From creative financing strategies to building valuable relationships with brokers, multifamily investing expert Jered Sturm delves into the key strategies that have fueled his success. Discover how he overcame challenges, his approach to sourcing quality deals, and the crucial lessons he's learned on his journey.
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Transcript
Narrator:
Quick disclaimer, the views and opinions expressed in this podcast are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to bestevershow.com.
Jered Sturm:
The people you're raising money from, whether they're billionaires, millionaires, mom and pops, friends and family, whatever, even if it's second, third, fourth generation, someone traded a portion of their life to earn that capital.
Narrator:
Welcome to the Best Ever Show, the world's longest running daily commercial real estate podcast. Our hosts interview commercial real estate experts every day to get you the best advice ever with none of the fluffy stuff.
Joe Cornwell:
Best ever listeners, welcome to the best real estate investing advice ever show. I'm your host, Joe Cornwell. Today I am joined by Jered Sturm. He's the owner and operator of SNS Capital Group. He's an apartment syndicator with vertical integration and operational excellence.
He invests mainly in Ohio and has been investing for several years now. I know Jered personally, we've become acquaintances and friends over the years. So I'm excited to have you back on the show. I know you were at the Best Ever Conference earlier this year and have been on the show previously. We will make sure to link to those previous shows. If you have not heard Jered's story, it's a really fascinating background. So please check that out. But Jered, today, tell us a little bit more about your current focus and what your company is doing in the Ohio market.
Jered Sturm:
Yeah, thank you for Joe having me and everybody else who's behind the scenes that puts all these episodes together. I'm appreciative of the platform that allows me to share my story, but you mentioned Ohio, I'm exclusive to Cincinnati, Ohio. What we do is we purchase multifamily assets, usually in the C to B class space, and we reposition those through, as you mentioned, vertical integration, both in property management and construction. So that's what we're doing. And we're currently still acquiring assets and growing our portfolio.
You said in my introduction there of best in class operations, and that's really what our core competency is, is running these assets to a high degree of efficiency, as well as forcing appreciation in them.
Joe Cornwell:
Yeah. And you are somebody that I've personally looked up to over the years. I have, I don't want to say necessarily copycat as your model, but I've certainly taken inspiration from what you're doing. And you and I are one of the very few multifamily operators. I know obviously I'm not quite on your scale yet, maybe one day that do things in-house.
So like you mentioned, vertical integration. So I do want to spend time talking about that today. And I'm sure some of the listeners who have dealt with third party management, third party contractors have probably felt some of the pains that are associated with those things, which certainly was a motivation for me to do that in-house and I'm assuming was a motivation for you. So take me back to your thought process on when you started transitioning into the midsize and larger multifamily, what made you want to do these things in-house?
Jered Sturm:
So at that decision, it was probably 2010 maybe. So we had built up a portfolio of smaller assets being like duplexes, quads, things like that, probably were around 30 units. And at that time, we knew we either had to build a real business with systems and processes to support the on-site operations of our assets, or we needed to outsource to a third-party management company. Ultimately, the decision we made was to outsource to a third-party management company.
So how we approached that decision was, it was very important to us to start from the perspective of the customer, which would be the tenant or the resident. So we found similar properties to ours and I listed online different management companies that had posted listings online for comparable properties to what we owned. So we were reaching out to those as prospective tenants, not to the sales representative in the corporate office, because I first wanted to see how they were handling their customers and the results were just not good at all.
Lack of responsiveness, lack of professionalism. Some even clearly breaking fair housing law, just terrible, terrible results. So we said, well, nevermind, we're going to backtrack, change that decision and build out our own management company. We don't manage for other people. So as of today, we have about 1300 units. That's what we manage is just our own assets. And over the 15 years of doing it, we just built out the systems and processes to find that efficiency that we're so good at of running our own assets.
Joe Cornwell:
So you knew as soon as 2010, so 13 plus years ago, you knew that you did not want to get on the road of contracting with third party management.
Jered Sturm:
I would say I knew that the results weren't what I wanted. Property management is the least fun, most work part of real estate investment that is incredibly important to the success of the investment. So, it's not that I loved it or that was my passion, but I want to produce good results and I knew that I needed control of that component of the investment to produce the results I was after. That makes a lot of sense. Take me down that road of your journey.
Joe Cornwell:
Obviously you continue to acquire more and more assets. At what point would you call yourself a full fledged management company, again, servicing your own portfolio?
Jered Sturm:
Well, I think we're there now. We have about 40 employees. Those are full-time W-2 employees that oversee the operations of our asset. And again, that's not just the property management component, but a lot of the construction component as well. And so I would say we're there and have been there. I think even when we were at one employee, I would have given myself that label because my brother is technical title in our organization, COO, right? So he has been very intentional about building the company to be able to handle 10,000 units.
Whether we get there or not is not as important to us as did we build it with the systems and processes and checks and balances in place to be able to handle it because we've had our learning curves over the years and one of the hardest things is when you build something for 500 units and you get to a thousand and have to scrap the whole thing and start over. And so he's been very good about building an organization that is professional from day one.
So even with one employee we were focused on how do we build a real property management company.
Joe Cornwell:
So when you go down that path and you want to build out these systems, what were some of the first challenges you ran into that you had to overcome? And again, using the lens of we know we're growing, we know we want to continue growing. So what were some of those challenges that you had to overcome with your systems?
Jered Sturm:
I think we run into challenges every single day. That's how I know how to grow a business.
You make asymmetric bets where the upside is bigger than the downside and some hit and some lose and you're just constantly adjusting along the way and trying to see around corners as best you can. But it's a game of whack-a-mole and you try to come out every single day a little bit better and over 15 years with one of our core values that our organization is continuously improving. So not only are we looking at where there's faults, but we're also looking at where we're strong and how can we get better.
Sometimes we try things and say that wasn't a good idea and scrap it and start over and just kind of relentless about that pursuit of improvement.
Joe Cornwell:
Okay, well give me an example. So let's say five years ago, obviously you weren't far along as you are now between portfolio or operations. What was something that was a reoccurring challenge for you guys that you had to overcome?
Jered Sturm:
One of the things that we're really good at is renovations. So, taking a distressed property, putting 10 to $15,000 in the interior renovations. So controlling all components of that renovation is something that we have slowly honed in. So an example of that, like what KPIs do you track to hold your organization accountable to that? So right now we try to average four days on our full renovation turnovers. So from the time the construction team walks in to the time the construction team walks out, four days, full gut renovation.
And how can we do that is a challenge. And what we've learned is eliminating transition points. So from the vendor to S&S, our company, and then back to vendors is always a slow point. So we've been pulling more and more in-house. So we have four full-time cleaners. We have our own turnover teams that go in and do this work. We don't sub out things like painting. We don't sub out things like carpet. We just train our guys to be able to do that so we don't have transition points.
But I think the biggest takeaway of that or where we have a continuous improvement to get to the result we're at today that we're proud of is again, my brother who's building out these operations, one of our project manager goes into the unit, does what we call move out inspection. That project manager is doing one input, which is inputting this process, which has multiple outputs. One of them is it creates a scope of work for our turnover teams. Another one is it sends out a material order to Home Depot.
And what we've learned is if we can keep our skilled tradesmen in that unit, that's a huge component of our speed. So all of the materials show up on the day of demo on a pallet wrapped up to where they can unpack it and execute that scope of work.
So I'll give you such a nuanced example of what we noticed through observation. Like when we would go to our job sites to these turnovers, there would be Gatorade bottles, Red Bull cans, things like that, probably things you're all familiar with construction sites, right?
And we're just like, well, where are you guys getting those? Oh, we go up to the gas station and so and so. So a part of our material order now is a pack of Gatorade and a Red Bull because the cost of that is significantly less than the labor costs that we lose and the inefficiency. So the goal is how do we keep our guys doing what they're really good at? And that could be Gatorade or Red Bull, or it could be like when you order a vanity, make sure that the supply lines P trap plumbers, putty, faucet, all those things are there, so they don't have to run and grab those things. And so our material ordering and our workflows are very intentional about keeping our time efficient.
Joe Cornwell:
Yeah, yeah.
Jered Sturm:
So that's slowly have picked away at that over the years.
Joe Cornwell:
That's an incredible point for anyone who's unfamiliar with the construction process. It is frustrating when you see your guys or gals running to the store constantly for things that were completely avoidable.
And that's something I have to constantly talk to my employees about where it's like, I know some of these things we don't necessarily order at scale because it's different on every unit, like fittings or something. And I explained to them, instead of going and buying one apartment worth of valves or fittings or whatever the example you want to use, get 10. Because the amount of time you spend driving back and forth to the store, the labor money we lose on that is more expensive than the fittings again, as an example.
So, how have you been able to really integrate your employees into that philosophy? Because that has been one of my challenges, is making them see what you see where they need to see it.
Jered Sturm:
You mean getting them to buy into that level?
Joe Cornwell:
Yes.
Jered Sturm:
I've had a lot of failures on that too. It's about what value. When we hire, we hire 50% for competency. Can you do the work? And we can use the tradesman as the example, but, can you fix or renovate apartments? And then the other half is on values. So we don't say like cultural alignment because what we don't want is, we don't want a team of all the same people. We think the diversity brings a lot to our organization from a problem solving skills standpoint and critical thinking standpoint. But what we want is we want values alignment. So our core values, continuously improving, reliable, having a positive attitude, always doing the right thing, and being team oriented.
So we have a lot of questions in our interview process that are testing their values. And the question is, do your personal values align with the values of the company? And a lot of times if we can get that right, we can get the buy-in to the efficiency part because we're just hiring people who have similar values to what the organization is looking for.
Joe Cornwell:
Interesting. Now that's probably something I have not done good enough at. Again, I probably focus more on the competency.
Do they have the skill sets or at least are they trainable to have the skill sets and less of the, again, the values and philosophical side of buying into what we're actually trying to accomplish here as a business. That's an interesting spectrum there that you have to look at both sides of. So with you guys being so efficient, and I know you and I have talked in the past about how you're able to turn some of these units and days as opposed to weeks, which I would consider probably average or normal for most operators that I've spoken with. On-site, the day-to-day, the scope of work, achieving these KPIs and the things that you mentioned. How do you have your leadership set up where those things are being done and someone is monitoring that those things are done in a timely way and correctly?
Jered Sturm:
It's a good question. And I was on a podcast, I think it was last week, and they were asking a lot of questions about operations and I syndicate these deals, right? So I raised money from investors and the focus of that podcast was about how can passive investors know if a syndication sponsor is best in class at operations. I don't think I did the best job on that podcast, but after the fact, I was reflecting on my answers and I thought there's a really simple way. And it may answer your question as well, that investors could know this, but from a leadership perspective, how we're ensuring these things are getting done. It's KPIs.
So if you're a passive investor asking questions to a syndication sponsor, and they're saying we're vertically integrated and we're very good at operations. Sounds great. What KPIs do you track to ensure that? And you can ask them on different levels, right? From leasing, what KPIs do you track and what are your metrics that you're targeting? Delinquency, what KPIs do you track? And resident length of stay, time for turnover. We break our vacancy out into three buckets from the time the resident moves out to the time the construction starts, time the construction starts, time the construction finishes
and then time to construction finishes till the time the resident moves in, right? So a lot of people are only looking at from move out to move in, but there are different departments and different people responsible for each of those components, and we hold them accountable to each of those components and we set targets.
A lot of times we're also trying to align financial incentives with those targets. It doesn't work for every position or every employee, but we do work that in when we can.
But your question of how does leadership make sure this happens, it's never ending. It's a lot of work, right? It's hard to get these things to happen. But having KPIs that can track data to then give you a more 10,000 foot view of what's happening, rather than me driving around every apartment and monitoring, is this turn going well? Is it not going well? Why is it not going well? It's kind of like, let's let the numbers tell the information and then we'll drill down where needed.
Joe Cornwell:
Okay, so specifically, how are you tracking KPIs?
Jered Sturm:
You mean like a software?
Joe Cornwell:
Yeah, yeah, what are you guys doing from high level to manage and track this?
Jered Sturm:
Mostly Google Sheets is what we use now, so all those are live documents where you can grant access to the right people. My brother, who I mentioned earlier, he's very good at scraping data from different parts and having them automatically flow into certain sheets, which then populate information. We also use some assistants in the Philippines who help us with data entry and ensuring that all of this data is inputted correctly to then produce the metrics that we're reviewing.
So some of it comes from our property management software, which is AppFolio is what we're using, but those KPIs are pretty basic. They're not very sophisticated. They'll tell you a lot. So we usually like more information than that. So usually they're automated formulas that are being built off data that's being scraped off somewhere else.
We use a software called Forms on Fire that our project managers are inputting information into as they're doing the move out inspection. That data is then scraped, plugged into a spreadsheet and then producing KPIs for us.
Joe Cornwell:
That's awesome. So when we look at self-management, vertical integration, controlling as many aspects of this process as you can versus someone who may be listening to this that does have third party management, tell me a little bit about where you think your strengths are going to show starkly compared to a, let's even say a good property management company, because we all know there's a lot of bad ones, but let's just say apples to apples, so to speak, good property management company in whatever Metro versus the way you guys operate your company, where are you going to shine?
Jered Sturm:
Profitability is where it's going to show up the most. I've been waiting for 15 years to show off what we've been building, and I think we're finally going to start seeing it here.
The wind's been at my back, it's been at your back, it's been at everyone's back for 15 years. And for those 15 years, I have been very intentional about building a company that is really good at executing. So I've been like, let's bring on some pain from an economic standpoint, because that's where we're really gonna shine.
If you look back over the last 18 months, our occupancy is 98.5. It's hard to do that across as many units as we have, but we're just executing at a high level. So yes, when we go into recession, we might see that number come down, but my goal is to always just beat the market. I'm just gonna outperform my competitors.
And something that just popped into my head is, Joe, you're a football fan, right?
Joe Cornwell:
Sure, yep.
Jered Sturm:
I remember playing high school football, and there was a game we were playing in the snow. And a few of the players on my team were just moaning and groaning about the impact that the cold weather and the snow was having. Can't hold the ball, we can't get grip in our cleats, and so on and so forth.
What our coach quickly reminded us of in his military-esque coaching style was the other team is also playing in the snow. So translating that onto real estate is if we go into a deep recession, it doesn't matter, I'm gonna still beat my competitor. So it's about being really good regardless of the external factors that we're facing. And there's a lot of people who haven't been paying attention to that for a very long time, so I'm looking forward to it. I'm really ready to show off what we've done.
Joe Cornwell:
Yeah. That's a great analogy. And that makes me think of when we were younger, the 2000 Patriots, or how many times did they host an AFC championship game or a divisional playoff game in the snow in Foxborough and you got Miami or the Chargers coming to play in the snow when they haven't practiced or played in the snow once all year and the Patriots practice in the snow outside five days a week. So that's a great analogy. And obviously, as you mentioned, everyone has to deal with it. But the ones that are used to practicing and perfecting their craft in that environment are the ones who are going to shine. So yeah, that was a cool analogy.
Jered Sturm:
I'll bring that to present day. We recently bought four apartment communities in the last two months. I could say interest rate climate is just too hard. Can't find any good deals, nothing pencils. Well, when you can run them like we can run them it makes it a little bit easier to service that debt. So call it the environment of the debt environment is the snow, but how we play is gonna offset that. And so a lot of times I enjoy the challenges because it weeds out the people who haven't worked hard enough to get ready for them.
Joe Cornwell:
Yeah, that's a great point. And let's talk a little bit about the market. As you mentioned, rates are up. We're all seeing it, we're all dealing with it.
Deals are harder to come by for most people. So with that in mind, how are you doing things differently than you did maybe a year or two years ago, as far as acquisitions, looking for deals and underwriting? Let's start with that.
Jered Sturm:
The biggest change has been the debt. So I would say that's where my change has been as well, meaning the debt products I've been using. So like from 2020, that started pandemic through early 2023, I was using all swap loans. So my entire portfolio is long-term fixed rate debt. I didn't take any floating rate loans. I never have. Our investment philosophy is consistent predictable cash flow. And I don't think you can have those first two words without having debt being consistent predictable.
So I was paying a slight premium to get that long-term fixed rate debt. In hindsight, that was a really good move. But what I was doing for those three years as interest rates were very low is I was taking swap loans. So that's where I take a floating rate loan from the bank and then I trade it in the derivatives market or third party market with a big institution, call it Wells Fargo, US bank, somebody like that steps up to the plate and says, Jered's taking a $10 million loan, it's floating at 3.5% and then I have to agree, Mr. Wells Fargo, I will pay you 4.5% fixed for 10 years as long as you pay my 3.5% and they say, great, 100 basis point spread, I'm happy. I get to make that money and I'm saying, well, I'm happy because I get the predictability of the fixed rate loan.
What happens is then fast forward to today, right? That 3.5% goes to eight or nine. We still are paying 4.5% Wells Fargo or whoever the buyer was of our loan is now paying that 9%. They hate that deal because they're losing money every single month.
Using those, you get an advantage because your debt can turn into an asset. So when you're in the money, basically Wells Fargo hates the deal, right? They're losing money every single month. So they will pay us to get out of the deal. So if we break the swap, terminate the loan through refinance, we pay it off or whatever, they'll pay us a bunch of money. And we've been doing refinances where we've getting very handsome breakages to get out of that. I'm not doing those swap loans anymore just because of the way the interest rate climate has changed.
So I'm taking on debt that potentially allows us to benefit from falling rates in coming, call it three to five years. So just restructuring the way we take debt, because that's the thing that changed most rapidly. So that's how we've adjusted and changed as well.
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Joe Cornwell:
So back to the swap that you were talking about. How did you even learn about that and what means you want to do that? Because you're the first person I've heard had to utilize it.
Jered Sturm:
Well, let me put it into more context. We have an apartment community. It's a smaller deal of ours, but it has about $7 million in debt that we bought in.
I think it was April of 2020. So at the time, I think the floating rate was three. And we paid the premium and locked in our rate at 4.5%, so we have 150 basis point premium. The rates have adjusted, but that's $7 million in debt. If I break the swap today, which we are considering it, so we're monitoring this one closely, the breakage payment that the bank would have to pay us is about 900,000.
So I don't know what that is, is percentage of 13, 14% of the whole principal balance is gonna come to us. Think of that as a prepayment penalty. If you had to pay 13, 14% for a prepayment penalty, you never would do it, but I'm gonna get paid 13 to 14%, which then allows me to do these cash out refinances in a higher interest rate climate. So what made me want to do that, I wasn't sitting there saying these loans are gonna be assets in the future because rates are gonna go up. I just want consistent, predictable cash flow.
And the way I can do that is long-term fixed rate loans. So I'm gonna utilize a swap. So I did get a lot of pushback from investors over the years back when everyone was taking floating rate. It was like, well, so and so is getting debt at 3%. Why are your loans four and a half? And I'm like, well, this is what I wanna do. It's safer in my opinion and I'm after that consistent predictable cash flow. So really that was the reason we were doing it. It wasn't because we thought it was going to ever be this asset, but it is a tool in our tool belt.
Now we're sitting on $40 million in swap loans that have these very attractive breakages that depending on how we have forced depreciation into the asset, even in today's challenging interest rate climate, we have done some very attractive cash out refinances because we're getting this added bonus of the breakage. So don't think that I was planning for that to happen. I just wanted fixed rate loan.
Joe Cornwell:
Yeah, it sounded like the Michael Berry real estate that knew this was all coming and had the crystal ball.
Jered Sturm:
It was like, oh, 10 year fixed rate loan at 4.5%. I'll take it and lock it in. Yeah, yeah. But my brain was on that for 10 years.
Joe Cornwell:
No, that makes a ton of sense. Awesome.
Jered Sturm:
This brings up a good point though. Being a good operator, we're relentless about finding opportunity even when we're doing really well. You asked the question, how did you even know about this? It's just like asking tons of questions. So I'm like, okay, I understand that these can be assets. Go to a mortgage broker. What would happen if I pay this off? Tell me more about that. How do I calculate the breakage? Tell me more about that. So being a good operator is about turning every stone to find those opportunities. And it could be through the debt, like I just described, or it could be once you own the property, how can we decrease the electric bill by putting LED lights in? Any way that you can find opportunity, and if you're a good operator, that doesn't stop once you start hitting your projections.
Joe Cornwell:
Again, this is the first I've heard of it. So spend a few more minutes talking about, let's say you got one of these. And again, I know in today's environment, they don't make sense probably, but when you were finding these, how did you go about selling these to an end buyer, so to speak.
Jered Sturm:
You mean like the swap loans?
Joe Cornwell:
Yep.
Jered Sturm:
The bank facilitates it all. So when you do a swap, they have an in-house person that takes your floating rate loan, takes it out to this market called the derivatives market. There's a huge market where they go out and say, who wants to buy this? Then these other parties, and then say, I'll buy it. And there's a, basically the word swap is like an interchange, right? Wells Fargo agrees to pay the terms of my loan. I agree to pay Wells Fargo at the higher interest rate, but fixed. And then that goes on.
And if it goes for 10 years, basically it ends and it matures and that was our original intention. But at the end of the day, one party is betting that rates will go up and the other party is betting that rates will not go up by a certain amount and they will continue to make money on the loan. So we bet in the right direction on that one, but it wasn't really a bet because we weren't trying to realize that gain. We just wanted the predictability of the fixed rate that so it's not about me taking that loan and approaching Wells Fargo and saying, would you like to buy this? I don't do any of that. It's all the bank.
Joe Cornwell:
Yeah. Okay. So it sounds like it's sold just like a normal note would be. It goes to the secondary market. Somebody picks it up like an investor and buyer buys your personal mortgage, similar to that market, they're gonna basically sell the note.
Jered Sturm:
There's a whole nother package of documents that goes into agreeing to do this swap, which we of course have our attorneys review it and make sure everything's good and that it meets the terms that we've agreed to. It's just basically a bolt on to the original loan documents.
Joe Cornwell:
Interesting. That's a very cool strategy. Sounds like it worked out really well. Let's talk about finding deals.
I think that's probably most common and reoccurring things I hear talking to investors. It's difficult to find deals in today's market. So how are you guys sourcing your deals in 2023?
Jered Sturm:
Quality deal flow has always been our bottleneck. So I'm specific to say quality deal flow because it's not just deal flow. We see deals all the time, but I mentioned that we bought four different communities in the last two and a half months, I think it was. Prior to that, it had been 15 months. So our market, Joe, you know this, had to go through price discovery. Buyers and sellers had to get back on the same page, interest rates were moving very quickly. And it just happened to be that we found these four deals that acknowledged the new market conditions and had a degree of motivation that was enough to do that.
But how we're sourcing deals is any and every way that we possibly can. So when it's a bottleneck, you do everything you can to clear that bottleneck. So that could be relationships directly to the owner, relationships with brokers. I will say typically what we're buying now is larger apartment communities, call it 100 plus units. So where I have found the most success, and it's not to say that this is where everyone will find, but for my personality, my willingness on the effort side, where I put 90% of my effort is building relationships with the top three to five brokers in our market that do multifamily in Cincinnati, Ohio.
I have bought some deals directly to owners because I have relationships with other owners in the market. But at the end of the day, at the size that I'm buying, real estate brokerage firms have worked that relationship for 30 years. In the sophistication of the seller, they know that probably the best thing in their interest is to go to the brokerage. So I just try to build that relationship with the broker for the most part.
That's the main area of lead generation for our acquisition. And so it doesn't mean that all of our deals are marketed. We get a lot of that for that first call. And that's how we usually can get in front of them.
Joe Cornwell:
So given the length of our audience and a lot of them are focused on commercial real estate, multifamily. I can sit here and put myself in your shoes today in 2023. And I know all of your success and track record and the reputation you've built in our market here in Cincinnati. So I think people may say, Oh, well for Jered, it's easy. He knows all these people, he's built relationships, he has a proven track record, he has access that I don't have. So let's say if you went back seven years, what would your advice be to yourself or to the audience who may be in that position? What can they do today to put themselves in a position where they've built those relationships over time? I guess that would be my question. Because I can already hear the peanut gallery and what they may be saying to that answer.
Jered Sturm:
There's no shortcuts, it's just hard work in time. I think you can work as hard as you want, but if you don't give it the time to actually come to fruition, it's not gonna happen either. So it's the combination of both. On a more practical level, there's times where you have to sacrifice to offset your shortcomings. If I'm competing with a much more established, qualified buyer, I will acknowledge that, and I think anyone should. You should know your competitive advantage, you should know where you lack, and then you should try your best to offset them.
I'll give you two examples. I mentioned building relationships with real estate brokers. There's one in Cincinnati that I consider a friend. He was a college quarterback. He played division one college football as a quarterback. So I think it was last year, the Cincinnati Bengals were playing the Buccaneers. So was Burrow and Brady, kind of top quarterback play. They were playing in Florida and Tampa.
So I said, thank you, I bought us plane tickets and football tickets and a hotel. Let's go down, enjoy the game and that. So it's like building relationships that way. That means something and it wasn't just all of, well, hopefully you bring me a deal. It was like, I truly enjoy spending time with them and it was a fun trip. So there's a way that I could maybe make myself stand out.
But on a more tactical one, there was a deal, I think it was 2019, larger asset that I wanted to buy. There were lots of buyers that wanted to buy it that were way more qualified than us. So what I did to try to position myself to compete in my shortcomings, so when the deal was being marketed, I went ahead, this was before the call for offers, before anyone was negotiating. I ordered the appraisal, I ordered the environmental, I ordered the property condition assessment, which is 15 grand to get all of those things done on a property of this size. I did all of that so I could write my offer and submit those reports with it and say, I'm waiving all those contingencies. I want to offset my shortcomings and show that my reliance as a buyer is high. So non-refundable earnest money and I've cleared all these objections ahead of time.
I did all that and I didn't get the deal.
Joe Cornwell:
Wow.
Jered Sturm:
But the point is you just try and sacrifice and you do what you can to try to compete with people who have more of a competitive advantage than you. And sometimes that doesn't work.
Joe Cornwell:
Yeah, that's interesting. So you definitely took a gamble there. And if nothing else, looking at it through a broker lens, it's like this guy is serious. He's legit. He's putting his money where his mouth is. And hopefully you did another deal with that broker down the road.
Jered Sturm:
Yeah. Actually, after that, I bought two from that broker and one of those was a, I'm calling three people on this deal. You're one of the three. There's a lot of transactions that happen like that, but yeah, it made an impact of like, man, this is serious and he'll do what he needs to do to win deals. So if I put another one in front of him, he's probably going to execute. So yeah, it sucked in the moment. It was like, man, I did all that and wasted my time, but I believe it paid off.
Joe Cornwell:
Yeah, that's awesome.
So one last segment here before we get into lightning round. I know we've talked a fair amount about it, but give some advice to the listeners who may be doing their first, second, third partnership or syndication. How did you start raising money and how has that transitioned to today? Just advice to others who are looking to raise money.
Jered Sturm:
Yeah. My advice, and I have said this on other episodes is three quarters of the people who are raising money should not raise money. So, for the first eight years of my investing, I did not raise capital. I didn't want the responsibility of it. I saw it as a whole separate business arm that had to be bolted on, which it is. But for the few that want to raise money, what I would suggest, and this is not just words, but you should really adopt this philosophy is the people you're raising money from, whether they're billionaires, millionaires, mom and pops, friends and family, whatever, even if it's second, third, fourth generation, someone traded a portion of their life to earn that capital.
So I think of my dad. My dad invests in our deals and he worked a corporate job for 30 years as an accountant. And he traded 30 years of his life to earn the wealth that then he entrusts with us. So if you think of the capital that you're raising as a portion of a person's life, you should hold it to that level of importance.
Think of the lengths that we go to as a society to save someone's life. And if you're playing with five years or 10 years of someone's life and you're playing with it recklessly, that's a terrible mistake.
So I mentioned the first eight years, we didn't raise any money, I didn't want that responsibility and it wasn't until around year eight, my dad was reaching retirement age. He did basically everything that a textbook would tell you to do from a financial perspective and he did a really good job. But he's extremely disciplined. Worked a corporate job 30 years, put your money into a 401k. At the end of the day, I don't think it got him to the point that he was hoping it would get him to.
So this was at a time where we, me and my brother, were gaining a lot of traction in our real estate investment. We found this 16 unit property that was just clearly a home run. And I said, why don't you buy it? We'll take a small portion to run it and within a very short time, I think it was less than a year, we basically did what his 401k did in less than a year, and it gave him the ability to retire. And so he wasn't in the position where he could retire, and then we brought our skillset to him, and that really shifted my mindset.
I was saying, I don't want the responsibility, that's a portion of a person's life, and then I saw it as like, I'm really good at this, and this is a way for me to find fulfillment, is to help others, and give them portions of their life back that they already sacrificed for. So then we shifted into syndication model and we began raising money. And we've been doing that for another eight years now.
But yeah, I think there's just way too many people that don't hold it to the level of importance that they should. And if you're going to do it, you should be thinking about it as a portion of a person's life. So long winded, but I think that's a really important topic.
Joe Cornwell:
No, I was wonderfully put. That's a moving story. That's awesome. I'm very happy you guys were able to do that. You know, obviously, part of what we do in our generation is to help take care of our families, take care of our parents. So that's really powerful stuff. Let's shift over to best ever lightning round. Are you ready?
Jered Sturm:
Yeah, I'm ready.
Joe Cornwell:
What is your best ever book you've read recently?
Jered Sturm:
Recently, Outlive, Peter Attia.
Joe Cornwell:
Tell me a little bit about that.
Jered Sturm:
Health, wellness, longevity, doesn't like that term, but basically how to live not only a long life, but a healthy life that you can enjoy from a mental, physical standpoint. So a lot of your listeners are probably focused on building financial freedom and things like that. And you'd have to ask the question, why? What's the point of all of that? And if you can't really enjoy it through your health, then it's pointless. So second to real estate, a topic that I'm very interested in is health and wellness. So that book is really great. So I enjoyed it.
Joe Cornwell:
Well, so I'll have to check that out. Best every way you like to give back.
Jered Sturm:
I like to give back in lots of ways, but the one that I enjoy the most is extending a hand to other real estate investors who are walking a trail that I've already been on. Because in the 16 years I've been doing this, I've had so many people turn back and extend a hand to me. And I would not be where I am without the generosity of many people. So if it's even just like a phone call or a sit down or advice, and I truly tried to open our doors to people who would even be seen as our competitors, to show them our systems and processes and how we do things at our organization, because I do think it's a good way to give back. So I really am, call it mentorship, call it just helping out someone who's on the trail, a couple steps behind me, I really enjoy doing that.
Joe Cornwell:
From the deals you've done, what was your biggest mistake and lesson learned from it?
Jered Sturm:
I really have a hard time framing mistakes because there's a little learning points, right? Kind of cliche, but that is how my mindset works. As long as we're keeping that failure to an extent from wiping you out, it's not a bad thing. But I would say a universal lesson that I've learned and consistently get reminded of is financial returns on real estate investment are supported by operations. And a lot of people know that and they'll agree to that. And that's why we say vertical integration is ideal from an investment standpoint.
But, the step that I think never gets mentioned, which I'll add to it, is financial returns are supported by operations, but operations are supported by the people who work on site. So we talked about values alignment and building an organization that has the people in the seats that have that values alignment. That's really where our financial returns come from.
So a lesson from my failures or even my successes is financial returns supported by operations, operations are supported by people. And so if you're gonna run a company that's successful, you really need to be thinking about the people.
Joe Cornwell:
That is another moving point there, I like it. What is the best way people can learn more about you, reach out and connect with you?
Jered Sturm:
Our website is SNScapitalgroup.com. And so those are three letters, like Sam, Nancy, Sam, capitalgroup.com, and there's ways you can reach me there. Look forward to chatting with anyone who I can be of help to.
Joe Cornwell:
Awesome. I really appreciate it. We'll make sure to link to that in the show notes as well for anyone who wants to reach out and learn more about what you guys are up to. I really appreciate your time. I know I learned a lot. I hope our listeners learned as much as I did. I'd love to have you back here in the future and talk more shop. It's always enlightening to hear you speak. So I appreciate your time.
Jered Sturm:
Thank you for the time and the opportunity. And if you can't tell after 16 years, I still really enjoy the topic and it's a privilege to be invited on. So thank you.
Joe Cornwell:
Yeah, well, I would love to have you anytime you're free. We'll make it a more regular thing. And again, I know I certainly will learn a lot and I hope our listeners do as well. Listeners, if you did learn something and got value from this episode, please leave us a five star review on the podcast app of your choice. Follow us on social media. And I hope everyone has a best ever day.
Narrator:
Hi, best ever listeners, Joe Fairless here again. And one last thing before you go, would you like to receive a short weekly email with proven tips from experienced investors, free tools and resources and a roundup of the week's most relevant news and Best Ever content? Well, if so, join the community of nearly 15,000 commercial real estate passive and active investors who receive the Best Ever newsletter. Just go to bestevercre.com forward slash access and you'll get the very next one. I hope you enjoyed this episode and as always, thank you for listening and have a Best Ever day.