycle would come back. And we wanted to be able to be prepared.

So, now, as Kip says, things are starting to normalize a little bit, we still have headwinds. Let’s face it. I mean, we got negative interest rates right now. We have a CPI that’s going to probably print north of 4%. We have fed funds at 3.5% and we have a new fed coming in, right? And as much as everybody’s talking about him being forced to cut, it’s a much higher probability. He’ll hike before he cuts. Given the current environment, if we get the things settled over there in Iran, then maybe we can get some things to calm down a little bit.

But we have headwinds. There’s no question about it. And you just have to be able to navigate that. And that’s why being able to be ears on the ground and with our teams and being able to figure out where to extract that value is so important because you can’t just push out capital for the purposes of getting your fund deployed and otherwise having to send the money back. Like Kip says, we’re not fund-based and we don’t have institutional partners at the holding company level. We have great institutional relationships, phenomenal.

But they invest with us at the deal level. And because of relationships that RREAF has built, that’s what’s creating these opportunities with these lenders, for example, because we’ve done business with these lenders. They know RREAF. They know we can execute. So, relationships are just so important.

Justin Donald: This has been incredible. You’re both just full of so much knowledge. And I appreciate you sharing it with us. Where can our audience go to find out more about RREAF Holdings?

Doug McKnight: Sure. I would encourage folks, like we’ve told many of the membership, just go to RREAF.com, R-R-E-A-F, kind of a funny spelling. Get yourself registered as an investor. There’s no commitment, but just answer a few questions. Then you can access our portal. You can see our deals. You can see our deal flow. I’ll add to that, that I do run the Capital Markets Group. My team consists of an institutional side and a retail side. And we have people that lead both of those efforts. So, it’s very organized.

Kip and I always like to say two things. Number one, we’re always available. I’ve gotten to know many of your members, Justin, personally, and you’ve got a phenomenal, phenomenal group. But last thing I’ll say is come see us. We love to invite people to come to RREAF. I like to call it a day at RREAF. Come spend the afternoon. Come on Tuesdays. We have lunch on Tuesdays, like we did today, and just really, just come get to know us. As Kip said, you just really need to know your sponsor.

Justin Donald: I love it. You guys have a true open-door policy, which I think is incredible. It’s been great. We’ve hosted a Lifestyle Investor meetup in your facility and we’re planning to do more stuff with you guys, so we appreciate your partnership and for you guys joining. And I like ending every episode with a question for our audience. So, if you’re watching this or if you’re listening to this, what is one step that you can take today to move towards financial freedom and really just move towards living a life you truly desire on your terms? Not a life by default, like most, but a life by design.

Both of these two individuals very much live an incredible life. In fact, we were hanging out at a 100x Forum alumni event and we were both talking about our time in the Caribbean. And these guys were on really fun, fancy boats and fishing but doing a little work, but doing more hangout and just socializing. So, they live the life, incredible gentlemen, and highly recommend that you guys check them out.

Doug McKnight: Thank you, Justin. Thank you for having us.

Justin Donald: So great. We’ll catch all of you watching this and listening to this next week. And thank you, again, Kip and Doug for joining us.

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Justin Donald

Justin Donald

Justin Donald is a leading financial strategist who helps you find your way through the complexities of financial planning. A pioneer in structuring deals and disciplined investment systems, he now consults and advises entrepreneurs and executives on lifestyle investing.

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