Time for a Change! Disrupting the Real Estate Market with a CEU – Chief Executive Unicorn

Jen Hardy [00:00:11]:

Welcome to the fabulous over 50 Podcast. We are here to encourage, inspire, and empower women to live their best lives. I’m your host, Jen Hardy. And whether you live on an island in the mountains, the suburbs, or an apartment in the inner city, living a fabulous life is all about mindset. And today we’re going to talk to Mike Kaeding about his mindset. He is the CEO of Norhart, a company founded by his father that is absolutely disrupting the building industry. Mike is neither 50 nor a woman. So why is he here? Because I met Mike in person at Podfest, which is a podcasting conference last January, and I was blown away with his ideas for completely changing the housing industry. When I talk about living a fabulous life, I say fabulous is what you want it to be. Well, for Mike, a fabulous world has affordable housing for all, and he’s here to tell his plan for doing just that and why he’s starting a YouTube channel about unicorns and everything in between. Here he is. All right, so today I have Mike Kaeding. Thank you so much, Mike, for joining me today.

Mike Kaeding [00:01:25]:

Oh, thanks for having me. This should be fun.

Jen Hardy [00:01:27]:

It is going to be a blast. Can you tell a little bit about yourself?

Mike Kaeding [00:01:31]:

Yeah. I’m a father of two beautiful daughters and an amazing wife, and we’re building a company called Norhart. And really, the heart of what we do is we design, build, and rent apartments. We’re working to solve America’s housing affordability crisis by solving the cost of construction. We’re already about 20% to 30% less. We believe we can achieve a 50% reduction in cost. But imagine what that means someday. I mean, someday your rent could be half or your mortgage payment could be half. So that’s the kind of worldwide problem we’re working to solve.

Jen Hardy [00:02:10]:

Which is exactly why you’re here today, right? Because you’re obviously not a woman. But I think what you’re doing is so valuable because, especially as people get older and they’re on a fixed income, boy, paying that rent, paying that mortgage is so important to be able to do. And I know for me, I live in Florida, and so there’s a lot of people that are being forced out, and because insurance and everything else is going up, if people had 50% of their mortgage, oh, my goodness. They could afford those changes and stay where they are. So let’s start with, how are you doing this? I think that’s the big question.

Mike Kaeding [00:02:47]:

If you look at other industries, like manufacturing, for example, they’ve improved productivity by 760% over the past 60 years. Construction during that time has done nothing. It’s been flat at 10%. So at a very simple level, we’re doing is we’re applying the innovations within these other trades, other industries into construction to give you some sense of that. One thing that I think construction doesn’t do well is they’re very segmented. You have different companies all coming together to work on one building. Imagine for a moment if construction were to produce cars. You’d have a different company installing the windshield, a different company installing the door, and a different company installing the wheels. Then, of course, the wheel company would call you up and say I’m so sorry, we can’t get out there for two weeks to work on the next car. So your line would be entirely shut down. And when they did arrive, they would be irate because they could only work on one car at a time rather than a whole floor of cars. And so we brought all that work in house and that enabled some efficiencies. But then we can do some really cool stuff. For example, you have the assembly line, which revolutionized manufacturing. But how the heck can you apply the assembly line to construction? I mean, you can’t take a building and slide it down a line. That’s true. But what you can do is you can take the person and move them through the building. And so right now, all of our different trades work in separate units and they all shift every 5 hours through the building. So if you look at the end of our building, every 5 hours we produce a brand new apartment unit and that takes a 15 month build process down to nine.

Jen Hardy [00:04:36]:

That is amazing. And it just seems to make so much sense as someone who has had things done to my home and tried to coordinate the different people.

Mike Kaeding [00:04:47]:

Horrible.

Jen Hardy [00:04:48]:

It’s a nightmare. It really is. And so I know that one thing that somebody listening might be thinking about is what about the quality then? If we’re reducing cost, is that affecting quality at all?

Mike Kaeding [00:04:58]:

This is probably the biggest misconception. People think that quality and price are two opposite ends. The reality is, when you do things right, you get quality and lower price. Think about the iPhone. You have a supercomputer in your pocket. And 30 years ago it would have been a desktop computer that could barely connect to the internet. It’s a radical improvement through improvements in innovation. So our properties are oftentimes some of the very nicest in the state. For example, our latest property is at the stop of a brand new transit line with a restaurant, coffee shop, two floor main entry, coworking space, thousands of square feet of amenity space, a pool, a spa, workout facilities, rooftop, patio and grill of views of downtown Minneapolis and St. Paul, and penthouse suites with 22 foot high ceilings. We can do all of that at a lower cross point than most people can develop the same property.

Jen Hardy [00:05:55]:

That is so amazing. And I love the assembly align idea. That just makes way too much sense to move to get the guys all in there at once. And that you have all of the specialists, right? You have all the people that do the things.

Mike Kaeding [00:06:10]:

For most companies that’s not possible because they’re working with very disparate companies that have to then coordinate together and they’ve got incentives that are misaligned with yours. It’s a big headache to rustle through all that.

Jen Hardy [00:06:23]:

Absolutely. So since you’ve got this down so well, I’m guessing that this didn’t just start a couple of years ago. This is a family business. It’s been going for a while, right?

Mike Kaeding [00:06:34]:

Yeah. My parents originally started the business and very small at the time we were producing eight or ten units a year compared to about 500 today. And I remember family outings where we went to a local hardware store a half an hour drive away and each one of us would fill up two carts full of supplies. Imagine me a pipsquey kid, can barely get my head past the cart and here I’m pushing two carts around and we would put it in my dad’s little trailer and drive down the highway. Not sure it was entirely legal because it felt a little rickety, but we would bring the supplies in and work to build these buildings. So that was my summers growing up. In the winters I was in school. And then at one point I went off to college and I wanted nothing to do with the family business. So I went into computer science and mathematics and management and other things involved with a number of small businesses, startups at the time. And my dad really wanted me to join the business challenges. I didn’t want it. And looking back, I think the reason I didn’t want it because I didn’t want people to think it was given to me. So I really wrestled with my own ego. But deep down what I started to realize about myself is that I wanted to make some kind of meaningful, positive impact on the world. That’s how I wanted to spend the limited life that I had. And so when I started to reframe my thinking in those terms, I started to realize that I could work with my dad to take this small business and grow it to that kind of impact.

Jen Hardy [00:08:18]:

And it sounds like you’re doing exactly that. That is so amazing. And that time that you went off to college and you studied the different things, that allowed you to bring those back into the business then, right?

Mike Kaeding [00:08:29]:

Oh, for sure. Like computer science. Right. People often ask like how did you get into real estate from computer science? Well, you just heard the story. But looking that becomes a really valuable asset. We can now apply technologies that maybe other real estate developers can’t think to do because they don’t have a skill set.

Jen Hardy [00:08:48]:

Absolutely. And we talked about values and that it’s important to you that people can afford their homes and have quality homes as well and that that comes from value system that is inside of you. Can you share a little bit about that? Because I think that is especially in the construction world so important and novel, honestly, from what I’ve seen outside of it, absolutely.

Mike Kaeding [00:09:16]:

I think in many ways the company has become a little bit of reflection of who I am. And so we have our core values and they’re so critical to us. In fact, every orientation, I do the orientation every single Monday, it’s like two and a half hours with all of our new hires, because it’s so important that people understand the energy and passion I have behind the values, behind our purpose, behind our mission. But for our values, they describe who we are. And one of the values that’s really different in the world of construction is that we want the value is called be a genuine human, really simple. You would think a lot of people would believe that’s the right thing to do, but in the world of construction, it’s actually stereotypically and quite normally the opposite. I hear every single week at orientation people telling me horror stories, but what their experience is really like with people yelling at them, not treating them well, demeaning them, not listening to their ideas, just telling them to get the work done and just be quiet, right? That sort of thing is quite normal and it’s polar opposite on how we think about things here. And so that respect is very high. If someone shows a level of disrespect, they don’t last longer than a couple of days here. If we realize that, that’s a problem with them. But it’s really interesting because at orientation, we describe our values, we describe our purpose, our mission. And oftentimes at the end of orientation, there’s somebody in the room that looks me in the eye and says, mike, I’ve heard these sorts of things from company after company. I don’t believe it, I see it. I said, Good, that’s what I want to hear. And what we do is we do follow up orientation two months later with everyone, and at that orientation, they share back with me what their real experience is. And it’s not perfect, right? I learned stuff there that’s really useful, that we can tweak and improve. But that skeptical guy comes back without fail, says, Mike, I thought you were full of it. Orientation, when I got to walk on site and see people saying hello and greeting me and excited about my ideas and pushing me to be better and just creating a wonderful environment, I was shocked. And that’s exciting, because that’s when we know we got something right. And it’s not always been like that. It’s been a learning lesson, a lot of growth for us to get to that kind of stage.

Jen Hardy [00:11:47]:

It sounds so incredible. I love the idea of that follow up two months later. I think that would be so important for other businesses to adapt and see how are you getting on, right? How are things going for you? And I think that just speaks to your values as well. That you care about your employees. So are you planning on any kind of expansion? Because I can just see this taking over the country format like this.

Mike Kaeding [00:12:13]:

Yeah, we’ve been growing quite rapidly about doubling in size, more or less every year. The biggest challenge is the rate, which you can find amazing people. And so we’ve built out a whole department for that, but just our long term growth. Over the next ten years, we’re hoping to reach 192,000 units under management, with a 60,000 unit per year pay us. Now, one of the things I often get asked at this stage is, mike, this all sounds great, but I went to your website and your rents are good, but they’re about average and that’s actually intentional. Why? How does this all fit in? If we were to lower rents by 20% to 30% today, which we could do, that would solve housing affordability for one to two, 3000 people. That’s great. But what we’re doing is we’re taking the money, the profits that we’re earning there, and putting it into the system that builds houses or housing. So imagine factories. We literally have factories, or precast facilities, or engineering and architecture. We’re building on a whole infrastructure to build buildings. Even Elon Musk talks about it’s hard to produce a car, but it is ten to 100 to 1000 times harder to produce the system that builds cars. So imagine someday Tesla’s Gigafactory, but a gigahusing factory. That’s what we’re working to build. And our goal is to ramp up to 60,000 units. Now imagine, though, what starts to happen at that stage. We’re producing at that stage so much housing to the market that given that supply prices start to come down. But here’s the magic. It doesn’t just happen for our own residents, it happens for everyone across the entire market. And that’s ultimately how you solve housing affordability for everyone nationwide.

Jen Hardy [00:14:13]:

Which also would probably upset a few people about their home values, maybe, I don’t know. But the idea that people could afford to live somewhere, and I love that you’re saying because someone would say, well, if the rent isn’t lower and you’re just pocketing all that money, then that doesn’t sound like a value. But you’re not. You’re taking that money and you’re reinvesting it so that in the future, people can really afford to have decent places to live. And I think that is one of the most commendable things because you’re meeting one of everyone’s basic needs and setting up a system, even just for the podcast, there’s systems that we have to do and it’s nothing like building a house. But I’m struggling with these systems, so I can only imagine the logistical what could be nightmare for you, but with that background and your education, I would imagine that that’s coming into play here too.

Mike Kaeding [00:15:09]:

Yeah, absolutely. And one part of my story I haven’t touched on yet is within a few years of joining the business, my dad passed away. It was sudden, unexpected. I mean, I can remember the day that it happened. He walked in and we got a call from a bank saying that our checks are bouncing to our residence, to our employees. And my dad had always handled that, and there had never been a problem. So what was going on? It turned out he’d moved money to the wrong account, which was such a basic error. So we had him sit down to write a check, and he couldn’t write out basic check. I knew something was wrong. And so within a day, he had a stroke that was caused by a brain tumor we didn’t know about, and we essentially lost him. And looking back, I really didn’t know what I was doing with running the business. There was only a few years into this, I was fairly inexperienced, and I’ve got stories where the city was very clear with me that I was not very good at what I was doing. But there was some value in that. And the value that I learned from it is I could start questioning things. I didn’t know the way things were supposed to be done, and I had no one to tell me no. And so we just tried new things to push this industry forward in new and unique ways. And I think that helped us get to the kind of stage that we’re at today.

Jen Hardy [00:16:44]:

And I think that’s so great, because one of the things I do on this podcast is try to encourage older women to start again, to start something new and different. And a lot of them are saying, but I don’t know. I don’t know how. I don’t have those skills. And I love that. What I’m hearing from you is you’ve got this business that’s gone from eight to ten units to 500 units a year, because part, in part, you didn’t know what you were doing a little bit, and you took it your own direction, you did your own thing, and you’re making a success. And I think that speaks volumes for anybody who wants to start something. And other people say, well, that’s not how you do it. You don’t know enough. You maybe don’t have to.

Mike Kaeding [00:17:27]:

It’s so true. One of the biggest things I have learned in life is that anytime you start something new, even if you’ve got many years under your belt, you’re going to be terrible at it. Right? And that’s okay. That’s the human nature. We start off not being able to walk, not being able to talk, can’t do basic arithmetic. Right. We can’t conversate with people. We go through that stages. And as a kid, we don’t think much of it. But as we get older, there’s something inside of us that says, if I don’t put it out and it’s not great initially, well, then I shouldn’t put it out. But that’s the wrong way to think about it. One study I saw took people and had them make clay pots. They broke them into two separate groups and for the first group they said, we want you to make the very best pot that you can. The second group they said, just make good pots. But the big thing here is make as many of them as you can. What’s interesting is when they looked at the first pot or the first group that did one pot versus the second group that did many, the second group, their first pot wasn’t very good and the first group’s pot was pretty good compared to that. The interesting insight is the later pots of the second group were better, much better than the other pot. In my life, every step of the way I start something new and I get people around me just reminding me how terrible I am at it. But you have to work past that and if you do, that’s where greatness happens. One little fun antidote. I was talking to a prominent podcaster not too long ago and I said, dude, how did you get what’s the difference between you and the other people that didn’t make it to your kind of level? He said, honestly, the simple answer, I hit record. Right. So many people stop because they’re just not willing to make that first stop.

Jen Hardy [00:19:30]:

Yeah, and that’s so true. And look at you. Question when you talk about a unit now is that a building or is that a single family dwelling place?

Mike Kaeding [00:19:43]:

A single family dwelling. It’s a one apartment unit.

Jen Hardy [00:19:46]:

Okay. Wow. So that is huge. That is so huge to go from that to that. Wow. And how many employees do you have now?

Mike Kaeding [00:19:58]:

About 250. About 15% of them are international, actually, which is kind of fun.

Jen Hardy [00:20:05]:

That is amazing. I love that. Wow. And so all these people get to work for this amazing place and you.

Mike Kaeding [00:20:13]:

Are in we’re in Minnesota. This is where all of our properties are located right now. We have manufacturing capability in Wisconsin, also expanding down to Texas and some in Mexico as well.

Jen Hardy [00:20:27]:

That sounds great. Yeah, I know. I used to live in Los Angeles and going down to Mexico, there was definitely a housing issue there. So I think that that’s really great that you’re expanding where people yeah.

Mike Kaeding [00:20:39]:

And for Mexico initially it’s just going to be production. So we’ve got like steel wall panels and stuff that we probably be produced down there.

Jen Hardy [00:20:47]:

That’s awesome. Very cool. Well, can you tell me tell me a little bit about your family, Mike. Who are you?

Mike Kaeding [00:20:53]:

Yeah, I have just an amazing family. We have two young daughters. One is the age of two and one is the age of five. My wife is the most understanding, kindest person in the world. I am not exaggerating maybe to her fault, but I couldn’t do what I was doing without her support and her just kind heart. One little fun thing that’s kind of come up recently is my five year old has been leading, saying, I want to create a YouTube channel. I want to do YouTube videos. Right. And put her off. Put her off. And eventually she became really persistent with it every night, said, fine, we’ll make the first video. So we made this little silly video of her, I, and Emma eating gummy food versus real food. And then that sparked into a spicy food challenge and then a big treasure hunt. And that’s been fun. What I didn’t realize is how fun of an activity that would be for us to do together. And then it ended up it’s becoming this thing, and it’s been growing on YouTube. So it’s been fun to see that happen. It’s kind of a fun aside for us to do that is can you.

Jen Hardy [00:22:05]:

Share the name of it?

Mike Kaeding [00:22:06]:

Yeah, it’s called Fearlessly Unicorn.

Jen Hardy [00:22:10]:

Oh, my gosh, that is so perfect. And I’ll have the link to that in the show notes because obviously that is not about building houses, but I think that just sounds like a blast. And my 13 year old has been wanting to do a YouTube channel, and I’ve been putting her off, and literally all of her equipment is arriving this week to get her started. Yeah, we’re just going to go all in because she sees me podcasting and she’s like, hey, I want to be part of something like that. And so there you go. But fearlessly a unicorn.

Mike Kaeding [00:22:41]:

What’s really cool, especially for the moms out there, is it captures moments of just like, really neat, genuine experiences that the kids are having. Right. It’s the little nuances that come in out of that that you can kind of edit together. I don’t know. It’s just so cute. It’s fun to watch.

Jen Hardy [00:23:00]:

I love it. And I love dads that love being with their kids. I think it’s such a good example to other men that you can be a strong man, you can be a businessman that’s doing all these great things and still come home and love your wife, love your kids, and spend time with them, and that it doesn’t take anything away from your strength. In fact, I think it makes you stronger to be quiet.

Mike Kaeding [00:23:22]:

Absolutely. If my home life is strong, I am just so much better of a person at work. Just part of that is just recognizing that when I get home, I want to give 110% to my family. So even if it’s been a rough day, something really rough has been happening. I always come in it’s, hey, Claire Bear. Hey, Emma. Right. And like, racing to catch them and engaging, I always bring the energy because I just know that pays off in the long run.

Jen Hardy [00:23:50]:

Yeah. And as someone with adult children and other women listening, do as well. The fact that you’re getting all you can out of this time, because as other people will tell you, you blink and it’s over. You can’t imagine when you’re in it and they’re little because it’s so all encompassing, especially for your wife when she’s home all day. But seriously, I just blinked. And now they’re all living all over the world and so it’s just a beautiful thing to hear about. So thank you for sharing. That part of it. I love that if someone is living in Minnesota and they think, I want to track this guy down, I want to see these buildings, I want to get into this, where can they find you?

Mike Kaeding [00:24:29]:

Yeah. You can learn more about us by visiting our website. Norhart.com that’s norh.com a couple of fun things. There not just our own properties, but one is we’re launching a new investment platform which lets people earn a high rate or an interest rate, and you can lock it up for different periods. Basically, we’re replacing the banks and we’re giving you the profit. So that’s been really fun to see that all come together. And then secondly is we’ve got a new podcast that we’re working on called Becoming a Unicorn. It’s about the journey of small businesses growing to that billion dollar enterprise. But frankly, for your audience, you probably would enjoy the fearlessly unicorn just because it’s about kids and having fun and it’s just really cute.

Jen Hardy [00:25:19]:

Can’t beat that. Yeah. And I want to go back. Okay. Because this investment thing that you’re talking about now, you’ve sparked an interest. So what you’re saying is instead of you going to the bank and borrowing money, you’re allowing people to invest and they’re making the interest instead of the bank.

Mike Kaeding [00:25:35]:

Yes. What it feels like to the end, investor is they can go to a website which is just about complete. We’re just about through all of our approvals. And you can deposit money into an account and you can earn a really high rate of return, much higher than you can get at the bank. You can lock it in for different periods of time, six months to 24 months currently, and then you can’t take the money out. If you lock it, then once you do get it back, you get a higher interest rate for having locked it. And the way it works a little bit behind the scenes is this is an investment fund that then is putting that money into our other projects. So if we build a new building, we’ll still maybe have the bank involved for part of it. But then the Northern investors, that money is pulled together and put into other projects. But you don’t have to think about all of that. You’re welcome to all the information is out there. But to keep it simple, it’s an account that gives you a really high rate of return that you can’t normally get elsewhere.

Jen Hardy [00:26:39]:

Well, and you’re helping grow something that’s helping people.

Mike Kaeding [00:26:43]:

Exactly. Yeah. Helping be a part of the mission.

Jen Hardy [00:26:46]:

Yeah. And I love personally and it sounds like you too. Making money, doing things that help people. I don’t want to just make money from people that I don’t earn or for things that they don’t need. Right. I want to give them value for what they’re getting. And it sounds like every piece of what you’re doing is doing that. And I just want to say thank you so much. I think it’s so great that there’s people like you out there doing that. It’s so very important.

Mike Kaeding [00:27:14]:

Yeah, it’s such a great point too. My dad died at a relatively young age and think a lot about how short life really is. We only live about 5000 weeks here on Earth and I often ask myself how do I want to spend the minutes I have here on Earth. And for me, that’s about my family, it’s about my kids. It’s also professionally, it’s about how I can make a meaningful impact here on Earth. I could care less if we have a lot of money at the end of our life, right? Like you’re going to shove $100 bills in my grave. What does that actually do for anyone? I think instead a lot about what kind of impact can we actually have. For me in my life, that’s going to be about housing, affordability and for.

Jen Hardy [00:28:05]:

You listening, that is a very good point. What is your impact? So if you’re an older woman, you might not have kids or you might have kids and they’re grown now, but your impact doesn’t need to stop. So what is it that you can do? And it might not be disrupting an industry, right. It might be visiting a lonely person today or it might be something, but we can all have an impact and it doesn’t matter how old you are or what your health is, everyone can do that. So I really appreciate the reminder, Mike. And before we go, is there anything else that you wanted to share with everybody?

Mike Kaeding [00:28:41]:

No, I guess I would reiterate just have the tenacity and energy to start something new. That first step is always terrifying. Just know it’s going to be terrible. That’s okay. It’s part of the process. But taking the first step enables you to get to the second, the third, the fourth, and eventually you’ll look back and be like, wow, I’m glad I did that.

Jen Hardy [00:29:03]:

That’s perfect. All right, I think we’ll end there. And thank you again for joining me today. I really appreciate it.

Mike Kaeding [00:29:08]:

Thank you so much for having me.

Jen Hardy [00:29:12]:

Wow, was that inspiring or what? I just love Mike, I love his ideas and it is amazing. The whole assembly line for home building, can you imagine what that could do for people who are going without having proper housing right now? It could be the most amazing thing. So I really hope other people jump on board and get into this. And I just want to thank you so much for listening to remind you. To tune back in on Friday because the second Good Human Award is going to be given out. We’re going to be giving one every single week because the world needs to hear more good news. And that is my job right now. And another good thing that’s happening is Jen’s Friends. If you go to Jenhardy. Net Friends, you can sign up to get a daily video email that inspires you and encourages you, reminds you that you’re amazing and beautiful inside and out. And you might not feel like you need something like that, but I’m sure that you know someone who does. And you can gift it, you can gift it for a month or six months or a year, but show somebody that you care because it is something that a lot of people need right now. Ever since 2020, people have been feeling a lot more isolated. So I just want to give everyone away to know that they’re loved and included and make it feel special. So thank you so much for tuning in today. Stay tuned and stay fabulous.