099. From Tech to Real Estate Mastery with Nick Stageberg

Connect with the host:

LinkedIn: https://www.linkedin.com/in/brandon-e-jenkins/

Website: https://www.birchprosper.com/

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About the guest:

Nick Stageberg is a career technologist, father to 4 children, and Owner of Black Swan Real Estate, a real estate investment and property management company. Along with his wife Elaine, Nick owns and manages a real estate portfolio of over 1,000 doors and more than $300M in assets under management. Through real estate investing, Nick reached financial freedom in his 30s and now helps others to do the same. Black Swan has delivered exceptional returns to hundreds of passive investors through their unique investor-focused private equity funds which enjoy no sponsor fees whatsoever, 100% return of capital to investors before any splits, and long-term returns and tax advantages, all coupled with socially conscious investing and at least 5% of profits donated to charity.

Connect with Nick Stageberg: 

Website: meetblackswan.com

Facebook Group, Real Estate at Scale: https://www.facebook.com/groups/realestateatscale

Facebook Page: https://www.facebook.com/blackswanrealestateteam

Website: www.meetblackswan.com

LinkedIn: https://www.linkedin.com/company/81014287/

Nick’s Calendly: https://calendly.com/nickstageberg

Episode Highlights:

✔️Organic growth of real estate portfolio

✔️Challenges and overcoming setbacks

✔️Investing in real estate for independence

✔️Mentorship's role in real estate success

✔️Strategic investment and hard work

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Transcript

SPEAKER_00 0:00

I realized that that house was the most financially successful thing I had ever done in my entire life. In fact, I can still remember being in the bank parking lot holding this check in my hand from doing that first cash out refi, thinking, like, is this legal?

SPEAKER_01 0:17

How successful would you be if you had the blueprint for building wealth as a real estate investor or as someone who acquires small businesses? If you want to move the needle financially in your life, then you need to understand one thing the capital stack. I'm your host, Brandon Jenkins, and this is where your journey to financial freedom begins. Hello everyone, what's up, and welcome back to the Capital Stack. I'm your host, Brandon Jenkins. Um I'm super excited uh to introduce our guest for today because one of the things or two of the things that I like to talk about on this show quite a bit is when a couple goes into this business together, has success in this business, and achieves balance. So I think that's a really important topic and a very relevant one. Um I also think that it's important to discuss different strategies and models for organizing a real estate firm, specifically if you can uh have success with being vertically managed because you have some serious, serious control over your costs, over your timeline, all of it. So really important. So our guest for today is Nick Stogeberg. Nick, how are you doing today?

SPEAKER_00 1:18

I'm doing fantastic. How about you, Brandon?

SPEAKER_01 1:21

I'm doing well. Thank you so much for uh being on the show here. So, Nick is the owner of Black Swan Real Estate, a vertically integrated real estate investment firm, which means they operate and manage their deals. Um, so we'll dig into the advantages and disadvantages of that model. Um, Nick and his wife, Elaine, own and manage a real estate portfolio of over 1,000 doors and more than 300 million in assets under management. Very, very critical. Um, so if you've been a listener of this show for a while, again, uh, you know how much I admire and respect couples, partners who do it, uh, who get it done together. I think it's just absolutely amazing. Um, another thing that um I love to talk about, like I mentioned, is um, or like I've mentioned in the past, is when people reach financial freedom early, okay, because it is possible. You know, people like to speak as if somehow it's a it's a dream or it's not possible. It is possible as long as you go about it in a measured and an approached, uh, I mean a strategic way. And so Nick and his wife have done it. So I think it's very impressive. And so we'll hear more about it. But Nick, um, you know, with that, welcome to the show. Why don't you kind of share a little bit about your journey, your background uh with the audience?

SPEAKER_00 2:22

Sure. So, you know, my wife and I, we have kind of an unusual background getting into real estate. My wife is a physician, trained at the Mayo Clinic, was extraordinarily successful in that career track, and eventually decided that you know real estate was kind of highest and best use of her time. I started in technology. I had about 15 years enterprise software, had the great privilege to get into the ground floor of a tech startup. We went from 13 million venture capital to 100 million in private equity sale over the course of nine years. Although our our great, our greatest achievement was just not going under. We had an inception date of uh 06. So the worst time to start a financial services uh you know software company since the Great Depression. And then uh had the privilege to be asked to create another software development startup for the Mayo Clinic. So we went from a handful of people to 13 teams of engineers I was leading over the course of three years, and we're doing about a third of all new development for the entire enterprise after that time. So that was another, you know, it would be another you know 100 million exit uh if uh if that wasn't an independent going concern. So really felt like I had kind of conquered every mountain that there was to conquer in in technology, kind of you know, back-to-back tech startups and uh you know, you you get old uh pretty quickly in the tech world. I'm 40 years old today, and I was uh you know mid 30s. Oh, thank you. Uh I was in my mid-30s when I stepped back from technology, and you're you're getting pretty old in that industry at that point. And it helped that uh along the way, uh, my wife going through med school and residency, all her training and doing my my tech startups, we'd invested in real estate on the side because I did just some internet research of you know, what do you do to build financial freedom and what do you do to invest? I had you know kind of anticipated getting you know these big financial windfalls from from tech and wanted to to make sure I didn't end up like one of those people who win the lottery and they're bankrupt the next year. And all my real uh research said invest in in real estate. And I sought out mentors, uh, found people who were you know very successful in their own right, and uh, you know, attorneys and accountants and stuff. And I I noticed uh that they all had invested in real estate as well. And it turned out that they were all working with this one real estate agent. His name was Don. I went to Don and said, Hey Don, I want to I want to be your IT guy. Uh so I was uh I did you know kind of IT stuff on the side. And uh uh Don helped uh helped Elaine and I buy our first first rental, and he helped, you know, various investors buy hundreds, thousands of HUD and VA foreclosures. That was kind of his he's uh you know dominant in that niche in in that area. And uh and kind of the the rest was history. You know, we bought one house one year and two houses the next year and four houses the next year, kind of organically growing our portfolio until we had um, you know, I don't know, probably 20 or 30 units or something like that. And that's when when I kind of stepped back from my day job and eventually we started serving investors, just had more opportunity than than capital. That's just kind of how that process often goes. And uh, and then eventually my wife stepped back from you know, kind of her day job. Uh the joke is today she uh she raises all the money and I spend all the money. And uh it's it's been a it's been a just a lovely journey along the way, all the way up to you know a third of a billion in assets under management today.

SPEAKER_01 5:28

That is an incredible, incredible um story and and a journey there. You know, you you you already started off as kind of having a very interesting background, but now you've got some things that really are just super um interesting and I want to dig into. Um, you know, so you you your story is interesting because you've had um like you mentioned several windfall ride events, successful exits and things like that, where you have to figure out, okay, now I have all this this capital, what in the world am I going to do with it? I think what's interesting is most people who uh you know, the first thing is most people don't have that uh they don't have that happen in their lives. It's not it's not a common occurrence. But for those that do, you realize that, hey, this is actually an interesting challenge. But for those who have never had that or experienced that, they just think that, well, you're, you know, you you have all your problems solved. And it's like, well, wait a minute, not necessarily, because now I have all this capital, I need to understand what to do with it and how to manage it. And so you were able to then say, well, here's an avenue to effectively manage it, both from um a you know, a tax advantage perspective and also from just uh preservation of wealth.

SPEAKER_00 6:29

And so something I want to something I want to clarify is I did not actually have that event. So uh six months before uh the company sold, uh, I was terminated, my my stock options were seized. And this is an extraordinarily common thing to happen in the industry. If you go watch, you know, Pirates of Silicon Valley and the social network and you know, the story of Apple and Facebook and countless other tech startups, the people who helped build the company are actually rarely the people who get the big payday at the end. Now, at the time I didn't really realize that. I thought, hey, I'm I'm set, I might be set for life if I kind of play my cards right. And what happened to me was actually extraordinarily common. In fact, it was a really big uh poke in the eye to me. It was uh, I mean, I I had like you know, PTSD for six months, which I didn't even know was a thing. I I thought, you know, you just you know, you get your your lumps and you get over it. It was a very you know hard, hard struggle for me. It you know, I had to I had to reinvent myself after that. You know, am I am I a tech guy? Is that is that my identity or is it something else? And uh we had already bought our first investment property. Uh we bought it for you know$35,000, did some sweat equity. You know, I was working my day job, my wife's going to med school, and then at night we're laying tile and repainting things and stuff, uh, you know, in this sweat equity remodel, bought it for$35,000, did about you know$17,000 in rehab. We were at about$52,000 all in on it. Uh when we were done, uh it was worth you know somewhere between like$85,000 and$100,000 or something like that. We got a loan for about$60,000. Uh so we got all of our money back out, not much more. Uh, you know, there was no burr back then. There wasn't a word for it, but that's that's essentially what we did. And uh at first, uh, you know, when when that big payday never came for me for for that that tech startup, I thought this house is a like a reminder of everything that that never came to be. But then uh after about six months of really brooding on it, having this this big old chip on my shoulder, I realized that that house was the most financially successful thing I had ever done in my entire life. In fact, I can still remember being in the bank parking lot holding this check in my hand from doing that that first cash out refi, thinking, like, is this legal? Like, like, did this really happen? Because I've got the house and I'm still paying down the loan and generating cash flow, it's still appreciating, I still have the tax advantages, and I've got all my money back out. Like, it doesn't seem like this should have been able to work out the way it did. And uh, and and that, you know, after about six months of really meditating on that, I said, you know what, this house is not everything that went wrong. This house is everything that went right. And if I can just do this over and over and over again, then that's all I will ever need. And maybe I don't have to do this tech thing, uh, you know, to to to generate, you know, financial freedom, or I didn't, I didn't have those words at the time. Just I had to put food on the table. And I thought maybe this is what could put food on the table for my family. So uh, so yeah, I just want to make it clear. I did not participate in that windfall, but I went through the exercise of preparing for it, which I think anybody can do. Like just pretend, what if someone gave you a check for a million dollars tomorrow? What would you do? That's like it's like a burden, it's like a challenge. And then going through the exercise of preparing for that is actually going to set you up for tremendous success, whether or not that check ever actually materializes.

SPEAKER_01 9:47

Yeah, yeah. And I want to apologize too for getting that for missing that uh detail there. So um, but yeah, no, so so that I think I think you're right. I like that you you essentially stopped and and kind of took inventory. And even though you were going through the the challenge of now having to deal with uh not being able to participate in that upside, you still um you know had something in the works. Um and I, you know, I found that that happens uh in life as well. Like so, you know, I got I like to talk about this on this show a lot, but I got laid off in 2019 um uh from a job that I really enjoyed an industry that I really enjoyed. Um, and uh same thing while I was dealing with sort of the mental stresses and the the burden of uh trying to find employment and dealing with, you know, yeah, I think you kind of touched on, you know, it uh trying to find a new identity. And so I sort of went through the same thing where it's like, well, gosh, is that really kind of who I am and what I am um what I've accomplished? Um, but I had those single family properties working in the background. And so it sounds like similarly, you know, you all had something at work um for you that really gave you uh the upside to the epiphany that you've kind of been handed and that you've um had to deal with that it's like, okay, there is another option, another vehicle for it. And so you continue to move forward with it. So let's let's talk about the transition. And so once you've identified that, wow, this works, you know, um what sort of motivated you to say, you know, what me we need more of this? Um maybe aside from the obvious, hey, it worked, but what but what sort of kind of said that, you know, hey, we need to do more of this and in scale? You know, what what sort of motivated you guys to do that?

SPEAKER_00 11:17

So when you get, you know, I remember sitting in that bank parking lot holding that$60,000 check, which was, you know, the biggest check I'd ever, you know, had my hands on in my life, and and you know, cash in my pocket, which is good because we were doing uh you know cash advances on our credit cards and stuff to it was every penny we had, and then about 10,000 more to get that rehab done. Um, like it was, you know, when I really truly embraced how financially successful that was, and that what if I just did that like 20 or 30 times more, we'd be set. It was it was hyper motivating for me. I went from being kind of kind of listless of like, well, I could do another tech startup, like what are the odds that I could do another startup that's as successful as the last one? And the last one didn't exactly have a great outcome, just a feeling of kind of uh learned helplessness or or just feeling defeated to like, you know, land deed title rights, it's it's something that's almost impossible to take away from someone. And while real estate is not as sexy as technology, it's not, you know, 10,000 X growth or anything like that. It's an incredibly consistent way to build wealth. It's a it's a get rich slow and get rich for sure kind of industry. And that was extraordinarily appealing to me, kind of in in the wake of going through that that roller coas ride with uh with my first tech startup. And it really positioned me, you know, I'm a spiritual man, I think my path is guided, and it positioned me well for my next, my next tech opportunity. I I actually ended up only being unemployed for like two weeks, which is just the craziest you know story of how that all came to be. But I came to realize, you know, I'm going to get this job uh for the Mayo Clinic, helping them build a startup. There's no stock options I got, a very generous salary, and it was just you know an incredible privilege to serve. It was very spiritually healing to me. And it also left me with a lot of opportunities to uh to work on the real estate game. So I jokingly call it uh reverse telecommuting. So when you're in a an architecture and management role in a large corporation, um, it's not that they don't want you to work, but you working can be extraordinarily counterproductive to the organization. Uh, you you can easily take on too much and then balls drop. And so, like executive coaches would be coming to me from Mayo saying, like, Nick, you're not leveraging your admin enough. Like, they need to be doing more. And Nick, we need to be hiring more people. You're doing too much, so you need to get more things off your plate. You know, we want to grow this big startup, and you're in like young, hungry startup mode. We have unlimited money to hire people, and you're not giving them enough. So strangely, I actually did not have to work that many hours, even leading so many engineers, hiring so many engineers just may have had such kind of limitless resources to dedicate to a project that was so successful. Uh, so I would uh go into the office and work on, you know, work on my my real estate game, looking at properties online, email correspondence, all of the litany of paperwork items that go with it. I got my my real estate license that helped me find new deals and ultimately started serving investors uh doing that. And then when I had a meeting, I would dial into that meeting on my headset to this day. I still have this uh this headset that I wear, you know, all the time. And uh I dial into my meeting at Mayo while I was like walking a property, you know. So I'd go out and look at a property by myself, uh, you know, being a license agent, I could get into the property and I could go like walk, you know, half a dozen properties a day while still like, you know, I can have my laptop with me with like a cell modem. And if I need to like weigh in on the meeting, I could weigh in the meeting. And so I kind of, I don't know, I kind of lived two lives uh for several years there. Uh and and while my wife was doing that, or I'm sorry, while I was doing that, my wife was going through residency and we had uh we had two small children. So so today we have four kids, seven, five, three, and one. Back then we had we had two kids that were uh one and three, uh, while she's working literally a hundred hours a week uh in residency. I think there was probably uh at least a one-year period where one of us was working 24 hours a day, seven days a week for for an entire year. So we like work, but that is it was too much work. Uh, but we knew, you know, your original question there, Brandon, was what made you motivated and everything? Um, when it was clear to me that all I had to do was was that that silly little house, you know, when you're managing a$100 million software project with a hundred people, like like buying a$35,000 house seems like a really simple endeavor. All I had to do was go do that like 20 or 30 more times, and I'm set for life. Like that's it. Well, heck yeah, I am all in, like unbelievably motivated to do it. My wife was all in, not not at first. I had to like um uh, you know, kind of I I think once she saw it start to happen, you know, the first couple of repetitions, she's that then she was like, wow, this this really is real. This is gonna happen. And you know, she's been my full partner the whole way. So she's working at two o'clock in the morning, you know, seeing patients in the psych unit at Mayo, she's a psychiatrist, and processing applications and uh making sure rent's getting paid. And then by day, I'm you know, leading my teams of engineers, walking properties to acquire. Um, so we were, I mean, we were working, you know, a couple hundred hours a week between the two of us every week for you know, there's probably a solid year stretch where we just worked unbelievably hard. It took about three years, three years of just really, really, really hard work of incredible focus, uh, saving money. I mean, when you're working that much, you don't spend it. So that's helpful. But then when we got to the end, uh we were, you know, we were financially free, you know, in our, I think Elaine was, you know, 30, 32, 33 years old or something like that at the time. Not easy, but it is incredibly simple. Just just work your heart out, work harder than anyone else is willing to work, and uh and find really good deals and add massive value, and and everything else is gonna take care of itself, at least, at least in the real estate world.

SPEAKER_01 16:55

That that that is awesome. And there are a lot of things to cover in there that I just think um, I think it's very, very important for people to um hear and to really internalize. Uh, one is that you know, the sense of sort of uh getting your your systems down, but then rinse and repeat um is one of the advantages, I think, actually, to real estate is that yes, there are some lessons that you have to learn in order to be very efficient um in this in this business. But once you are efficient at learning them or executing, then it really is a matter of kind of doing it um, you know, over and over again and having success at it. And like you mentioned, we you all you thought about was, hey, you know, I did this one time and had great success with this deal. But then once I do this 20 to 30 more times, um, then I will be financially free. And it really is a matter of debysis. It's really saying, you know, hey, if I have success with this, I'll improve my practices each uh with each subsequent deal. But you can more or less map out your path to financial freedom. And so people, I think that that, you know, sure, before you start, it appears to be very, very complex and complicated. But once you get over that first uh door, first deal, um, then I think that the path becomes a lot more clear for people. And so I like that you all said we're going to start and then we'll we'll get there. I think the other thing that is important is um how you talked about, I think you you phrased it as you were living two lives for a moment there. And I think that um that's essential as well. So the, you know, most of us in our professional lives, we learn different skills that we uh refine and improve on every single day. But many of us are then afraid to apply those to our own businesses. And so for the people who like you and your wife, the people who have success at doing that and say, you know, I realize that this same mindset, you know, here I am uh leading large projects, you know,$100 million, you know, projects. And even though, you know, the listeners, your projects might not be quite as large, but the fact that you on your day job, you still have things that you're doing that where you're managing large projects or you're working with multiple people, whatever it is, you can apply those skill sets uh to the real estate business. So I like that you did that as well. Um, I just think there are, you know, there are tons of nuggets to pull from that. And also not the least of which is certainly you can grow as your family grows. You know, a lot of people will say that, well, I have children, I can't do it now, I gotta wait until they're older. It's like, no, you don't, you don't have to do that. You, you know, sure you might not be able to go as hard as you did when you didn't have children at all, but that doesn't mean that you can't chip away at it and be consistent and then still achieve your goals. So there's just a lot to a lot to pull from what you just mentioned there. Yeah, go ahead. Sorry.

SPEAKER_00 19:36

Oh, just one of my favorite, you know, memories or whatever is uh, you know, pushing my kiddos around and uh walking for dollars. So load the kids up in the stroller and just just go for a walk, go walk a different neighborhood every day, every night. And uh, and and one of my kiddos, they uh they really struggle to fall asleep at night, which is horrible challenges, but they really love driving around in the car. So we go driving for dollars at 10 o'clock at night at midnight. And I'm sure there's some parents out there who, I mean, my my youngest actually had a really enough night, rough night sleeping last night. And I'm like, you know, if I'm gonna be up all night with a crying baby and driving around helps them fall asleep, I'm gonna go out and do some driving for dollars at midnight. And uh I'm gonna I'm gonna honor this uh this struggle and bring some value out of it. And to this day, you know, we love walking our properties with our kids and picking up trash and you know, submitting tickets to our maintenance team and our facilities team, and uh, and our kids are learning from the very youngest of age. This is how wealth is grown and wealth is protected because that's gonna be the the burden that they have is what what do they do with this thing when you know Elaine and I are one day gone, and uh and so having young kids can be a real burden. It can slow you down. But I've I've found nothing motivates me more than how can I, you know, just make sure my children have every possible opportunity, and how can I make sure that they inherit the skill set and the knowledge that they need to one day uh potentially be responsible for this thing that we're creating.

SPEAKER_01 21:03

Yeah, absolutely. I uh my wife and I, we we have three young children. And uh one of the things that we you know tell each other is we want them to have options. You know, we sure sure it's like right now, you know, we're plugging away at it and we're building something. And like you mentioned, it's it's not easy. Um, but I think that while you have young children, the strategy just changes. You know, sure, if you don't have children at all and you have all the time in the world and you can go through things without having to plan, you know, and having to pack a little baggie before you leave. But but you know, once you have children, you know, all it means is okay, there's some additional things I have to consider, and maybe I can stay out, you know, I can't stay out quite as as long, but you know, walking for dollars like you do, and um, you're still getting value from it. So I just think that you know that's a very, very important point is that you can achieve balance regarding regardless of your circumstances. And it's important to see them, you know, in as you do, it sounds like, which is really as a source of motivation and purpose, you know. And so um, I just think that's super powerful. And so um Um, so I wanted to mention now, because you talked about uh, you know, you you all are vertically integrated. So you all manage your deals, you also operate them. Let's let's let's talk about that for a moment. What what motivated you um to adopt that model?

SPEAKER_00 22:15

Yeah, so this is a really easy thing to point back to you. I remember when we had you know approximately 20, uh 20 properties, we were getting to the point where there's always something going on, there's always a turn, there's always an emergency maintenance ticket, there's always an escalation, there's there's always something kind of demanding of our time and of our focus. And it really started to slow down our growth. And there's a lot of uh wisdom out there, I think, of people who say, hire a professional third-party property management company, bring in the pros. Don't don't try to mom and pop this thing, especially if you are getting into a larger property. But in my opinion, I would say I am very opinionated about this. I think there's huge benefit to any real estate investor if they truly want to do this as an active person, which I don't know. I think there's a lot of uh uh real estate investors out there who are doing it on the active side, but they really want passive income. And I think they might have that a little bit mixed up. But if you truly want active income, you should just self-manage a few single-family homes. And I think most people, they, you know, if they own their own home or they've spent time in single-family homes, they have some sort of core competence. Warren Buffett will call it your sphere of competence with that. And when you get to larger properties, it's a little more exotic. Um, but I think there's a tremendous learning advantage that goes with self-management, so that one day you can manage a manager very competently because you yourself have had to make some of those hard phone calls. But eventually you get to a scale where you just can't do it yourself. I, you know, I had a bag of tools in the back of my van. And uh you know, I was the leasing agent. My wife was the accounting and back office. I was I was the maintenance technician, I was the real estate agent, I was the everything. Um, but but eventually that that just it doesn't work very well. And there's this this valley we we call it the valley, where you have enough properties that you kind of hate it, but not enough properties yet that you can really scale. So we said you toss over the keys to third party management so we can continue you know growing this thing. Um do we sell it all and and do something else or whatever? We had a good run of it, you know. Um and then kind of the the the alternative that we found that we really liked was start a third-party property management company.

SPEAKER_01 24:32

Yeah, yeah. I think that um I think that's a great uh sort of adjustment um to make there is to to kind of consider well at what point do we grow and scale and maybe adopt a a different type of um model. So I think that's um um absolutely incredible way of uh making the adjustment. And um yeah, good thing, good thing you were able to do that. So it looks looks I think I lost you for a second there, did you?

SPEAKER_00 24:57

Yeah, yeah, my it looks like my internet cut out for just a second there.

SPEAKER_01 25:00

Um so I think I think the last thing you said was you then you mentioned one you said uh I forgot what the three options were, but the third one was to start your own property management company. So we can just pick we can pick up and now just cut this part out. I think I lost you again.

SPEAKER_00 25:23

Yeah, but usually that's just fine. Uh I'm not sure what's going on there. It looks it looks like it's okay now. Uh we'll keep we'll we'll keep going here and hopefully that's hopefully that's it.

SPEAKER_01 25:32

Okay. I'll just uh we'll do a three, two, one and then we'll I'll just ask a question about it. Okay. Three, two, one. All right. So um, okay, so then let's let's maybe uh talk a bit about that though. So um from a practical standpoint, what were some of the things that you knew you needed to tackle first in starting the property management company? Because it's not always always easy to just um step into that into that role or to launch that sort of sector, the division of the company. So how are we able to do that um successfully?

SPEAKER_00 26:00

Yeah, this is a leap that I I encourage a lot of people to make. A lot of people I think are afraid to kind of hire their first employee. That first employee is almost always an administrative assistant persona. And if you can find a rock star, find someone that is is just gonna you know pick up, pick up the rope and carry it. Uh, I always, you know, as a as a manager, I always want to find someone I have to pull back on the reins, not crack the whip. So those people are out there. And just as a, you know, just as a little bit of you know, coaching or whatever, you just need to find uh, you know, uh her her name is uh is you know uh Jill, let's say, and she's worked for Bob's Plumbing for the last 20 years. She's 45 years old. She's helped Bob grow his plumbing business. Now Bob's getting older. He's sold his plumbing business to another plumber, and she's looking for a job. And she knows what it looks like to run a business, to keep the books, to answer the phone, to manage customer service. Uh, don't try to go find like a property manager, just find an administrative assistant, a rock star admin who just wants to keep doing that admin thing for another 10 or 20 years. And then you can train them on the property management piece and you'll have fantastic outcomes. And it doesn't matter what your, you know, what your kind of ultimate goal is, but most people, I think they're they're afraid to make that leap of hiring someone. And you know, to this day, what we do is we put all of our cash back into HR dollars, into salary dollars to keep growing our team because our team is it's truly our biggest asset. So we just found a rockstar administrative assistant who is now our director of operations. Our next hire was our director of growth. So he was a former uh uh MP in the Marines, so very familiar with having tough conversations and de-escalation. So he's kind of our policeman. And uh he did all the recruiting and training for a large uh healthcare system in our area. So the the second person you can hire is someone who's really good at hiring people if you're planning on scaling a large organization, because hiring is a really time-intensive core skill set type thing to do. Um, and then uh, you know, if you if you fast forward to today, we've got about 49 employees. We've got uh director of of construction and maintenance is kind of our third person, but we have uh you know operations growth, which manages leasing and acquisitions, uh, and then and then construction and maintenance. And you can kind of think of those as being, you know, kind of uh uh you know uh the traditional bifurcation of of an organization between operations, sales and marketing, and then like administrative, you know, kind of vertical legal accounting, whatnot. Um, and and we we just implemented that in a property management format as well. So we've got a bunch of maintenance technicians, a bunch of cleaners, facilities caretakers. We do in-house lawn, in-house snow, uh, we do you know as much in-house as as we possibly can. But for most people, it starts with just hiring that administrative assistant.

SPEAKER_01 28:44

That is absolutely, absolutely incredible. You know, because I so one thing that that um you know people have to understand, and this is this is from really no matter where you uh which which perspective you sort of look at a company from, uh, infrastructure is very, very important. You know, if you have a goal in mind and you plan to grow, infrastructure is important for both your yourselves as the people who launch the firm and start the firm. It's important from your investors' perspective because you know, uh there are a lot of I have conversations with people all the time who say I want to take the company in this direction, but there's rarely mention of we're going to grow the company in order to support. Because how do you facilitate that growth? You have to have infrastructure and you have to do what you all have done, which is to then put the right people in the right places to help you grow. I love that um you you really made made making it clear that hey, your first hire needs to be someone who is more of an administrative role because then you can start to really push um smoother systems, right? Your systems uh start to really take uh uh priority because now you have someone who can help facilitate those, you know. And if you're if you're the one who's sort of doing the business, sometimes it's difficult to step back and organize the system and also implement them. You need to have someone whose full-time job it is to do that. But I just love the you know, the your focus on growth. And now to have you said 49 uh uh people, yeah. Absolutely incredible. So um, so so let me ask you, okay. Now, this is maybe the softer side of some of this, right? So you're I love that you mentioned service a number of times. I think that's very, very important. And I share that with people all the time. Hey, this is a service business. Um, so how how have you been able to then convey that mission and vision, I guess, to your employees, to your team?

SPEAKER_00 30:25

Yeah, great question. This is an area that there's a real woeful gap in our industry in particular. So if you call any property management company, any apartment building, you just pick up the number and dial, there is a one in five chance that they will pick up the phone. A one in five chance. That's a that's a it's it's abysmal. And if you compare that to just about any other industry, that's very much out of step with the norm. The expectation is if you call a business, they pick up the phone. But in property management, I think that uh the culture tends to be one of like a policeman, not of serving the customer. So we actually pretty deliberately never recruit people with a property management background. I actually just got done with an interview right before this uh uh this you know this call. And this is a person he has been an assistant, uh, or that's not the right word. He's he's been a person in a private investigative firm. So he's familiar with like setting up surveillance equipment and conducting stakeouts and that sort of thing. And with a thousand units, we actually kind of have a need for that sort of persona uh for managing escalations. Okay, we've got this report of cannabis usage in the building and it's creating this odor that's a huge nuisance, multiple complaints. We need someone whose job is to go set up surveillance equipment and use an air quality meter and go door to door, that sort of thing. But the last thing I would do is I'd I would not hire someone with a property management background because they'd probably like send a notice to the whole building saying no weed smoking, which actually conveys the opposite message because everyone reads that and they're like, Oh, I guess a lot of people in the building are smoking weed. Yeah, I need to find out who.

SPEAKER_01 32:01

Yeah, yeah, yeah.

SPEAKER_00 32:03

Yeah, let me go. There's a connection in the building I can access. Uh, it's like an anti-customer service approach that most they'll they'll put up junky signage on the door, you know. They'll like it, it it it uh most property managers have this really they they project an image of a really low quality police state, basically. It's just terrible, it's like laughably terrible. So we find really high quality people with a customer service background. So think front desk person at a hotel. These are people who in my area, if you make$18 an hour, you're doing pretty well as a front desk person at a hotel. It's not a high-paid role, but it's pretty stressful. You know, people walk up all the time. There's often escalations. You have to have a really you have to have poise and good communication skills. You have to be able to juggle a lot of things all at once. You've got you know, line out the door people to check in one day, and then you're maybe helping do you know room turns the next day or something like that. We love hiring front desk people. Uh, we love hiring uh waiters, uh servers from restaurants because those are people who, again, know how to juggle a lot of things. It's a very cognitively demanding uh role where you have to do a lot of stress management, you have to do really good customer service, but also manage escalations if the food is cold, that sort of thing. Uh, you know, one of our uh staff members is a level three uh sammelier or something like that. I you know was a server of a very fine restaurant, and so he manages some of our more class A properties. Uh we love to recruit people that, you know, our director of operations, she has a master's in social work, and then she was a fixer for Marriott. So she would travel around to the different uh Marriott uh properties that were kind of struggling and help them figure out what they need to do to turn things around, who do they need to fire, who do they need to hire, where they failing in their processes or something like that. Couldn't imagine a more rock star person to have to bootstrap our organization from an operations perspective. But none of these people had prior uh property management experience because I find whenever we do hire those people, or even when we interview those people, uh the they don't get the customer service piece. Like literally, if you hire someone with three years of property management experience and the phone starts ringing, I have to go, so uh you're gonna get that? And they go, Oh, you you answer the phone? Um, okay, I guess sure. Yeah, I can I I can answer the phone. That wasn't really in the offer letter, the expectation that we'd answer the phone, but I can I can cover that, sure.

SPEAKER_01 34:22

Yeah.

SPEAKER_00 34:23

You hire someone who doesn't have property management experience, the phone rings, they just pick it up. There's no pushback on that basic customer service expectation.

SPEAKER_01 34:32

Yeah, I love that. You're right. I mean, it's like it, you know, what's interesting, this industry, I think, has been ripe for a disruption for some time now. Um, you do see that in the prop tech space, but you're right, in the service space, we have not seen that yet. And it's and it's we've needed it. Um, for all the things that you're list that you're talking about right now, you know, is I think what ends up happening is for people who've been in the industry for a long time, especially who are in the weeds operationally, you know, they they almost treat the tenant body, the customers as fluid, like almost as a one body, just is like, you know, because you mentioned um kind of putting up a notice saying, oh, hey, you know, you know, no weed smoking and hoping that that solves it. It that what's behind that is, well, I'll put a notice up because people are going to do what they want anyway. But it's like, well, no, let's approach this in a way like we're dealing with people. Let's deal with people and not let's not slap a notice up and then think that that will solve it because we all know that it won't. Let's make sure that we pick up the phone and then when we pick up the phone, we actually have a certain um, you know, well, a welcoming tone and a voice like we're actually a business instead of picking it up and saying, huh, you know, or something or something like that. You know, um, and so yeah, I think this is it's incredible because here again is another example of you and and your wife being able to pull some of your corporate experience into sort of the uh what's really fueling the company. Because, you know, I you know, I think that it's important to have that, uh understanding that we have to be professional in every sense as a service business, and that's what's coming out in what you're saying as well. Um, and so so let's talk then about scale. So you you you have the infrastructure, and um, let's talk about how you were able to pace scaling up to where you are now with a thousand doors. So, how are we able to do that while you were sort of growing the company?

SPEAKER_00 36:21

Yeah, it's it's very challenging. And the path that we followed is not for everyone because we were we were kind of financially free before we started. And in like the syndication space or private equity space, there are a lot of people who have like gone to a boot camp and they're still working their day job and they're trying to like get to financial freedom through syndication or something like that. These are not people who have the ability to to launch a property management company. What we're doing is uh frankly, it's about a hundred times harder than you know, just hiring a third-party manager and kind of kind of hoping for the best and holding the manager's feet to the fire. It's it's very hard to hire and manage and lead people. At the end of the day, I think you get just categorically superior outcomes, but it's it's very hard. So, you know, just talking, speaking of the brass tacks there. Um, early on, uh, we started by doing third-party property management because it was easier to build relationships with investors. It's a very uh loose coupling, right? Like you can kind of fire your third-party property manager without a ton of difficulty. Uh, and then we kind of evolved into a little bit of like a turnkey model. So we'd represent you as a licensed real estate agent, we would represent you as a project manager, we'd represent you as a property manager. So it's kind of a kind of one-stop shop. We could say, yep, here's where we think the performance is going to be. And then, you know, let's say the rehab is a little bit more expensive than we expected, but then the rental rate is a little bit better than we expected, and we end up kind of kind of meeting our outcomes. Uh, so with that model, we got none of the equity, which is which is what we're really interested in. That's the you know, that's the really big piece over the long you know time frame. But we got a ton of cash income on the front end of the deal, which is really you know what you need. So early in the life cycle of any business, uh, you know, it's it's just a race for survival, just just making sure you have enough cash to uh to make payroll, to you know, to meet your costs. And early on, before you have you know several hundred units, your costs really outstrip your your income. So property management is a hopelessly unprofitable line of business. It's just that's just the reality of the situation. It's it's not a very profitable line of business. So you should not go into property management if you want to make a ton of money, but the opportunities that are unlocked by property management are staggering. If you're the property management company, you're you're kind of the quarterback, right? So right now we supervise uh, you know, millions and millions of dollars of capital that's that's flowing around. We get into relationship with investors. Um, you know, Jeff Bezos says that the person who is closest to the customer wins in capitalism. So we're the person who's closest to the tenant, we're the person who's closest to the uh the vendor, to the garbage company, and ultimately to the investor as well. And uh, and so early on, we we you know we knew that this was kind of a loss leader that we'd eventually thank ourselves for in the future. And that's that's what ultimately happened. Um, as we scaled up, you know, when we got to like that 300 unit mark, we probably had you know half a dozen staff members or something like that. So really lean staffing. If we have a thousand units and 49 people today versus 300 units and six staff members, you can think we were short staffed and and Elaine and I were doing a ton of leasing, a ton of showings, a ton of everything, but you just you can't afford it early on. And then today we have a you know a very different business model, kind of the opposite business model. So we take no fees whatsoever at the asset management level. So we collect a 10% all-in property management fee, which is about 30% cheaper than a typical like market rate property management company. We'll collect brokerage commissions if we're able to collect brokerage commissions, which is another you know big piece of that vertical integration puzzle. Um, and then uh we we get 50% of the of the equity on the backside of the deal. So compared to a typical private equity fund or real estate syndication, we're really delaying gratification essentially. Our our investors usually come out well ahead of where they would with a traditional syndication model. But uh because we have that property management company to essentially run our asset management layer. If you if you own the property management company, you don't need to have an asset manager to like, you know, uh manage the management.

SPEAKER_01 40:16

Manage manager, yeah, yeah.

SPEAKER_00 40:17

We have we have multiple full-time accountants. We don't need asset level management, you know, uh, or asset management level accountants. We uh don't need an additional layer of legal. There's this huge chunk of overhead we're able to just obliterate uh with that vertical integration piece. It takes years and a lot of harder work to get there, but but the the prize and and you know, just as an anecdote, so um, you know, we recently brought lawn in-house. So we spent you know a quarter of a million dollars on tractors and trucks and trailers and stuff, but we will reduce. So if you you know compare year to date today with year to date a year ago when we were doing we were still using vended lawn last year, that's not something you should be in a hurry to bring in house, by the way. It's it's pretty intensive bringing lawn in-house. But we have we have 90% year over year savings, 90% savings to our properties. It's just it's a staggering amount of savings. Uh, you know, we're kind of at like a break-even essentially at the property management level. And the reason for that is that it's been a very dry summer in our area. There hasn't been a lot of rain. So the grass hasn't grown very much. So we've needed to go out and mow our properties very infrequently. So not only are we saving 50% just by eliminating all the profit and overhead from hiring a third-party manager uh lawn service company, but we don't send our guys out unless the lawn needs to be mowed. Whereas when you hire a third-party vendor, they're sending their guys out to mow the lawn because they got to make payroll with their guys, whether or not the lawn needs to be mowed. And if if you know anyone listening to this, if you understand that story I just told, you understand everything you need to know about vertical integration. Like it's tough to go buy trucks and trailers and tractors and and to hire and retain the people that are qualified to operate that equipment safely and responsibly. But once you have all that infrastructure, I mean, at a at a five cap, a 90% cost savings on lawn, you can drive a truck through that difference in the the property value. So it's it's a staggering gains you can make with the vertical integration. It's hard and it takes a long time. It's not very profitable in the short run, but in the long run, I mean, we will save, we'll save a quarter of a million dollars on lawn and snow services this year. It's just the this the savings are going to be staggering.

SPEAKER_01 42:20

That's incredible. And I think that what's sort of what underpins some of this um really is it's a shift from kind of an investor's uh uh focus or an investor uh perspective to really running a business now, a real business, you know. And I think I think that's one of the key differences because you mentioned earlier that really for syndicators, um, you know, it's it's almost like a passive active, you know, or active passive, whatever you want to call it, kind of role. Um, and once you uh step over to then being vertically integrated, this is a true business that you now have. And so you then have to uh, you know, put your, you know, switch your lens a little bit and say, well, I'm willing then to have this short-term, uh, like you mentioned, um, this period where it might not be hugely profitable. But I understand that on the other side of this, it will be hugely profitable. Um, and the other piece is, um, which I think is very important, is cost control, you know, it is essential. So as you know, as a syndicator, you go through and you run your numbers and you're you you you sort of confer with the property management company and with some, you know, other things like that to make sure that, hey, how do these look? But for you, that's you know, you are the property manager, so you know how much it's gonna cost. It's not really a guess. You know, it's not really there's the the band of uncertainty is much tighter because we're we're the ones who are gonna actually steward the work. Um, so I just find that to be uh of a huge of huge benefit um to investors and just for yourselves also, knowing exactly what things are gonna look like and how much they're gonna cost, what the time is gonna, you know, how much time it's gonna take. Um, I think is is incredible. Uh and you're right. It's it's certain things that, you know, even like you, you you mentioned how much you're gonna save just on. You know, lawn maintenance and things like that. Each each bucket that, you know, you know, at a first pass, it might not seem like there's this huge savings, but in each single one of these line items and these buckets, when you're operating at scale, like you all are, there's a huge amount of savings that come into being vertically integrated. Um, so I just think that's incredible. You also see that in in you know in other industries. Like I'm my my professional background is oil and gas. And you see that in oil and gas as well. When there are companies, if they're vertically integrated, usually these are the cost control kings of the industry. So um I think that's that's that's really powerful. Um and and one thing I wanted to ask about as well is you know, we've talked a lot about um well, two things. Well, actually, let me ask you. So, what's the first thing then if if someone wants to start um you know of to switch to being vertically integrated? I know you I know you touched on this a bit, but what do you think the first thing that they need to do would be like if I have a firm, I want to switch it now to being vertically integrated?

SPEAKER_00 44:55

So it's gonna depend on just you know how big their portfolio is, what their current situation is. There's certainly a uh let me just step back for a second. So, in all that I do, I ask myself, how do I create not just a win-win deal, but a can't lose deal? Where I go to a competitor, to a vendor, to a staff member, whatever it is. And at the end of that meeting, they're just like, Well, I mean, I guess I'd be an idiot not to do this, right? Like, like there's just there's no way I can possibly lose on this thing, right? So uh, you know, just just as an example of that, we have an apartment building that has a master lease to a university, and the prior owner, I think, was playing a little bit of a game of chicken with them, or the university maybe wants out of their lease, but it's such onerous terms to terminate the lease that you know they haven't terminated it, but they're probably thinking about how can I get out of it. And we bought the building, and I literally went to them and I said, you know, I have a feeling that you want out of this lease. Is that correct? And they like kind of all look at each other and they're like, uh, I mean, yeah, yeah, you know, and they're they're feeling really uncertain. I'm like, okay, I don't want anyone living in one of my buildings that doesn't want to live there, universities included. So here's what I'm gonna do for you. Why don't you let me just start leasing your units and uh you can vacate them and you'll pay for the rent up until we, you know, a new tenant moves in, and eventually we can slowly unwind this, you know, this this undesirable situation for you. You're like, I have a feeling that's like the best possible outcome you could really ever hope for. You've avoid all these early termination fees, and you probably don't need to go spend$100,000 on attorneys figuring out some way they can find some catch in the contract they can get out of it. And they're like, uh, yeah, I mean, they they had, you know, they had to think about it for a day, but it's just it was a can't lose deal for them. So let's say hypothetically you own uh, I don't know, a 100-unit apartment building, and you and this is gonna be different for people that are in a different you know situation, right? But let's say hypothetically you own a 100-unit apartment building and you're hiring third-party management and you're just you're not happy with the management. And I'm just gonna posit that 90% of people are unhappy with their property manager, it's just never it's never it's never good enough. Uh, and there's a lot of reasons for that. But let's say you did want to, you you'd want to bring this thing in house. I think a lot of people what they do is they try to like ambush the property management company and be like, okay, I found a catch in our contract and you're not pulling your weight, and so you're take a hike, you're fired, I'm taking over, there's a new sheriff in town. And I would just come at it from a place of love and service and collaboration and say, listen, things aren't working out. Would you agree that things aren't going so great? And they they'd probably say, Yeah, yeah, we have high vacancy or high expense or whatever it. Okay. I think that it is a mutually detrimental thing for us to continue to be in this relationship. And I would like for us to part ways. I'd love to do it in a way that just leaves us both happy and wealthy as a result of that. Would you like to do that too? Well, well, yeah. I mean, who would say no to that question, right? So, you know, I really like this site staff person, uh, but you know, there's some other site staff people that they've got to go. You know, could could I could I hire this person just as my employee, and then you can decide if you want to keep these people? And maybe we have a probationary period, like a like a 90-day you know, transition period where you know I take over and uh you know, I'll still pay you your full property management fee for the next six months, even though the last three months you won't be doing anything. I just want to be able to call you in case something happens and transferring a contract, we need to get your authorization for something like that. Would that be a can't lose deal for you? Would that be a no-brainer win-win kind of deal? I promise you, the money you save in transition costs would tower over whatever management fees you're gonna pay that property management company, 10 or 100 to one. And I promise you, that property management company, they're gonna say, Man, you know, this is the kindest, gentlest, most profitable divorce we've ever had. I can't wait, I can't wait for the next opportunity for us to do business with this person again, because who knows? Maybe it's harder than you think it is to run that apartment building. And maybe you go back to that property management company and say, you know, uh, this is actually more work than I thought it was. And you all were actually doing an okay job. So can we go back to the way it was before? So that would just be an example. Uh, and and you know, if you have one door, it's gonna be maybe a different situation uh than if you have, you know, a 50 doors or a thousand doors. But you know, kind of the premise there is you have an existing third-party manager and you're thinking about bringing it in-house. I think that that only happens in collaboration with the in-place manager. So you have continuity for your tenants, continuity for the staff. Uh, and that's what we do whenever we acquire a building. So there's almost always in-place management. We say, you know what, we'll do a probationary period for all the staff. Well, everyone gets a chance to keep their job, even if we don't need them. We're gonna find a place for them if if they can pull their own weight. Um, and and keep in mind, we're often buying distressed properties. That's a that's a tough decision for us to make sometimes, but we always try to partner with the outgoing property management company, even though we're often, you know, there's a revenue loss. They know when when they find out that we're buying the building, they're like, Oh, thank God it's Black Swan that's buying it. This is gonna be a smooth, easy transition. We're losing some business, but you know what? We're losing some business anyway because this the owner decided to sell the building. So they're probably losing the management business regardless. Black Swan's gonna take care of us on the way out the door.

SPEAKER_01 50:14

That is absolutely a super valuable and incredible uh strategy right there. I think that um, you know, partnering with them to say, hey, listen, you know, let's let's come up with something that's mutually beneficial. Um, hugely valuable piece of advice there because, you know, how often you you hit it on the head. How often do we find that people are saying, well, I'm unhappy, you gotta go. You know, and then, oh, by the way, they're surprised and they're shocked when they find out that there are certain things that the property manager might have hidden from them, or there's certain, you know, things that they did to sort of throw a wrench in their plans. It's like, well, listen, if you instead say, hey, let's, oh, you know, would you I love the way you phrased it, would you agree that things aren't working out? You know, you you bring them to the table to have the conversation. You know, it's not a one-way dialogue. You're not talking at them. Instead, you're identifying problems and solutions in a way that will benefit the both of you. Um, and so for those who are looking, it this works whether you're looking to onboard a new property manager or you're looking to switch to being vertically integrated. Like you said, either way, it needs to be a conversation. You know, you don't go in trying to bullhead uh, you know, your way through it. Um, so just you know, super valuable. And it's and I can just uh you know pick from that, I can just tell immediately that this comes from years of experience and it comes from now having you know an organization that is a highly effective, smooth running machine that you've seen. Yeah, this is what works and this what this is what what doesn't work. So I hope the listeners really clued into that. I think that's a um just a huge piece of uh information because because I know people personally who are looking to do that, who they want to be vertically integrated, they want better control of their costs, they want to be able to better serve their investors and serve the tenants, and there it is right there. Um so I think that's very important. I thank you for sharing that. And I also wanted to ask you now, this is something that, again, for me is very important. This is about balance, you know. Um, so you all have grown, you you know, you you you started off together, which is a which is uh super incredible. You've grown the business, and uh now you have four children, which is wonderful. Um, and so uh how what are you doing to achieve balance uh now and and something that can maybe help someone who's listening who is is struggling with that?

SPEAKER_00 52:19

So I don't believe in balance. I think that is a uh uh just a hopeless goal. Um the same way I think like compromise is a terrible thing in any deal. It shouldn't be that you have to give a little and I have to give a little. No, no, we can all get everything we want and 10 times more if we're sufficiently creative. And I think balance, we often say, oh, it's tough to strike a balance. Yeah, it's tough to strike a balance. So so don't. I believe in the integrated life. When I am living life full out, when I am at maximum engagement and in a peak state and just uh in flow, every moment of my waking life, that's my ideal life. And when I can't tell when I go from working and I go into playing, that like that's that's that's as good as it gets right there. In my in my opinion, that's really kind of the paragon of existence. At the end of our life, you know, I think that especially, you know, as as uh as men in modern society, uh, you know, we we struggle with, you know, it's it's not okay to be a workaholic and we have to be there for our families. And I think that our our wives, you know, or women in our society, they feel like they have to somehow do it all. And and it's just it's it's such unfair uh expectations or frames that are put on our our life's ambitions. So uh my wife, she is a lion and uh, you know, type A personality all the way. Uh, but a lot of times she just wants to be a mom. And sometimes I want to just spend all day with my kids and you know, and have a beautiful day with my kids. Other days, I want to work 20 hours a day working on uh, you know, an epic acquisition, uh, you know, an asset where I'm just gonna drive past it every night for months, just marveling that I get the privilege to own this thing. And there's nothing wrong with any of those things. And and we and we really get stuck when we say, oh, we have to we have to be in balance. Like I love living out of balance as long as I remain being a whole person. And let's talk about that from a very like tactical perspective. So we just booked a trip uh yesterday. So I'm in a mastermind. And uh there's like three parts to this trip for this mastermind. And the first one is like a family-oriented one, then there's a piece that's for kind of like lower net worth people, and then there's a piece that's for like higher net worth people, and you know, there's travel costs, accommodation costs, registration costs, and we just registered for the whole thing. And that's a little bit of a privilege of wealth, but it's such a small amount of money, truly, in the grand scheme of things, it's not that much. And my wife is a master of points, uh, using airline points and stuff like that. And that's one way we're able to travel. And what we're gonna do is we're gonna go and we're gonna flow. So when you have four small children, things go horribly all the time. And you just have to know that's gonna, you know, you're gonna have a kid who's sick, you're gonna have a kid who's sad, you're gonna have a kid who's throwing up but not actually sick. You like you're not gonna sleep, whatever it is. Uh, so we're gonna stay as long as we can, and we're gonna know that we're gonna lose some of those registration fees if we leave early. And maybe we uh maybe we enjoy it so much we stay later than we expected to stay. And while we're there, we're gonna be networking with other successful entrepreneurs and we're gonna be hanging out with our kids, and we're gonna be hanging out with their kids. I can't think of a better litmus test for whether or not I want to be in partnership with someone than meeting their children. Like, like that's the real them is reflected in their children and my kids playing with their kids. That beats the heck out of networking in some hotel ballroom somewhere. Yeah. Uh we're gonna hit ski slopes. It's at a ski resort in Vermont. We're gonna hit the ski slopes. Um, one of my business partners, I went skiing with them this past winter and I did a slope that I knew was so far past my capability, it was gonna be a complete disaster. And this guy, this business partner, he's a much better skier than I am. And I did that on purpose because I'm like, uh, you know, I believe that how how you treat the least of these, how you treat people when they're at the most vulnerable really reflects your true character. So I'm curious, is he gonna be a jerk about it? Is he gonna get impatient huffing and puffing? Yes, we went down that slope for an hour. It was a multi-mile run, it was a long run, an hour of me. I fell 20 times, sometimes going 40 miles an hour, and I was dazed. And he came by and helped me pick up one more time. He's like, Nick, we just got past the hardest part. And I'm like, That's the 10th time you said that, you're lying to me. I hate you, and like we're like, you learn so much more about someone's true character when you go through intense experiences like that than in a conference room or a hotel ballroom. Now, Brandon, when in that whole sequence of events was I working and when was I playing? I couldn't tell you, yeah, but I know I I lived full out from 6 a.m. till midnight. I live full out, and that's what we're gonna do on our trip here this weekend. And that's that's that's for me the goal is you know, when am I working? When am I playing? I can't tell. And the more I can merge those two things, I know the more, the more joyful life I'm gonna have.

SPEAKER_01 57:20

That that is awesome. That is beautiful. You know, I think um the two things I that I I really like that uh you mentioned in there. I like all of it, but I think you mentioned uh the living full out all the time and also staying in a peak state. Um, I just think that's a very, very powerful uh point and a very uh way to sort of illustrate and convey what you're what you're getting at there. It's always, always looking to be in a peak state, no matter what you're doing, you know, because then then there is no switching on and off, you know, or I'm working now, or I'm I'm enjoying life right now, you know, I'm enjoying my time with my family right now versus being in, you know, looking at a new deal or whatever it is, you're always in a peak state. And so no matter what you're doing, you're you're fulfilled. Um, and so I I I love that. You know, that to me, that approach um I think is the solution. You know, it's the way to finding value and happiness and and uh fulfillment and anything that you're doing. So I love that. I think that's very, very powerful. Um, and you're right. I think it is, you know, it sounds like whoever you were you're you're skiing with there, he he encouraged you and picked you up and made and didn't get frustrated and trying to didn't try to bury you out there in the sun. So so I think that's good. You're right. You know, those are the times where you really get to a person's true character. It's like how are they treating you when you're in trouble and they're and you're sort of needing their assistance or guidance. Um, so very, very powerful and very important stuff there. So so what's next then for Black Swan? Um, you all have had just a a huge uh amount of success and growth, and and I just I love it. What's what's next uh for you guys?

SPEAKER_00 58:47

That's a great question. So uh, you know, five percent of all of our profit goes to charity. Uh we we built a school last year. We we did an adaptive reuse, converted a 40,000 square foot abandoned office building to a school. That's that's one of the coolest things I've ever done in my entire life. A million people were involved. I can't, you know, I can't take credit for that thing, but I was just the the crazy guy that wanted to build a school and and somehow it happened. Uh, you know, 5% of the profit from our uh enterprise goes to our staff and a profit share. Those are the things that really get me waking up and excited in the morning. Um once you have enough money, more money does not, it's almost anti-motivating. It can it can almost be a toxic thing if you're if you're not really careful and intentional about your your next steps. What's the thing that is going to drive you forward? Um, I love I love buying really cool things and and transforming them. You know, we bought uh three 100-year-old apartment buildings in the last couple of years, and we've done just insane, you know, kind of restoration projects on those. Not the most lucrative projects we've done. Well, one of them turned out great, one of them not so great, and one of them is the worst project we've ever done. But man, they're just these beautiful historic buildings. Um, we uh you know we we've been aggressively growing our company. We're gonna do that soon. We've got uh a wait list out there for our next uh vehicle, our next private equity fund. Uh, we've got, I think, 21 million on the wait list right now for that. Uh, but we're holding off on launching it because uh, you know, I'm sure you've seen uh transactional volume in the commercial real estate markets down 80 to 90 percent year over year. So this time, you know, last year we would have uh you know had you know four or five, six deals that we're actively working on. And we still are looking at four or five, six deals. We just wrote an offer on a$40 million property last week, but uh, you know, we offered 38 and they want 43. And there's just a gap there between the the buyer and the seller. And until the seller is truly desperate, they just they're not gonna, they know it was worth 43 last year. It's probably worth 40 this year. And the market dynamics being what they are, we don't think it, you know, we we need to offer more than 38 to to pay what what market value truly is. So um we're not doing a ton of new deals right this second. We're really focused on operations, uh, you know, training our our largely young team. Uh, we're gonna do a ton of kind of retreats and culture stuff here this winter. Uh, you know, our revenue has grown 30% in the last 12 weeks. So that's a pretty staggering amount of growth in our industry. And that's from uh organic rent growth, lease trade-outs, but also all the units that we have been renovating from all of our myriad value ads. We have 50, 54 renovations that are in progress right now. And so those are coming out of renovation. We're leasing those units for the first time. So uh, you know, keeping up with that growth from an operations perspective is kind of our big focus. Uh, and then at some point, you know, in the next day, week, month, year, uh, we're gonna we're gonna you know hit on one of these big projects that we're offering on right now. We're we're looking at deals every day, just I don't know how likely is they're gonna get our contract, uh, but we're we're gonna get one of these really amazing projects under contract. It's gonna be the deal of a lifetime, just because that's how the the market cycle is gonna is gonna go. That's how the interest rate you know environment is gonna go. We're gonna buy it at a low price and eventually, you know, be able to refi it at a materially lower interest rate. It'll be a home run deal, and uh, and we'll be ready, you know, with our capital raise, ready with our debt and stuff when uh when all that comes along. So uh hopefully we'll have a couple more babies or something somewhere along the way. Uh you know, just we like to do everything at scale. Um yeah, that's kind of what the immediate outlook looks like uh for us, Brandon.

SPEAKER_01 1:02:22

Oh, that that's awesome. That's awesome. And and and it and I know it feels good to have some of that sort of um those commits lined up and ready for when you are ready to uh to get into when you're right. That that gap is is still there. Um it's it's maybe a little slightly narrower than it was um you know several months ago, but it's still there. And um, yeah, we'll we'll see kind of what happens here going forward. Uh, I want to ask you something real quick too. This is uh because you mentioned um lease trade outs. And I'm kind of curious, what what are some of the things that uh for those who are not vertically uh uh integrated, the things that they should pay attention to from their property manager on a monthly basis to kind of maybe indicate the how the property, the health of the of the property. You mind kind of just sharing some some things there if you could.

SPEAKER_00 1:03:02

Absolutely. So uh being a person in the business, I think I can speak to this not as an asset manager, not as an investor, but speak to this as a property manager. Uh in my opinion, the vast majority of investors get this not just wrong, but they get it backwards. So they believe they heard on a podcast, they learned in a boot camp, I don't know, that their job is to like hold their property manager's feet to the fire. And they need to like yell at their property manager. They might brag, oh yeah, I'm on the line every week with my property manager cracking the whip. Now you'll recall, I said, I like employees where I need to pull back on the reins, not crack the whip. If anyone tells me I'm cracking the whip, I know they're either a terrible manager or they have a terrible employee. Like that's that's no nothing more needs to be said. And it doesn't have to be this way. So when I'm hiring a painter, I don't tell the painter, here's the brand of paint to use and the sheen of paint and the color of paint and everything, and and paint this wall, but not this wall. Uh not only is that micromanagement, but it's it's leaving at the table the most valuable thing that painter has to offer, which is their knowledge. When I walk a property with a painter, I say, What would you do? What what what wall? Oh, you'd actually go with a flat sheen because the lighting in here and you know, usually use this paint shade, but you know, there's cooler lighting here and warmer lighting here. So you really need a mix between them and a painter. I promise you, they have a better eye for that thing than you could ever have because this is their life, this is their business. You could take master class or you know, what you know, go to seminars. You will never know uh 1% of what a painter knows about painting. And likewise with property manager, I would meet with that property manager on a routine cadence. Don't bother them because they're always quite pressed for time, but meet with them on a routine cadence and just ask them, how are things going? What are you stuck on? What can I help you with? How can I serve you? How can I step up and lead as a true servant leader? And uh just as an example, I have a friend who's an asset manager who I think does it right, and he's a property management company that's struggling. And uh, and he said, Okay, you know, what would it would I get in your way if I went and I visited the site for a few days? He went to the site and uh there were you know some rock star staff members, but then some people that he thought, you know, these these really aren't rock stars, and I bet this is kind of holding back our performance. He said, you know, if I got in and helped you interview some new people, do you think we could maybe you know make a few changes here? Up to you what you do with the site staff that are outgoing. I just need to interview the new incoming staff uh and and help you find some rock stars. I'm happy to pay more. Turns out the staff for this site were being underpaid because the regional in that area was at a certain salary amount, and you can't pay someone more than their manager makes. That's just like some BS rule in management. Management, right? And so he's like, okay, well, I can't pay your regional. That doesn't make any sense. I can only pay my site staff, but you have to pay my site staff appropriate market wages, or we're not going to get rock stars. He only learned that because he went and hired people and he's like, oh, yeah, there's their salary requirements are 51,000 a year, and the property management company's like, oh no, we can only we max out at 45. And he's like, well, that's kind of low. I don't even know if we'll get the person we want at 45. Why can't we pay more than 45? Now and no, if you're trying to hold their feet to the fire, they're just gonna make things up. They're they're just gonna they're they're just gonna tell you a story until you hear what you think you need to hear that you feel like you've held your feet, their feet to the fire, and no progress will ever be made. No problem will ever be solved, no value will be created. But if you step up and you step in to serve and you ask permission and you inspect with respect and say, hey, you know, um uh at some of my properties, we we keep our vacancy down to 5%. I know we're running 7% here. You know, why do you think that is? Do you think there's anything we can improve on? You know, I've got a buddy who's a web developer. Maybe he could, you know, create like a better website. That's something I'm happy to pay for. Technically, that's in the contract for you, but you know, that 2% vacancy that crushes me financially. What can I do to serve you? I can tell you if you if you approach it proper uh appropriately with respect and with service, you're gonna be extraordinarily successful. But the vast majority of investors, they just they get it all wrong. They look at the numbers first, and then they try to uh tighten the screws or crack the whip or whatever on their property manager. And the the thing that's holding your property back is not quantitative. It's not 25 bucks a month in rent. It's qualitative. There's an amenity you're missing. There's a member of your site staff that's not a rock star, that's that's not attracting the highest quality tenant, your ideal customer. There's a piece of your marketing package that's missing. There's a vendor that has been selected for all the wrong qualitative reasons, not for the wrong quantitative reasons. And then they're doing a crappy job, and then that in turn turns your tenants away. So that's how anyone listening to this, if you're struggling with your property manager, which is 90% of you, no, no one's ever truly happy with their property manager, get into a relationship with them and ask them how you can serve them and see what kind of value you can create together, and you will just turbocharge your property. You'll create incredible value in ways you can never possibly expect.

SPEAKER_01 1:08:22

Wow. Yeah, I think that's really uh really a great point there. And I love, I love the inspect with respect um line. And you know, the the the property managers are your partners in in a in a deal. And so I think that too many investors, like you mentioned, there kind of view it as some, you know, with the wrong lens and to get it backwards, they don't view them as a partner, but they are indeed a partner because with you know, a great you can have an incredible deal, but if you don't treat your property manager with respect, then it won't really matter because they're the front line and so they're the ones who are getting it done. Um, so I think that's very, very uh essential and very important. So I love that you shared that. Um, and so we're getting close uh to close here. I mean, this has just been an incredible conversation. I really appreciate it. And so I wanted to ask now, uh, for someone who is listening to this and they've kind of loved everything that we've discussed here, um, but they're hesitant and they're they they want to get started, but they're they're nervous. What's something they can do to take action to get started today? Uh we'll say as a passive investor to start off with.

SPEAKER_00 1:09:20

Yeah. So I'll I'll just selfishly plug that that anyone here can go to meetblackswan.com and uh block time to chat with me. It doesn't matter if you're a fellow syndicator, fund manager, and you just like a few tips on vertical integration. Uh, this isn't a sales pitch. Like uh I have a bachelor's degree in ministry, my wife's a psychiatrist. We just love to serve people and and just that's that's kind of what gives us our our juice. On a busy week, we might do about 50, 15 minute phone calls between the two of us. We we just love we do uh you know some sort of teaching and speaking almost every day. That's kind of the thing that gives us energy. So anyone is welcome to just go to meetblackswan.com and we've got a link to our calendar there. You can block time with myself or block time with my wife, whatever, you know, whoever might serve you better. Uh, and and we're happy to just do you know a little bit of a little bit of free coaching with you, whatever. We don't we don't have any coaching services to sell or anything, just whatever's gonna bring you value. Uh, and then just generically uh don't get caught up in the in the big vision. So uh, you know, it what's the most immediate next step you need to take? So let's say you wanted to do some some passive investment. Let's say you don't want to work 24 hours a day, seven days a week for a year straight, like my wife and I. Let's say you'd like to trust someone else, trust a professional that that's been there before. Um, you know, you might want to go talk to you know half a dozen different syndicators, just like shopping for a product on Amazon. You go look at a few few options, few alternatives. Uh, I can tell you that um, you know, Gary Keller would give you the coaching. You are one relationship away from taking your business, taking your life to the next level. And you just need to find that relationship. It's rarely a course or a book, or it's almost always a person that takes you to that next level. You need to find that person, someone who inspires you, someone who guides you. They don't have to, it doesn't need to be like a paid coaching program. That's a little bit of an epidemic, I feel like, in our industry. When I got started, I literally just found a real estate agent who uh who was you know more successful than than I could ever hope to be, knew more than I could ever hope to know. And I just said, I want to get in on that, please. I I would like you to buy me a house, please. And uh, and and so you just need to go get into a relationship uh with that person. So I challenge you to put this this podcast on pause and just go dial the numbers right now. Go dial the numbers of the person that you need to talk to, uh, or or book a time to have a call with them, a a local mentor. You're welcome to block time with me, uh, with with anybody. And you should probably talk to multiple people, but don't just think about it. Don't do research, go get into conversation, go get into relationship, and that's ultimately what will propel you forward.

SPEAKER_01 1:11:55

Wow, awesome. Another, another golden nugget right there. And I think you're right, it is often a person, a relationship that will absolutely transform your business if you already started, and or your mindset if you are kind of um, you know, waiting for something to sort of be the catalyst that will put you over um into it. And so I think that um that was very, very valuable. And I really appreciate that, Nick. And so um, for those who, you know, for anyone who's listening to this and they loved your incredible message, which I'm sure everyone has. I know I have, what can they do to sort of reach out to you and maybe hear more about you?

SPEAKER_00 1:12:24

Yeah, anyone uh listening can go to meetblackswan.com, as I just mentioned, blocked down my calendar, but we also have other ways to connect with us there. Uh we we do have a course that's a pay what you can model, and 100% of the revenue goes to charity. Uh, we raised over$100,000 last year from that. Uh, and that's uh that's you know part of how we we built that school. We uh helped upgrade a local homeless shelter from a residential kitchen to a commercial kitchen. Lots of fun stuff we do with that. We we joke that the uh our private equity fund is the restaurant and our course is the cookbook. So you can check out the cookbook if you want and say, oh, this looks pretty delicious. I actually want to go eat that at the restaurant. Or if you yourself are a chef and you want some inspiration, you can go check out our cookbook there. We've got our our Facebook community there. Again, you know, getting into a relationship with other people is really what's going to propel you forward. So you're welcome to go jump into our uh closed Facebook community there. And uh we'd we'd love to just serve you any way we can. We do a monthly group coaching calls for people that sign up for our course. I just did one a couple days ago when it's just kind of rapid fire people working on specific challenges. And um uh again, you can access that through our course time for our mailing list. And uh we've got a wait list for our next private equity fund launch as well. Uh, so you can learn more about our private equity fund and and how we create massive value for our passive investors.

SPEAKER_01 1:13:36

Awesome, awesome. And so I will include include all that in the show notes, and so that anyone listening to this, you can feel free to reach out to Nick directly through the links that I'll provide in the show notes. So again, Nick, look, really, really appreciate your time and uh just for adding so much value um to the listeners, to myself, to the show. And um, I I love you know your your spirit and how you focus on serving others. And so I think it just really it's apparent in your message, and I really appreciate your your time here on the show today.

SPEAKER_00 1:14:04

Thanks. It's an honor to be here.

SPEAKER_01 1:14:07

As always, thank you so much for tuning in to the show today, brought to you by Bridge Prosper. If you enjoyed today's episode and you'd like to learn more about commercial real estate investing, please like, subscribe, and share. And we'll see you again next week. I'm Brandon Jenkins, and this is the Capital Stack, where we help you learn, apply, and prosper.