Do you want to achieve fantastic freedom of time?
Steve Louie is an entrepreneur and real estate investor who achieved fantastic freedom of time. He's invested in over 3,000 units including 8 properties in Arizona as a General Partner. Steve went from cubicle to corner office to full-time real estate investor. Steve believes his journey is life-changing and wants to help others do the same.
You'll learn how Steve was able to achieve this success by investing in apartments and what it takes for you too! If you're looking for an alternative way of living your life then listen to this episode! This could be the best decision you ever make!
Table of Contents:
- Where To Listen To The Podcast
- From Insurance to the Investing Space
- What Makes or Breaks the Opportunity to Achieve Freedom of Time
- The Key to Success and Freedom of Time
- A Good Chance of Achieving Freedom of Time
- The Sacrifice of Time
- Freedom of Time From A Passive Perspective
- How to Reach Steve Louie
From Insurance to the Investing Space
Darin: Steve Louie lives in California with his family. He spent the bulk of his career in the insurance industry and climbed the ranks from cubicle to corner office. Then he found apartment investing and recently quit his W2 job to go full-time as a real estate investor. Steve leverages his vast experience managing teams in the insurance industry to managing teams in the investing space.
A little bit on how I know Steve. We both were part of the same multifamily mentorship group. And I probably joined three and a half years ago. There was an event on a Saturday and Friday night, there was a happy hour. And so I went to the happy hour, I didn't know anybody. Steve was one of the guys that I met there, and he was pretty new in the business as well. We kind of hung out and swapped stories, and he's had a ton of success since then. So I am really looking forward to this conversation. Steve, typically first question, how many properties and how many units are you currently invested in?
Steve: Thanks for the great introduction. I'm invested in about 3,000 units and a general partner on about 1,000 units. We have eight properties that I'm a GP on as well, specifically in the Arizona marketplace.
Darin: That's crazy. So did you start around the same time as me like three years ago, three and a half years?
Steve: Yes, I think I remember. We were standing at the bar.
Darin: We did have a few beers while we were talking.
A Side Hustle
Steve: We did. And then it kind of helped me change my mindset a lot. I was a corporate America guy all my life and doing this was somewhat of a side hustle. I got introduced to multifamily, and I really doubled down in the Arizona marketplace. Found it a little challenging living in California to close a deal by myself in Dallas and in Texas. So kind of took all the principles that both you and I learned and applied them in the Phoenix, Tucson market.
Darin: That's huge. So if I recall, I could be wrong, but I want to say you were in the insurance business?
Darin: So what were you doing in corporate America?
Steve: Yes. I call it a journey from cubicle to corner office. So I started as an underwriter on the healthcare side. And then worked my way up and graduated into a corner office in a senior executive role within the organization. I was a W2 wage earner on the insurance side for a couple of small companies, MetLife and Mercer Consulting Firm.
Darin: Really small.
Steve: And halfway through my career journey, I got into real estate.
Climbing the Ladder to Freedom of Time
Darin: So you made it to the corner office, that's the dream for a lot of people. Go to school, go to college, get good grades. Get into a good company and climb the corporate ladder and get that corner office. So you had the corner office and you still got involved with real estate. When did you get involved with real estate in that whole run-up to going up the corporate ladder?
Steve: Yes. As I was climbing the ladder probably about halfway through my career, I've been in the insurance business for 25 plus years. Halfway through the journey, my financial planner and CPA actually mentioned that you might want to consider getting into some type of real estate. Because there's some tax advantages that you may or may not be able to take advantage of. I investigated that while I was working, and I got into single family homes. And so those single family homes, I built a portfolio of 10 those including fourplexes and duplexes.
That started the journey of the passive income route. Then shortly thereafter, I went to a meetup, which I typically don't go to. Someone at the meetup mentioned, "Hey, there's a conference out in Dallas that you might want to consider going to. It's all about buying apartments." And I was like, "Now, that's kind of outside of my league, I don't have time for that. I don't understand commercial real estate," et cetera. And next thing you know, I think that's where we actually met.
The First Single Family Deal
Darin: That was the time that we met, yes. We were both going to that conference for the first time. Let's go back to the first single family home. Part of it was prompted by an advisor saying, "Hey, look, you may want to consider this because of the tax advantages." Was that scary doing your first single family home deal?
Steve: So there's a lot of fundamentals around single family homes too. Here living in California you can make money on single family homes, but it's not as landlord-friendly as some of the other states. So I chose to invest in pretty much turnkey properties outside of California. My first purchase was in Ohio. I purchased two single family homes in Ohio that were and still are cash flowing today.
Darin: You still own those properties?
Steve: Yes, I still have most of my single family. I was thinking about completely unloading. But when you have a passive income stream, it kind of makes sense to keep them at least at this point. I might change my mind next year, but I still have that portfolio.
Darin: From a listener perspective, there's some listeners that totally get passive income. There's some that are just trying to learn what passive income is. And others that are in the multifamily business and they're looking to scale their business. But passive income, you're not doing anything anymore, and you're getting basically mailbox money. So you're making money while you sleep per se.
Freedom of Time Is a Dream for a Lot of People
Darin: That's the dream for a lot of people is to have enough investments that you get positive cash flow to pay for your lifestyle. How did you go about buying those single families in Ohio living in California? I understand why you did it because in California, it's really expensive, and it's hard to cashflow. So you realized, "Hey, I need to look at a different market." Did you end up finding somebody that was boots on the ground in Ohio? How did you do that?
Steve: The nice thing about real estate in general, it's about building a strong network across the board. One of the things that I did, there was a turnkey provider out here in Newport Beach that focused all of their time on real estate. Single family homes outside of California and in the primary markets that are very landlord-friendly and that cash flow. And so I researched that model and they led me on to all the multiple different markets that I'm in, Ohio, Arizona, Texas, and Tennessee.
I'm from a single family home perspective. And those actually match very well if you look at multifamily investments as well. They connected me with property managers and brokers in that particular area, and they had relationships that drove that. It was pretty much hands-off from my standpoint, I really just had to put an offer out. At that point in time, it was 10, 12 years ago, it was turnkey and cash flowing. You've heard the 1% rule maybe, so 1% of the actual rent. It's 1% of the actual purchase price of the house is your rent.
Going Down the Multifamily Route
Steve: And so we did that, and that just made sense to us, and I started to grow that. Like I said, we got that portfolio to 10, and then I met someone that suggested I go down the multifamily route.
Darin: Yes, that's awesome. So what was in it for that turnkey provider? Did he get a commission or a piece of the deal? That's an interesting topic in itself. As you go into real estate, there are people that have already done what you want to do. That if you go out seeking to find those people, yes, maybe they're a mentor that you have to pay to learn. Maybe they're providing a service and they get a commission. But there's a lot of people that you can leverage the experience of in real estate if you go out and search for it. So that's key that you did that. And then when somebody recommended multifamily, then you went and did the same thing.
Steve: Absolutely. Tony Robbins always says success leaves clues. So one of the things why I tried to go down that path, just to go back to single family. With my corporate job and how busy I was trying to climb the ladder, we didn't have time to research a market, figure out who the best broker was out there, or figure out the property manager. Went to a provider that did all of that, and they found the deals. They did get commission on it, so they split the commission with the broker there, but they aligned you with a great property manager.
What Makes or Breaks the Opportunity to Achieve Freedom of Time
Steve: As we all know, property management is what makes or breaks the opportunity. You can do all the same things in multifamily. And that's the great thing about real estate, the networking, the potential to learn from others. I like to share what I've done and help others out who are seeking to get out of the corporate rat race as well.
Darin: Yes, absolutely. Look, there's a lot of people that go down the path that you went down. They start out investing in a single family and then they get to a point where they're like, "Oh man, now my portfolio, how do I go bigger? How do I scale this thing because it's starting to take up a lot of my time? And so then you went and sought out and you joined a mentorship group. Now this is crazy, you are a GP in over 1,000 units, eight properties in the span of three years. Talk about how you did that. I see how you have the base, the experience of, "Hey, I'm going to leverage other people. I'm going to invest out of state." But talk about how you got into your first multifamily deal.
Steve: It goes back a little Darin on the education that we both learned. So education and mentorship, I believe, is truly important. A lot of the principles in the programs that we were in really provided the foundation on investing. And there's a lot of folks out there that think they can do it on their own. They can, they definitely can, they have the heart and the will. But sometimes they just need a little bit of the guidance to get you there.
Making a Decision
Steve: Essentially, all of the things that I learned in the educational program that we were both part of, I took all of that and applied it to the Phoenix marketplace. So I took two weeks off of my corporate job, my W2 job and spent that in the market. One meeting all the brokers, the commercial real estate brokers and multifamily. Connecting with all the loan brokers and trying to make a decision on which one made the most sense for us.
Connecting with all the property managers as well as contractors. And spending that time in the market knowing and understanding the submarkets. Then my prior background in insurance relates, I would say it's really synonymous with the business side. It is very synonymous with the multifamily real estate brokers that are out there. So I made a really good connection with the real estate brokers just because of my background.
I always say everybody can do the underwriting, but it takes a lot to really execute and build that relationship with the brokers. So that first meeting I actually remember today. I went out there, met with two brokers. One of the things that I always do is bring a copy of my real estate resume, which has a lot of passive investments in it.
They saw that and they looked at it and gave me that opportunity because I was able to connect with them. So that opportunity, they said, "Oh, here's an opportunity, we can go check it out now." We looked at it, and the next thing you know, a week later, we closed on it, close and everything.
Darin: A week later you closed on it or a week later you got it into the contract?
The Key to Freedom of Time
Steve: Yes. A week later, yep. Put it on LOI, and then 60 days later we closed the deal.
Darin: I'm like that's the shortest multifamily close I've ever heard of that we closed in a week. I haven't heard that one before.
Steve: You'd have to have a lot of cash for that.
Darin: Yes. But what you brought up there is key. Broker relationships is something that if you're serious about getting into multifamily, the brokers on the large-scale multifamily, which we kind of define as 60 units or greater, the brokers control probably 80% of that market. When you first meet with them or you first have a call with them, it's a two-way street.
You're trying to see whether you like the broker and want to work with that broker. And that broker is sizing you up like, "Look, is this guy for real? Is he committed? Does he have the resources? Is he somebody I want to work with? Do I think he can close? Is he credible?" And building that relationship from the get-go is very important.
Steve: One of the things too is in meeting them. You're right, they have thousands of people calling them every week. And so they have to decipher which one is going to be the best sell. The one thing that I tell everybody is you have to stand out. Or have a little bit of an edge in some capacity for them to remember you. One of the things that I love doing, I don't think anybody has ever done this, but I brought them Starbucks. So I brought them Starbucks and pastries, first meeting.
Applying the Same Principles in All Types of Business
Steve: That's what always would happen to me when I was on the insurance side. All the carriers would come to me with tchotchkes and the breakfasts and the coffees and all that. So just applying all of those same principles that happen in all types of business. Bought them coffee and pastries, just the little box, which doesn't cost that much. And they remembered me on that, and they're like, "Wow." I would also say, come with a resume. So you come to the table with your real estate resume, that's going to help.
A lot of us just want to come and show up, they have to have something to remember you. And then they look at it and they realize, "Oh, this person is credible." Even though I had done zero deals with them. To this day now, I've done four deals with them. We're actually unwinding one deal, we're selling one as well. So four deals with that one broker due to the initial relationship. And we joke right now, "Oh, yeah, you bought us pastries for our whole office." So kind of cool.
Darin: That's great. Another thing you brought up was getting an education, and I think that that's important. Listen to podcasts, read books, get an education. A big value add for me in joining that group was seeing all the other people that had prior success. All of a sudden you surround yourself with all these people that they figured out how to do it. And look, they're great people, I'm glad to know them. They're smart people, they come from all different industries.
The Confidence You Need to Achieve Freedom of Time
Darin: You look and you're like, "If they can do it, I can do it." So that also gives you the confidence that other people are figuring it out and you can do it as well.
Steve: Yes, absolutely. A lot of it is mindset too. So the fundamentals are all there. For me, I was much more programmed as a corporate individual. Take my money, invest it in a 401k, do all the right things. I was blessed to be able to rise up the corporate ladder. And a lot of that is through hard work. Finding the right mentors for myself, and people taking a chance on me to take me to that next level as well.
So really, just watching others and seeing their success on the multifamily side, it was a mindset shift for me. I thought the first thing is I don't even want to go to Dallas. I'm never going to even get into this area. But the person challenged me and said, "Hey, why don't you start listening to the Old Capital Podcast." I started to do that. The aha moment came about.
I usually don't fly to various conferences for anything outside of, at that time, my personal work because I was so busy. But took a weekend, and that was absolutely life-changing. It was life-changing. It established how to build an even quicker passive income stream to allow me to exit the corporate rat race sooner.
Darin: So listeners, did you hear what he said? He said it was life-changing. It’s important to know that, look, it's hard work. You have to dedicate yourself to learning and then taking action. But it has the opportunity to be life-changing, so let's talk about that.
Markets and Partners
Darin: One, how did you pick the Arizona market? You said you wanted to invest outside of California, but why Arizona? Two, when you invested in your first deal, it's my understanding that you partnered with a few folks. How did you develop that partnership? So talk about both markets and partners.
Steve: Yes. So why Arizona? A couple of things. It's similar to the Dallas or Texas marketplace in itself. The great thing about it, it's landlord-friendly, so that's the most important thing. Here in California, you can have somebody stay in your unit for two years and never pay rent if they follow the rules appropriately.
Darin: That's crazy.
Steve: It's different. Versus Arizona and Texas, at least in Arizona in five days we can actually serve notice if they don't follow through with their commitment on their lease. We can have them out in a couple of weeks to bring in a tenant that would appreciate the high-quality asset that we have for them. Then it's a high rent growth, there's a lot of migration into the state as well.
And so that migration, you see all the charts that people are migrating into Phoenix as well as Dallas. A lot of similarities to the Dallas marketplace. In terms of the deal, initially we were thinking about syndicating this opportunity. But we just took it down with a joint venture of three individuals.
Darin: How did you meet those?
Steve: We met as part of the networking group. We did our due diligence, we did all the right things. And then we executed based on everything we learned being the first time and using our own dollars to do that. That was pretty neat. Learned a lot through the process.
The Key to Success and Freedom of Time
Steve: We had to go through a couple of different property managers. And then we finally found one that is top-notch that really met the needs. So I would say that's a key thing as you're going into the market. The property manager is really the key to the success after the acquisition. We're so focused on the acquisition, but a lot of times we forget about the operations piece. Because everybody's training us on, "Hey, here's how you acquire it." And once you get it, what's next?
Darin: Absolutely. You said a few things there in terms of markets, important for the listeners to understand. Steve brought up a number of characteristics that are very important to look at in terms of what markets you want to invest in. One, you want population and household growth. You want income growth, you want job growth. So when you see companies moving there and you see population growing, that's a good sign for a market. Seeing rent growth.
All of that is a positive sign of a market. Then he mentioned landlord-friendly. There are some states, as he mentioned, California, that are not landlord friendly, they're more geared towards the tenant. You could end up having tenants in your property for a long period of time not paying rent. And you can't legally have them removed and bring in another tenant that would appreciate the property.
Those are factors that people look at in terms of the actual market to invest in. So he decided it meets all those criteria. I have to imagine the fact that Arizona was pretty close to California, it was a shorter flight, probably, it was part of why you chose it as well.
The Beauty of Having Freedom of Time
Steve: Yes. Proximity was great, it's about an hour flight for me or I can drive it in five hours. Even during COVID, we were able to drive the property and drive, so that's the beauty of it. The distance was a little bit more challenging. But it can be done outside of the state if you have the appropriate property managers in place that I've now vetted and have a team that helps us there.
Darin: Yes, that's huge. And then you partnered with a few people. You decided to take down the property with your own capital between you and a few partners. But those partners, you met through a multifamily mentorship group. Look, a lot of listeners when you think about your network, you say, "Hey, I want to get into investing in real estate. And I want to get into investing in large multifamily." There's going to be a lot of family and friends that are going to tell you you're crazy.
You may let that limit your mindset and say, "You know what, maybe it's for somebody else." But when you end up going and getting involved in groups that have a lot of people that are like-minded. So Steve goes there, he meets these other people, they want to invest in Arizona also. And they're like, "Why don't we team up?" It just makes sense, and so that's huge. But you have to do the work to meet those people. You have to like them, trust them, and build that relationship.
A Mindset Shift
Steve: No, absolutely. It's a mindset shift as well because the majority of us out there are hardworking corporate America individuals. And it's a little bit of a mindset shift that you have to have if you want to invest in something that's going to be providing some tax benefits as well as passive income across the board. Which, as you mentioned, Darin, passive income just keeps coming every month no matter what, whether you're working on the property or you're on vacation.
Darin: Yes, that's a beautiful thing.
Steve: That's the beauty of passive income. I think we've been both benefactors of that.
Darin: Absolutely. So how big was that first deal that you guys got into?
Steve: That first deal was 28 units. And so 28 units, the price point on that, I think we bought it for around 85,000 a door. Then within about 23 months, we did a full cash out refinance, and got 100% of our money back. So we have no money in the deal. And it's an infinite return like the purple book says, the Robert Kiyosaki thing, you want an infinite return on that. So that ended up being a great opportunity for us because multifamily is so cool. You can force the appreciation. And so we are able to improve the units, increase rents from as low as $500 to today. It's probably pushing 1,100 with some rehab that we have completed.
Darin: Wow, more than double?
Steve: Yes, exactly. And so that's how we were able to cash out, refinance in very short order.
Darin: You said 18 months?
Building Great Relationships
Steve: 23 months on that one, we had 23 months from beginning to end. I think the background that my partners and myself had, you have to be able to deal with people, relationships, and motivate individuals to keep things moving along the dial, and then having those great relationships. Initially, we were going to sell. We put it for sale and then the numbers came in that, hey, we can actually cash out refinance, get 100% of our capital back and then keep this as an infinite return. It can be done.
Someone said, "Oh, that's a unicorn." Well, our second deal which I got off-market from the same broker while we were rehabbing this first one, while we were going through the process on it did the exact same thing. We got about 80, 90% of our capital back on that one now, and that's a cash flowing asset.
It can be done, and so you just have to kind of take those. Like you even mentioned, people will always be telling you this can't be done. But we have to have that mindset as how can we make this done or who can we get involved to help us get to that point. And I get really enthused when I talk about multifamily. Like I said, it changed my entire outlook on what is possible.
Sharing with others is what I like to do and helping others out. And giving back to the community that has been so good to me and meeting great people like yourself and others in the industry.
Why Education Is Important
Darin: But you know what, hats off to you and your partners. People don't come and knock on the door and just hand it to you. So education is very important. But then at some point, you actually have to take action. And it's a little scary when you're buying something because you don't know if you're buying at the top. Any investment you make, there's no guarantee. What we learn is that all these other people have built tremendous wealth by doing this.
So you kind of have to step off with a little faith and then take that chance. Then once you have experience, and after that first deal, you put in the capital. And then all of a sudden you do a cash out refi, get all your capital back, you still own the asset. It's still appreciating, you're still getting cash flow off of it. You're like, "Holy cow, this is real."
Steve: You hit a great point. A lot of times, all of us, it's analysis paralysis, I call it. So we'll analyze a deal 100 times. And if I look back on my prior deals, no proforma that you put together is going to hit exactly what you projected. We used to spend hours, we met every single Monday and spent from, I think it was nine o'clock all the way to almost two in the morning sometimes just underwriting deals. But at some point, you have to take action and execute. So execution is the hardest part. I think some of my background being in sales revenue-generating roles throughout my career.
One of the Key Things That Leads to Freedom of Time
Steve: You have to execute or you have to close. And so that was one of the key things that I kind of had to make sure we did or else we'd still be somewhat sitting on the sidelines, so to speak.
Darin: Right. There are a lot of people that get involved in this space that get stuck in there on the underwriting. And they don't go hard after a deal. I don't know about you, but my experience with underwriting, it's an important part. You have to go through it. In the beginning, most people, including myself, stay extremely conservative. So when you do underwriting, people will teach you, okay, you take these numbers and put them here.
And then it's going to calculate returns on the deal and the general partners. How much they're going to make and the unlimited partners, what they're going to make. But what they don't really get into that much is that there are so many decision points when you're putting together that underwriting. That if you take the conservative route on every one of those, no deal is going to look good.
So one, hey, I can talk to the lenders, and they say I can get a 3% interest rate. But I'm going to use three and a half just in case. Hey, I think we could bring rents to 900, but I'm going to say 825. I think that we could keep our expenses at this percent, but I'm going to put in a higher percentage. Well, now all of a sudden, every time you make one of those decisions, it impacts the underwriting.
A Good Chance of Achieving Freedom of Time
Darin: Then there's experienced syndicators that know and are confident that, unless the economy just tanks, I should have a good chance of meeting this proforma. And so they will not be as conservative and will offer a higher price because of that.
Steve: You have a great point. Just so everybody knows, I spent an entire year underwriting deals with getting zero deals. So I was very much in that camp, or the group that I was with was very much in that camp. One of the things even with partnerships, if I had to reflect back, you want to partner with folks that actually know more than you at that time. When I initially started, it was a group of four of us.
We just underwrote, like I said, every Monday for four hours, and we didn't get a deal for the whole year. But what that did was it built a lot of understanding of how the numbers work, and those types of things. Then at that stage, that's when I pivoted to the Arizona marketplace and then just went a different path with some of those individuals.
Darin: Fantastic. So, first deal was 28 units, the second deal, what size was that?
Steve: The second deal was off-market at 35 units, but we just converted one of the offices over to 36 units. That is 80, so that one we got about 80% of our money back too, same type of thing. So we redid all the interiors and pushed rent, doubled. Probably got rent from 700 to about 1,300 right now pushing across the board.
Looking at Bigger Deals
Darin: You start with 28 units, second deal is 35 units. So we're in the 60 unit range, that's two properties. You have eight properties with over 1,000 units, so you must have all of a sudden started looking at bigger deals.
Steve: We ended up closing on another deal, 126 units, which happens to be for sale right now. Branched off into the Tucson market and grew that. And then this week has been an awesome week, we closed 93 units just Tuesday. Just a couple of days ago, we closed the 93 units, which was a complete off-market deal that was with a broker.
A lot of people say, what about networking? And I say, "It's beyond networking, it's actually building a relationship with that individual." Because we can all go out there and say, "Hey, Darin, I want this." But how about, Darin, what do we need to do to partner together to try to see if we can obtain that?" And so, yes, that was a great deal.
Mostly two bedrooms, two baths, and we got our property manager managing that. So we just closed on that one, we're super excited with that one. But that was truly off-market too, we were the only ones that he actually went to. So sometimes people say off-market and off-market still goes to 30 of their closest friends, the brokers. And then it gets narrowed down to a second-best and final, which is 10. Then you do the third best and final, which the seller may make a decision on.
Darin: There's definitely different levels of off-market. But the thing is that until you build the relationship with the brokers, you're not going to see any off-market deals.
The Ability to Close Comes From Experience
Steve: They're pretty cautious about that because they're at risk too. If the person doesn't have the ability to close, and most newer individuals in the marketplace might not have that same ability to close as opposed to somebody that has experience. Like I said, if I had to do it over again, I would probably immediately partner with somebody that has done it in the past.
Darin: Absolutely. So a number of things had to happen. One, you developed a relationship with brokers, with partners. And you talked about mindset earlier. You started with 10 single family homes, a couple of duplexes, and fourplexes. And now you're just rattling off like it's no problem. Like, "Oh yeah, I just did a 126-unit deal and a 93-unit deal."
That comes from experience. It comes from layering one piece of knowledge and one experience on a deal to another, and continuing to level up. Everybody starts with their first investment property. If you don't have it yet, don't beat yourself up. Everybody starts with the first one. Get some experience and then figure out how to go to the next level.
Steve: And then after that, it's building a team too. I've managed pretty large teams in my corporate career. So how do we build a partnership and a team with individuals that can take us to the next level? I started a new company at the beginning of the year here. Well, first I left my corporate job at the end of 2020.
Darin: Good for you, man.
Steve: Pretty awesome to focus 100% percent of my efforts on multifamily.
Darin: How did the wife feel about that?
Steve: She was a little bit uneasy at first. Because she really has spent most of her time watching over our 10 single family homes as the real estate professional. But it really didn't generate enough of the income to cover everything I was doing from a W2 perspective. We do forget every time you make an extra dollar on the W2 side, you get taxed even higher.
There's a lot of great tax advantages if you follow what the government tells you to do when you're an entrepreneur. Especially an entrepreneur within real estate with all the great tax benefits the depreciation provides. And lining it all up and doing the analysis, it all worked out. I did have quite a few passives under my belt as well.
I wouldn't say go out there and exit your corporate job that quickly. Well, I didn't. I grew a great corporate career, paid me extremely well and was in a sales-oriented revenue-generating environment. So that taught me a lot of the skill sets. I'd say corporate America was awesome to me. It was a stepping stone to get me to have the success that I'm having today in the multifamily arena.
Darin: You loved it, why did you leave?
Steve: So a couple of things. There's a lot of sacrifices that you do. In corporate America, if you want to climb the corporate ladder, you can ask anybody, there's sacrifices. So I sacrificed a lot of my time and family for dollars. Example is driving from Orange County to LA or Glendale every single day.
The Sacrifice of Time
Steve: That's a two-hour commute. Getting up at 4:30 in the morning so that I can get there by 6:30. So that I beat traffic to make sure that I am at the top of my game and stay there until eight o'clock at night to ensure that I miss traffic. Yes, there's a sacrifice of missing those things. Could I have stayed in corporate America? Absolutely, I could have stayed.
Our time is very limited here, so I'm probably in the second half of my life now. And it's up to the great creator that created all of us upstairs, our days could be numbered. So we have to take advantage of spending time with our family. Now it's about me giving back to my family on some of the things that I did miss out while I was climbing that corporate ladder.
Those are the things that, hey, I'm pretty open and honest about those things. That's what the sacrifices are for those that do want to climb up. But another option too is, do a great job. I always say this, do an awesome job at your current job and then great things will happen.
Whether you're climbing the ladder or you're a W2 individual and you're in the accounting department or legal department. Whatever department you're in, focus on doing a great job there and then build on your passion. And if that's real estate or that's products or solutions or anything else, build on that passion alongside of that and you'll feel really good about having that side hustle there.
Passive Investing Make Really Good Money
Darin: Absolutely. I've made some good money in W2 jobs. When I was in that role, I was making really good money. I just was socking it away in 401ks and ETFs, I didn't know you could passively invest. So I wish that I had known syndicators. I was living in South Florida, I'm in Dallas now. And I wish I could have siphoned off 50,000, 100,000 and had them work it.
So I've got a passive deal right now, and I'm sure you've had this experience too. I invested $100,000 three years ago, and they just sold the property, closed, I think last week or early part of this week. I'm being told I'm going to get my $100,000 back plus more than $100,000 in three years.
I didn't manage that deal, that was passive. I wired the money into that deal, and then they worked it and increased the value. There's a lot of parts that you can play. So when you got into the larger deals, you had to start marketing and bringing in investors, I imagine. Where did you find those investors, and how did you build trust with them?
Steve: A lot of the investors came from my network, so just the individuals that I've worked with in the past. If I look back on even the one we just closed, I have competitors that are invested with me. When I was in my prior roles, I had vendors that were invested with me. Fellow associates, clients as well have taken the step in there. They've done quite a bit of research.
The Big Factor Contributing to Freedom of Time
Steve: You hear this phrase out there that they have to know, like, and trust you. And trust is a big factor there. So if they can trust that you're going to come through with whatever the end result is, they're going to be willing to put some dollars on it. And some of them have seen me in my career on the real estate side. "Hey, he's done it on those single families, he has a portfolio now on the multifamily. And so we're going to put some dollars in." Then surprisingly, they did that. I didn't talk a lot about what I did when I was in my corporate role.
There's almost a little bit more of a conflict. Where am I focusing my time? Am I focusing on growing the organization, the W2 side, or am I focused on growing my own business? And so I had to be focused on growing the corporate job at that time. I really never crossed both. That's why you even see on social media I'm not that strong at it. Because I'm not that present, at least I wasn't, I'm starting to push more today.
Darin: Know, like, and trust, you hear that over and over again, and that's so important. The other piece is people have to know what you do. If you don't tell anybody that you're investing in real estate, they're not going to invest with you. You have to somehow let people know what you're doing. And sometimes it takes a while for them, they'll watch from the sidelines. I have some golfing buddies, they know that I've invested in a lot of deals. They were waiting to see, are you going to get any money on it?
Where Does Reputation Play In
Darin: And now they're like, "Holy cow, you're making that much money off that." Sometimes people need a little bit of time, but you have to let people know what you're doing. So huge, huge, huge. Talk about reputation. Reputation in a lot of different capacities in this business means a ton. So talk about what you think about reputation, and where does it play in?
Steve: I always say reputation takes years and years to build, but it can be taken away in the snap of the finger. That's one of the key things. It is all about reputation, and with that, you have to communicate. When not so positive things happen, which they do, you have to communicate with your investors. Communicate with those that are involved with the project.
If you over-communicate I think people actually understand because nothing's perfect out there. We don't live in a perfect world. But yes, that's the slogan that I go by. Your reputation is everything there. And boom, snap of the finger, it can disappear.
Darin: You brought up communication, I think that's key. So when you're in the deal when it's different, somebody that hasn't passively invested, it's different than going to buy an Amazon stock. Buy the stock, and it's liquid, and you can sell it tomorrow. If you want to know more information, you could read the 10K or the 10Q. With these multifamily syndications, whoever's putting the sponsorship group, somebody is going to be sending out a monthly email that has a written update. Like here's what's going on in the property. I'm in a lot of deals, and some of them are like, "Hey, everything is good, here are the reports."
The Good, The Bad and, The Ugly
Darin: And then some of them, they take the time and they're like, "Hey, here's the good, here's the bad, here's the ugly." I know, I appreciate reading that, and it makes me feel like I'm in good hands. When there are challenges, they go and they discuss, "Okay, here's what we're doing to counter those challenges." I also know on my deal that I've had people say I appreciate that you share the bad. Look, it's so much easier as the syndicator to send out the email saying everything is great, cashflow is amazing. But when there's a challenge, it's a bummer news, but you have to share it.
Steve: Yes. Well, most people don't want to share negative things out there. So I've been in quite a few deals just like yourself. And I have some that I don't even know when the communication comes out. So as a passive investor because we're both in quite a few passives, that's what you have to look for. I would dig deep on who the syndicator is, what they've done and ask them for their past performance. What makes them stronger? A lot of the syndicators out there are going to say the exact same thing. We're going to give you an 8% cash on cash return or we're going to give you a 1.75 to a two multiple within five years.
All the deals look the same. And they're all probably pretty close in terms of that because there is no perfect proforma. But then, who do you really trust? Does that person have a reputation that is very positive out there even when times are tough? And so I think that's crucial across the board.
Freedom of Time From A Passive Perspective
Steve: If I'm looking from a passive perspective, knowing what I know today, I would have not invested with some of the people I invested with on a passive side before.
Darin: Well, yes, you learn from that, and you also learn your own style. You learn like, hey, I like what this guy is doing. I'm going to steal that and use that when I do it. And then I don't really like how they're approaching this, so I'm definitely not going to do that. On the trouble side from other career paths, and I have to imagine that you went through it too, building an organization in this insurance business.
Sometimes when you have a client that has a problem and you don't ignore it but you actually tackle it and help that client. That client could end up being your best client ever from that point on because they're like, "He didn't have to do it, it was a pain. He spent a lot of time and didn't get paid for it, and now I want to give that guy my business."
Steve: I think that goes with everything. So a lot of times whether it's disagreements, disagreements among people sometimes actually bring them closer together. It's how we react after that disagreement and how we solve for it. And so the ability to solve some of the issues there, they actually trust you if you can continue to give them the feedback and you connect with them, absolutely.
Darin: Eight properties, talk about one challenge that came up and how you guys overcame it?
When the Property Managers Are Not Doing What They Need to Be Doing
Steve: I would say probably the first couple were the property managers. We've had to go through, I think three property managers, to get to where we're at today. That's never an easy discussion when the property manager isn't doing what they're doing. They have busy jobs too.
So if you think about what they're managing, could be 80 different properties that are regional. Or it could be 20 different properties the regional has just depending on how the setup is. And then just having those tough discussions and getting things moved to the top of the list. So a lot of times what I'd say is the squeaky wheel does get the oil out there.
So if you just sit back there and assume that the property manager is going to manage it, that's not going to happen. One of the key things that we pride ourselves in today is ensuring the operations piece. So having those weekly meetings and then going through exactly where the leases are on them and staying into the details.
We have them weekly. And then once things start moving well, we move them to maybe biweekly, et cetera. But that was probably the biggest obstacle there. Because once you start seeing some of the rents, especially when you have smaller properties and they're not being leased up, that's a challenge for everybody. I would say that was probably the biggest thing. But once you build all of that and you build those relationships with the property managers.
Multiple Property Managers
Steve: We have multiple property managers we work with. Some are for the little bit larger properties, some are for that mid-tier property. And then the smaller ones like the 28-unit ones, which are really not considered large, but I still consider them pretty decent size too.
Darin: Right. So that's a pretty difficult decision to make. You buy a property, you have a third-party manager on the site, you live in a different state. And at some point, you've already had discussions like, hey, look, these are the objectives. And you need to meet these objectives or let us know what’s the stumbling block. You just see that they're not accountable to that. And at some point, you have to make a business decision, "Hey, look, I'm going to swap out and bring in a new property management company."
And that's a pain in the butt because it's new people. The new people are dealing with all the tenants, the tenants know the other person. Then there's new accounting software that they use, and they've got different company procedures. All of that, it's a hard decision to make. But that's the type of decision you have to make if the results aren't there.
Steve: And you have to do it quickly too. We did that within the first couple of months. I'm all about giving people second chances, third chances. One thing that I'm pretty good at is that I have a pretty good intuition on things too if we can get to that next stage. Can we get from point A to point B? It doesn't have to be a perfect straight line, but if we can actually get to that point B.
The Ups and Downs of Having Freedom of Time
Steve: There's always going to be ups and downs to get there. I don't think we can do that with the existing team that's in place. And this is maybe what corporate taught us, you have to find the right team members that can get us there. So we just moved them pretty quickly off. Discussion was not easy. I remember it actually pretty vividly right now, and I had to have that. They understood, they didn't come through with their side of that. And they were a little upset at first. But then at the end of the day, we parted and then things were fine across the board. Now we've engaged with a new property manager.
So I say when that happens, you have to address it upfront. Because we are all in the background, and we all do this. We can complain, oh, how come they're not doing this, how come this? Well, let's just have a meeting. Pretty basic things, have a meeting, put it down on paper, who's going to be the responsible party? If the responsibility still can't be completed then, hey, we've done the best we can. And we just have to pivot and go in a different direction.
But they're not easy discussions to have. That's why multifamily real estate is a people business too. I know how to underwrite so does all the other 10,000 people out there. The softer skills, I believe, is what helps distinguish the great syndicators versus the good ones out there.
Darin: That's huge. So what's the next big stretch goal for you? I mean, look, you're invested in over 3,000 units, 1,000 as a GP. Where do you see you going from here?
Growing Our Team
Steve: It's really growing our team. I have a great partner who's Jenny Gou. She came from a very corporate background, sales strategy and is super strong on the operation side, the asset management piece. She's the one that's leading that piece. And so we're growing our teams. So I'm focused mainly on sourcing deals, acquisition, and working on relationships. She's overseeing our investor relations slash operations, mainly asset management. We're going to bring in somebody to help us with the investor relations to help manage our database.
And then the cool thing is we have an underwriter as well, he's a former rocket scientist. He actually launched rockets. We always say if he can launch those rockets, then she can actually do the underwriting or a multifamily underwriting report plan. So I think it's just growing the overall business to be able to support our growth. Massive goals, try to just grow the business in the favorable market that we're sitting in today.
Darin: Oh, fantastic. So something that you did when you picked your partner Jenny. Look, when you pick partners, you ideally want to pick partners that compliment one another. If you're really strong in one area but weak in another, pick a partner that's strong in that area rather than have three people that look the same and like to do the same thing. And then all of a sudden a piece of the business isn't being looked at the way it should be. So that's huge. What do you like to do outside of work?
Outside of Work
Steve: Outside of work, I'm very active in my local church. So that's an important thing there. I'm part of the pastor parish board, which basically we review the pastor and all the staff. So that always keeps me busy. And then enjoy a little bit of a need for speed too. On the outside, I like to drive fast.
Darin: Like you have a lot of speeding tickets?
Steve: Car and motorcycle, just a little bit of that.
Darin: Do you have a motorcycle?
Steve: Yes, I do. I have a Harley. It's actually been sitting in the garage, I haven't had a lot of time to ride it, but I have that.
Darin: Well, if I come out there, I might have to rent one and we go for a ride. I love riding, I don't have a bike. But I'm in Dallas. Last year, I rented a Harley, kind of one of these Airbnb for motorcycles. Drove down to Austin and met with some real estate guys down there. And I got my motorcycle fixe for a little bit, but I love to ride. And so we'll have to do that sometime.
Steve: I saw that, I was like, that's a long ride on a Harley though.
Darin: It was a long ride.
Steve: I was like, "How did Darin do that?" I saw the picture, I'm like, "He went from Dallas to Austin on a Harley? I don't think I would do that."
Darin: When I came back, I had a discussion with my wife. I was like, "You know what, probably would have been better to drive down and then rent a Harley down there and just go around the cool areas."
Do I Really Want to Do That?
Steve: And you still have your teeth.
Darin: Exactly. The other thing is I've had this dream since high school that I'm going to drive cross country on a motorcycle. Driving from Dallas to Austin made me question, do I really want to do that? Or do I just want to drive and trailer a motorcycle somewhere and ride it in cool places?
Steve: No, that's great, absolutely.
Darin: That's awesome. If people want to reach out to you, what's the best way? I know that you guys just came out with a new website. Talk about that and where listeners could reach you.
Steve: You can connect with me at email@example.com. Or you just go to our website and you can set up a meeting with us. There's an app right there and you can set a meeting with myself, Jenny, or both of us at the same time for 30 minutes. Love to have a discussion with you. Thank you Darin for having us on. It's been great to connect with you again, and looking forward to more things for both of us.
Darin: Absolutely. So the website again is verticalstreetventures.com. I love the fact that you're rocking it, I love knowing people that are taking action and are seeing success. Who knows, this is a small world, we may end up partnering on a deal here or there. If not, we'll get out and ride together at some point. So I appreciate you coming on. Listeners, I hope you enjoyed that one. Until next week, signing off.