Join Whitney Sewell, CEO of Life Bridge Capital, as he sits down with Dr. Elaine Stageberg who shares her journey and insights into building wealth and achieving financial freedom through real estate investing. With over a decade of experience in the industry, she has grown Black Swan Real Estate from single-family homes to a successful private equity firm managing $330M+ in assets. Discover her unique approach to investing, her commitment to their investors' success, and the strategies she’s used to raise capital and create long-term wealth. Gain valuable insights and inspiration to embark on your own path to financial prosperity through real estate investing.
Nick was still working full-time in Tech, I was still working full-time in medicine.
We had several children by then, and there was something every single day, and so we had to make a decision.
Do we hire a third party management company and that's our path to growth, or do we become a fully fledged Property Management Company and we made the tough decision of becoming a fully fledged property management company, and so today, with all one-third billion of our assets, we manage all of them ourselves.
This is your daily real estate.
Syndication show I'm your host Whitney Sewell Our Guest.
Today she's going to bring a lot of information to you in a very short period of time.
I feel like they have a very different business model, which I I'm, loving learning more about I had her husband on just a couple of months ago.
His name is Nick, but her name is Elaine and it's Elaine stegerberg and- and they are a couple- that's doing some big stuff.
But her background is: she was a psychiatrist she's, the owner of Black Swan real estate.
They own a managed portfolio of just over 300 million dollars in assets under management and her and her husband through real estate to reach Financial Freedom in their 30s.
They founded the Black Swan in Black.
Swan is delivered, exceptional returns, hundreds of investors, but they have a very I'm, not I, don't want to give it away, but they have a very different model that for operating these deals, then we've typically, maybe ever heard on the show Even after 1700 or so interviews, it's a very different model, but I'm I'm, enjoying learning more about their model and their focus on the investors, their focus on their tenants and employees.
They have a they're, very values, driven and, of course, I love that about them, but but she is just action-packed in this show in this episode and just laying out their model and how they do it, how they've been successful, raising money? What that looks like for them, so I know you're going to learn a lot from Elaine today, keep hearing in our industry right now that people are struggling to raise money well, our guest today has had a lot of success.
Raising lots of capital and they actually have a different business model or a unique model.
I'll say that I'm looking forward to hearing more about, we heard her husband just probably two or three months ago, and enjoyed the conversation in just their heart to give back as well as a part of their business and so I'm excited about this interview.
Elaine welcome to the show! Thank you so much for having me I'm excited to be here: yeah Elaine, let's Jump, Right In give the listeners a little bit about your background.
We heard from Nick a number of not too long ago, and so who are you let's jump into this business model and how you all have been successful, raising money and was tied into today's climb of trying to raise money as well, yeah, absolutely so? I'm Dr, Elaine, stockberg, I'm, a psychiatrist by training and I'm married to Nick, who, as you mentioned, recorded the show a little while ago, he's a technologist by training.
We've been married for about 12 years.
We have four kiddos and along the way we were Real, Estate Investors started doing single-family homes.
We've always had a burr business model, so we've been able to take one bucket of money, buy something do a renovation put a renter into it.
Do a cash out refi, take that same bucket of money, rinse and repeat over and over and over along the way.
We grew and grew and grew, and now we both run Black Swan real estate, which is real estate, private Equity Firm based in Rochester Minnesota and Tacoma Washington about a third of a billion in assets under management, all long-term residential, real estate, ranging from single-family homes to large apartment buildings and get the Good Fortune to share the benefits of real estate, investing in the financial prosperity that it's brought to our family with other families.
Now yeah, that's awesome, you all have grown.
You said a third of a billion in really just a few years.
Uh give us a couple: I, don't know a couple steps that you all took that were crucial to making that happen.
Yeah, absolutely because it doesn't just materialize out of thin air right, not typically right and the thing that comes to mind.
Don't compare someone else's ends to your middle right, so if you're listening and you're growing your business or something and thinking how can I get there, that's so far, it's so impossibly far away like it takes a lot of time right.
It takes a lot of effort.
In the early years it was Nick, can I doing renovations ourselves, um, painting things laying flooring just being very Hands-On with our assets and allowing us to do it and then, along the way, Nick became a real estate agent and that allowed us to create a third-party property management company.
That was a big pivotal moment in our growth and then Nick stepped back from his career in technology to run our company full time, and then I stepped back from my career in medicine, to run our company full-time and all along the way we were doing projects with our own capital and then managing properties for others.
And then we started doing some joint ventures, and then we created a private Equity Fund, and today we only manage what we own and so we're very deeply vertically integrated.
There was never a grand plan like 10 years ago to have a company that we have today.
The plan was always to get ourselves to Financial, Freedom, Nick and I, both struggled with poverty as children, and knew that we wanted something very different in our own marriage and with our own children, and then we were very fortunate that we got there rather quickly.
We got there in about five or six years, and that was really the inflection point where we had to ask ourselves.
We really like investing in real estate and we could continue to invest in real estate simply to grow our own wealth to kind of run up the score, but that's kind of not very fun.
We could take this skill set that we have and help other families get to Financial Freedom through real estate investing, and so that was really the big pivot when we moved into our joint ventures and then eventually our private Equity, Firm, yeah, wow, so uh- and maybe let's talk about that for just a moment as far as they all started with the third party or with third party management right.
Are you all starting over? We always manage our own.
Oh, you always manage your own okay, okay, I misunderstood there! So looking back, are you glad you all started with manage or managing your own properties? I am yeah, so our very first property was the home that I lived in before we got married, and so it was.
It was kind of like a property on training wheels right.
We never acquired it specifically to turn it into an investment property.
The opportunity just presented itself because Nick also owned a home, so we moved in to his home when we got married and because I had lived there, it was literally like a mile away from our home.
We thought we can just manage this ourselves and I'm so grateful for that, because that then led to the company that we have today where we saw how important operations are.
We saw how critical, even like the minor things like really good Lighting on your marketing photos, so you can get the most amount of phone calls, so you can get the most amount of leads so that you have the least amount of vacancies so that you can place a high quality resident.
That's going to take good care of the property, like all of these pieces, all go together and because we were always right in the thick of it.
We knew how important that was and when we got to probably about 15 or 20 properties.
That was but like, as I mentioned, one of the major inflection points where we no longer could manage those properties completely by ourselves.
Nick was still working.
Full-Time in Tech, I was still working full-time in medicine.
We had several children by then, and there was something every single day, and so we had to make a decision.
Do we hire a third party management company and that's our path to growth, or do we become a fully fledged Property Management Company, and we made the tough decision of becoming a fully fledged property management company, and so today, with all one-third billion of our assets, we manage all of them ourselves we're deep in the operations we do lawn and snow and maintenance and cleaning and Leasing, and everything that goes into managing those buildings, and it all goes back to that very first one that showed us up close how important operations is to the success of an investment yeah.
No doubt about it.
The operations piece like the asset management piece right I mean it's just crucial for all your investors and just the your property thriving but I I.
Just recently, it's interesting conversation, just recently I've heard, like both sides of this coin, right really a mentor friend of mine, who has many many many thousands and thousands and thousands of units I recently got out of management.
They had their own management arm too, and they just said hey.
You know what, for the amount of Revenue that this generates is such a small percentage of their overall income and and really the distraction you're right, because I said we can we can't do it as efficient as say some of these groups that are third party management that have hundreds of thousands of units across the country, and so they went that route.
I mean they closed it down to go you third party and then I knew other guys who are just like you all right we're managing in-house as well.
But it's just interesting thoughts I mean even at a really large scale where they decide.
You know what we think it's best to go back to third party and so I just wondering.
Have you all felt that hey? It really sets you all apart? It's really a driver behind you all to bring to keep all that in-house even long term.
Absolutely so I mean I can look at very clear metrics in the communities where we are in Rochester Minnesota and Tacoma.
Washington, like I, can just do a quick search on, say, Zillow or apartments.com, and see that our rents are far above the norms and that's because of excellent customer service because of excellent marketing because of things like drone tours and matterport tours and other things that other property management companies aren't doing because of how we train our leasing staff, our average renewal rate is about 79 because we provide excellent customer service during the year that family is living their timely response to our maintenance tickets, no clearance lawn all of those things so I can see the metrics that our property management company performs better than other property management companies in our communities.
The thing that caught my ear there is that the group that you know I and I have no idea who you're talking about, but just a little bit of data that I heard there.
The group with a large number of units that decided that property management isn't profitable, and so they stopped it.
Well, that's 100, True, Property, Management unto itself is not very profitable.
We strive to run our property management company as essentially a break even every year.
We need to make sure that we can offer amazing salaries, benefits, have all of the computers and tools and everything that we need for our people, but we really keep the the money in our buildings, and so if we can bring down the cost of say, lawn care or snow removal, while increasing quality, while increasing control, while increasing resident satisfaction well because of the way multi-family real estate is valued based on noi right, so I could make a dollar of profit.
In my property management company, great I have a dollar in my pocket.
I could leave a dollar in my asset by basically just charging say, break even for say, snow clearance in this.
In this example, well, a dollar of increased noi, our Market's, about a five cap market.
So you multiply that by 20.
So now, I have 20 additional dollars in the asset, and so Property Management has never been a major profit Center for us, as I said we we strive to run it basically Break Even, but because of that, and because of the quality and the control and the consistency and the higher level of customer service.
We're able to radically increase the noi of our buildings by decreasing costs, and you know increasing the rental rate that we're able to charge the renewal rates that we're able to get and that drastically increases the value of our assets, which is the real driver of wealth.
Yeah, no I appreciate you going into detail into that completely agree, and so I want to transition just a little bit, though.
While we have a few minutes here, because I want to dive into how you all raise so much Capital right and What's led to that success such being able to raise capital and consistently successfully, and then, let's tie to just the current climate of being able to raise money.
So, but let's dive in a little bit on you're all's path to being able to raise money and how you feel you've been successful.
Doing that yeah excellent question.
We have had the Good Fortune of being able to raise pretty much as much money as we want.
Despite the challenges that have come in the industry in the last year or so, and really you know it all comes down to, we put our LPS so far ahead of our own needs like it.
We have a model, that's completely different than the norm in the industry, and it just came from our own sense of intuition right.
So we entered private Equity first as Real Estate Investors many people come into private Equity kind of straight from Wall Street or something like that, which is fine.
It's just a different path, so we came as investors saying we're really good at real estate.
Investing there's, probably some other people out there that want to benefit from real estate investing, but don't necessarily want to build this skill set or spend their spare time.
This way we could work together, and so we didn't create our private Equity model off of like the traditional recipe with refs and splits and waterfalls and fees and all of those things we just asked ourselves like what intuitively makes sense to us, and it intuitively made sense to us that we would charge no fees whatsoever.
We give 100 of all profits back to our partners until they're completely repaid that just made good sense to us that if our partners had money in the deal we shouldn't have any access to any profits or splits until they're completely made whole.
And then, after that, we keep the property because we have a burr business model.
So we all have zero dollars left in that deal and then it's a 50 50 split indefinitely.
In that infinite rate of return period and again, that just led me very intuitive sense to us that, as we were growing our own real estate portfolio, we never sold anything.
We always did a burr business model to harvest that Equity, keep that cash flowing property and The Debt Pay down and the appreciation that's coming from that property buy the next one and the next one and the next one, and then all of a sudden.
You have dozens of income streams coming in and dozens of mortgages being paid down and dozens of properties growing in value and all of the tax advantages that come from that.
So our models- just it's just very different- and it's very, very Pro LP, because there's no fees so we're not taking any profits.
You know right off the table right at time of acquisition or Capital event or disposition.
All the profits go back to our partners until they're completely repaid.
So it's an incredibly safe model and then it's an indefinite hold period that allows people to have Decades of passive income and all of the benefits that come from that which is really different and at first I will say it was a little bit harder at first when we first started working with passive investors, because it was hard to compare it to the norm and there were a lot of conversations of well.
Well, what's your waterfall! Well, there is no waterfall, you you don't have a capital event fee nope, not that one either.
You don't have an acquisition fee, nope, not that one either like so it took a while, but then once investors started to understand it, and particularly through you know all this talk of recession and investors are maybe a little more cautious right now they see how safe it is because it prioritizes their needs so far ahead of our own.
Then it just makes Capital very easy to raise and a question that commonly comes up so I'll just address it because people are like well.
How do you do that? How do you work for free all of those years until you get to a cash out? Refi return, all the capital to your partners and then you're able to participate in the split, and the answer is very simple: we're free, independent through our own real estate.
Investing! So that's what pays our mortgage and takes care of our kids and puts food on a table that allows us to put our LPS first so that when we get to where our LPS are completely repaid, then we're in that 50, 50, split indefinitely and everyone's wealth will will grow extraordinarily during that time.
So it's because I was gonna say the babies need shoes right, you gotta, yeah, yeah yeah, so because I know, like you said, a lot of people are going to wonder, wait a minute.
How are you all affording to to eat right for until that happens right until some of those properties are reach? That level is there a time frame that you all have experienced now or, as maybe you're getting some properties to that stage? How long does that has that typically taken? We advance our investors to plan for five years.
Historically, it has never taken that long.
Historically, it's never taken more than three years.
The average is probably somewhere around two and a half years, but I'm.
Just a big big believer in hopelessly conservative underwriting publicly conservative projections.
What I would never want is an investor to think.
Oh I have a sophomore in college and I'm going to put some money in it and get all of it back and say two or three years and then put that kid through college I wouldn't want that to happen.
So we tell for people to plan for five years, but historically it's never taken that long and we're laser focused on that day, because we don't see any profit whatsoever until our investors are completely repaid.
So our incentives are completely aligned.
Our investors want their money back so that they can invest in the next thing or you can do whatever it is that they want to do with that capital, and we want to hit that day, because that's the day that we start to get profit.
Could you elaborate on how you do distributions a little bit or the frequency of them? But then how do you know how much to pay out then two investors, then I was thinking about it.
Anything you paid out, then it sounds like in this model would be a return of capital right versus a return on Capital, exactly so in the first phase, during that that period, where we're acquiring properties doing the renovations and then targeting our cash out refi.
During that phase, we make no promises whatsoever about distributions.
My goal in my head is to get distributions out starting about 18 months after any given fund opens and the thought process behind that is.
It takes about a year to acquire the building.
Have units open that are available for renovation.
Do the renovations do any.
You know, Landscaping common area improvements, those sorts of things move people in at that those new rents it takes about a year for that process to unfold.
So at about 18 months, it's likely that we would be able to start distributions, but really in that first period, I encourage people to think of it, as our Target is the cash 35 and I.
Don't want to do anything that will jeopardize that cash out refi, so I don't want to do a distribution that slows down our renovation velocity or do a distribution that gets the liquidity in the bank account low that the bank is then maybe skittish about that cash out refi.
But my plan in my head is about 18 months into any given fund will be able to start distributions and it would be probably pretty small.
Like 10 percent of Say, the original invested amount in about 18 months 10 that following year and then in that following years, when we're targeting that cash out refund, so it would be like 10, 10 80.
and, of course, every fund performs very differently.
Past performance doesn't guarantee future outcomes, but that's what I've seen in the 12 or 13 years that we've been doing this and then once we get to the cash out.
Refi and investors are completely repaid and they're at zero dollars.
That's phase two, and during that time it's very predictable.
So there will be regular quarterly distributions.
Every single quarter, sometimes they'll be larger if the properties are doing well.
If there's a big maintenance item or new room for those sorts of things that need to go in, then distributions might be a little lower in those quarters and then the real magic happens when there's subsequent cash out refi's when we're in year, 10 15 20, when we're able to do future cash out refi's and those distributions will be rather large and that's like the real magic in in our wealth Journey.
When we were able to have a property get all of our cash out of it and then years later, despite the fact that we've had no money in that property for many years, do another cash out refi get a big bolus of return, and then we always reinvested.
Of course our investors can do whatever they want with their returns, and then that will happen about four or five times in a 20 to 25 year period.
At the very end, we'll sell everything liquidate, it all share all the equity with our partners and then that fund will be completely closed.
Yeah, okay, so so the plan would be to hold that for those properties for 20 plus years, but to sell uh and then what about the tax bill at that point, so the the tax advantages of our model are very good.
So, of course, in the beginning, we're doing everything we can to do bonus, accelerated appreciation with possig studies.
There's big tackle tax losses that go out from the renovation costs, so we're pushing out as many paper losses as we can and then cash flow that comes in subsequent years will, of course, chip away at those paper losses.
One thing: that's really nice about a cash out refi.
Is that that's tax neutral to the IRS, because it's not really considered to be income in the eyes of the IRS, because it's backed by debt, it's backed by that new mortgage.
So those are very tax, efficient distributions and then, of course, there's no depreciation recapture until all the way, at the very end, so unlike say a traditional model where there might be a sale, every two three four five six years and people kind of get on this, like depreciation treadmill, where they're recapturing and then needing to get new depreciation, recapturing kind of on and on ours, just kind of holds all the way until the end, and then there will be depreciate recapture at the end.
But every year that you hold there's less and less depreciation recapture, because in the eyes of the IRS, those items are fully depreciated.
So I anticipate our depreciation recapture at the time of final sale will be quite small and of course there will be a you know, a large Equity distribution that goes out at the time of sale.
That would more than offset that that tax bill, that's due, but it's incredibly tax, efficient, Nick and I have not paid Federal personal income tax, in probably at least eight or ten years, and just thinking from that tax lens of setting up where you're, not selling properties, so you're not getting into depreciation recapture you're harvesting your Equity through a cash out refi, which isn't considered to be income in the eyes of the IRS.
Doing all of these things to push paper losses out in the beginning, it's incredibly tax efficient model.
How is the current interest rate climate affected your model, the thing I say is: it has required us to put our thinking caps on a little bit more because it's it's no mystery that three four five years ago a cash rate refi strategy was easier.
Interest rates were so low.
Money was basically free.
It was much easier to do a cash at refi through 2022 and 2023.
We've been successful with getting our cash out refi's of all of the assets that we anticipated.
We would get cash out refi's in in those years, but we've had to change our strategy.
So what we've done is instead of going to the bank and saying I want a whole new mortgage on ABC Apartments.
We go to the bank and we say you know we have this really lovely primary mortgage on ABC apartments at 80, LTV, three percent interest rate 25 year amortization we've got four years left on the term, there's no way we want to give that up, because the prevailing interest rates now or five or six percent.
But let's put a second mortgage on we've renovated.
We can get a new appraisal, let's Harvest our Equity, by putting a second mortgage on that and today all of our banks have been happy to do that.
The bank knows the value in the building.
They see the renovation.
Obviously they see the higher appraisal.
The loan officer, of course, wants to do a loan so that they can collect income um, and so it's been a win-win deal that five years ago, we had never done that strategy because there was no need for that strategy, but we had to come up with a way of how do we Harvest our Equity without giving up these beautiful interest rates that we've gotten over the last several years? And so that's what we've done there and then the the real thing to note is that all of our debt is with local Regional Banks.
It's all fixed rate debt, it's all at least five year term, with Bankers that we have real relationships with their friendships, even I, say after so many years of doing business together.
So we're able to have real conversations with our bankers and say: John.
We've always had a cash out refi model that doesn't change in 2022, just because interest rates have gone up.
What strategy do we have to have so that we can exercise this business plan, despite the fact that the environment has changed? Let's put our thinking caps on, let's come up with something creative together and I, can't remember, which Banker came up with that second mortgage idea, but then once one of them did we went to all the other bankers and we said well this bank's going to do a second mortgage.
Will you do a second mortgage and they were all happy to do so and what's the average size property you all are pursuing? You know it really runs the gamut.
We have single-family homes and then our largest apartment community is 129 units right at about 28 million dollars in value okay, I mean there, you are syndicating rose, I, assume absolutely yep yeah.
That's awesome well.
Give us uh.
Maybe a couple tips too on how you all have continued to raise more money.
I know it's the model, as you all have grown, just the really the education piece I feel like on your model.
It's probably helping you to raise more money right.
But what would you say? How are you all communicating? Well, a little more I guess a tactical or things you all are doing as far as how you're communicating with investors or things you're doing every day with them, yeah.
I think investors want to have education, they want to feel secure.
They want to have whatever amount of information that particular person wants and I think, because I'm, a psychiatrist I have a little bit of a good idea of kind of human behavior, and you know what humans want.
Some humans want to read three bullet points and you know have come from a referral and they're good and anything more is just noise and bothers them to them.
Others want detailed, spreadsheets and, as many q a as they can possibly come to and full newsletters, and so we try to provide something for people all across that spectrum and we were very reachable.
So our calendar is freely available on our website.
Meetblackswand.Com anyone can block a Time on nip or eyes calendar.
We respond to every single one of them anything else.
We send out a Weekly Newsletter, we do a live teaching call once a month.
It's called our community Power Hour, where we just get together with our group, and sometimes we teach on something very Timely like when the Silicon Valley Bank flaps happened.
We did something that night about that, because I knew people were really scared and worried, and what does all of this mean other times we teach about mindset or communication state of the market, how to do Renovations, just anything that we think our community would be interested in, and then we have a live in-person event here in Rochester once a year and people love that we kind of in our mind we think of it as like the Berkshire Hathaway annual meeting.
So people come to Rochester, they do mingling and networking with fellow investors with our team on Saturday.
We do real estate education all day, Saturday night.
We have a really nice Legacy and goal setting time together, really asking ourselves like what is the point of all of this passive income right, like most people, don't want passive income just so they can log into a bank account and see a big number.
They have a reason for that really eliciting.
That reason of taking care of parents taking care of kids vacations cutting back at work whatever it is, it's different for every person, but really eliciting.
That can be a very powerful experience for someone and then on Sunday.
We go tour the properties, and that is really fun to see something pre-renovation mid renovation post renovation.
What is it like to go through like a leasing encounter? What is it like to go through, like a maintenance encounter? A lot of people really describe that as the time when kind of everything clicks for them of not just what Black Swan is all about, but like how is value really created in real estate, investing so just being very open with our people really having relationships with our investors like I'm, a very relationship driven person, I think that comes being a psychiatrist and just all these things like.
If, if in my mind, our investors were just names and numbers on a spreadsheet, this would not be interesting, but when I see names and I think oh Joan she's taking care of Aging parents with these distributions, like I, wonder how she's doing I wonder how Mom and Dad are doing I just I get goosebumps, even just thinking about that of that's just that's what makes it so enjoyable for me, and so the thing I would encourage people to think about if you're considering raising capital is follow.
What's in your own heart and just because maybe other firms out there are Ultra, professional and coat and tie, and all of these things like, if that's you like by all means, do it.
But we've always had more of a conversational sort of peer-to-peer friend a friend like we're all in this life together.
Let's help each other out along the way, and it's not kind of your typical private Equity feel, but it attracts the people that want us and so, if, if you're thinking about raising capital or you're thinking about investing with someone like find, the group that resonates with you or just be your authentic self and the investors will come and they'll be they'll, be attracted to your energy, because it's authentic, yeah, no I, think it's great advice and Ben appreciate that just the Tactical thing.
So even you all meeting all in person and one-on-one relationships and even the the calls you and you just said, a weekly update, I think as well, your Weekly Newsletter yeah, that's, and what about profits, the property specific updates? How often are you all doing this? We do those once a quarter and we also do both live, and so that's a little bit different in our industry.
That um some groups will say they do live q a, but they actually have their questions submitted.
And then they formulate their response and then they go live, which is fine right, like I, everyone does things kind of the way they want to.
We are very extemporaneous like we just get on calls with our investors and it's just an open, Zoom time, and we have a presentation of this- is how all the buildings are doing.
These are the plans we have coming up.
These are the challenges we're experiencing teaching about, say, as interest rates are changing here's our strategy and how it's changing around cash out, refits, just anything that, like people, have the same set of questions right and then we just open the floor for questions all the way until the time ends and I'm not gonna lie at times.
That is a little anxiety provoking of like who's going to ask who are good, loving caring people, so we don't have jerks in our group that say rude things or ask mean questions or whatever and I think people see that they can ask us questions and just write in the moment.
We're like we're running this company day in and day out, like we have the answer or if we don't we'll go figure it out, and people see that transparency and that authenticity, and so that makes any of the Jitters that comes from a real live q, a very worth it yeah.
No, that's awesome another quick question before we move to a few final that I want to get to and do you all I know you run what you call a values driven organization right and I can relate to that in a big way and but tell us how you implement that and how how you all benefited from that right from being a values driven organization, I know we have and it's affected everything that we do but I'd love to hear from you, how you all Implement, that across the organization yeah absolutely and it kind of goes back to Our Roots right, like we came into running a private Equity Firm as Real Estate Investors as a family that had reached Financial Independence through real estate investing and we were building our company and working with other families, and so for us.
It was always about something bigger than just the real estate like if it was just the real estate.
This would have long been boring, because the actual real estate is pretty repetitive right, like you buy something you renovate it, you do a cash short refly, you take your carry residency, do it over and over and over so thinking about.
How can we really make the world a better place to live? What are our real core values? Show up for people create infinite opportunity, radicalize transparency.
We have seven core values.
Those are just there's three of them and thinking about how can we live that day in and day out so like our private Equity model is completely different than what's in the typical private Equity model, because it radicalizes transparency, there aren't all these fees and calculators and prefs and waterfalls and ketchup crafts that really are, just quite frankly, very pro-gp, with all sorts of obfuscation over them like I wish, our industry would just say we're pro GP and that's okay.
If you want to participate, there's still a lot of benefits to it, but we're pro GP and instead we just radicalize transparency, and we have a business plan that, like a fifth grader, could understand um and leading our people and creating jobs.
That's more than just about you know, showing up to word punching clock collecting a paycheck getting our people to see like we have the privilege knowledge of creating housing for people in our community housing where people feel safe.
They enjoy living they're excited to bring their friends or their parents or their pets home to it's.
Just such a privilege to to get to be kind of at the epicenter of all of this, and then one of the things that we decided several years ago is that there had to be a big giving component.
So we created the stalkerberg Family, Foundation and kind of had this big aha moment that for years, people had asked Nick and I to do real estate coaching, and it just was never like really on our hearts like to to do real estate.
Coaching wow is a full-time job like to to do it really.
Well as a full-time job- and we are much more- we enjoy doing the deal and running the deal and doing the property management, but there's this need kept coming up and phone calls and emails and things so one day, I decided, you know what we will create this coaching division as part of our family foundation and we'll basically give it away for free.
It's called single family, it's Yale singlefamily at scale.com, and it's a give.
What you can model and 100 of Revenue goes to our charity and you get access to our.
We call it our cookbook, our entire Playbook, of exactly how we built the business.
It's like 100 modules, all of our calculators, everything you could possibly need, and we do once monthly private coaching calls with that group.
Where we just do deal troubleshooting.
We don't have any specific teaching topic or anything.
We just show up, and we say: what's on your mind, what deals are you doing? How can we help you and then all of a sudden it was just like win-win thing where people wanted coaching from us.
I was excited to give it because it raised money for charity.
We've built a playground with that money.
We've built a commercial kitchen in the homeless, shelter here in Rochester, we've donated to a homeless shelter in New York City, we're working with a group here in Rochester to build an indoor adaptive use player around for children of all abilities.
We sponsor the children's business Fair here in Rochester to get young people interested in entrepreneurship, like all of that stuff, would not have been possible if I hadn't created our course, but our course wouldn't have been interesting to me if it was just a for-profit Endeavor.
So instead we have this opportunity to serve people and teach them real estate, investing which Taps into the people that either don't want to or can't do passive investing.
They want to be active investors, so we're able to serve that group and serve our community and just that we get to be like a part of that is just like.
I can't believe this is my life, it's just it's just so neat yeah! No, that's neat just you're hard to give back in that way and and to do it through that platform like like that you're giving back a couple of different Avenues right by doing it like that, offering the coaching allowing other people to change their financial future forever, while man, their their donations, go towards all those causes.
So that's incredible.
I want to jump to a few final questions before we run out of times.
I know we're getting really close, but but you know I always say none of us have a crystal ball.
We none of us know exactly what's going to happen right next, 6 12 18 months.
However, what we do believe affects what we do right absolutely, and so so how? What do you predict? What do you all think about the next six 12 18 months and how's that changing what you're doing or your business plan, or buying or selling, or maybe you're not selling? But you know how is that changing what you are doing now excellent question, so some of the things that come to mind are data driven.
So when we look at the average time between when the FED starts, raising interest rates and when they start decreasing interest rates, it's about 18 months, so we're about 15 months into that cycle.
Again, that's just the average, but past data predicts that soon we will come to a time of decreasing interest rate and Jerome Powell said so himself.
He had like a very elegant phrase.
It was don't quote me exactly, but it was like I believe that the time of fiscal policy via interest rate increases is coming to a close.
So he didn't say I'm lowering interest rates next time, but he had this very beautiful sentence that basically said I'm not going to continue to lower interest or to raise interest rates.
Um interest rates typically go down during election years.
That's just data driven doesn't always happen, but it typically does happen.
We're going to enter into an election year here in about six six months, we're in a housing crisis in the United States that came from the 2008 crisis when Builders left the industry and went and started other businesses or became other professions and never entered the Building Trades again, and so we're in this massive housing crisis, where millions and millions of units behind.
So it's very likely that U.S residential real estate is going to continue to grow in value as we continue to have a supply and demand problem and then we're long-term investors.
So could it happen that real estate that we acquire in 2023 is somehow worth less in 2048 yeah things happen, it's that likely, probably not, and so because we have such a deep value-add plan and then such a long-term hold the the things that happen in any given Market have never changed our core business plan, which is to acquire as much real estate as we can do deep value.
Add do a cash out.
Refi manage it very, very well and just keep repeating and repeating and repeating so I feel very optimistic if I was doing things like slipping or other things like that.
I maybe wouldn't feel as optimistic, but I feel really good.
And then the psychiatrist in me said as all of Economics is just a study of human behavior and if we just everyone's like I, don't know, maybe there's a recession.
Maybe there's not.
Maybe there is like if we all just stopped talking about the recession, there probably wouldn't be a recession and I.
Don't I don't have enough like influence in the world yet to just like tap everyone on the shoulder and say like.
Let's just stop talking about this because none of us are sure.
So in the absence of certainty, let's just choose optimism, but maybe like next economic cycle, I'll be there.
I will have arrived at that stage, I'm not there yet, but I can plant a little seed in everyone's head.
That's listening right now, like just choose abundance and make wise business decisions, but practice as though housing is in short supply and if you own, some of it you'd, probably come out a Hatton yeah.
No, what are what are some of the most important metrics that you track? Our chief metric is payback period.
Can we acquire something, do a value-add plan and get all of our Capital back in about two and a half to three years.
If we can get it in that five year buy box we're likely to strike on it, but you know we want it to be as quickly as possible.
So that's the chief metric for acquisitions for property management.
We have what's called our key performance indicator.
I recommend anyone.
That's running a business, have a very simple spreadsheet that you and all of your team members can understand.
We run it in Google Sheets.
It is nothing fancy, there's probably about 50 metrics on there.
So it's it's enough that you can look at it and really understand it.
In about half an hour.
You can't just kind of like look at it and instantly know you can look at any individual number and instantly know, but you can get a really good sense of the whole business in about half an hour and it's things like how many units do we have how many residents do we have what's our occupancy? How many units do we have in renovation? How many units are coming out of renovation in the next 60 days, because that's going to go into vacancy? How many leads have we had in the past week? How many investor dollars do we have committed on our wait list, which is on and on basically like different sections of how many maintenance tickets do we have and we track all of those things so that at any given time, Nick or I can look at that spreadsheet and know exactly how the business is doing.
I love that I'm, afraid of POS straight out of traction, yeah I love the the detail that yeah that you all can go into and just the knowledge into the business yeah.
What about any daily habits or that have produced the highest free term? For you, it was crazy for me to say.
The me that was listening, two or three years ago would have been like huh I feel like he may be edited in a different woman there at the end, but for the past year, I have made the commitment of being in the gym five days a week and the first three months it was.
It was pulling teeth.
I mean every day.
I made up some excuse of I.
Can't the business is busy.
The kids need me, I'm, tired, I, didn't eat right, like just whatever, but I just committed, and the thing I would say to someone who's trying to start a habit is the kind of the joke I would play with.
Myself is for the first three months all I had to do was go to the gym.
I didn't actually have to work out.
I just had to go to the gym and like once, you're at the gym, like you're, probably not just gonna, walk out right, you're like well I drove here like I'm in my gym clothes like oh I, guess I'll just go, do something! So if there's something, maybe maybe it's physical activity like say to yourself, I'm gonna do one minute every day for the next month and then your brain will start to say.
You know what let's do 10 minutes, let's find 20., hey I bet we could do 30.
I really enjoy it when I do weight, lifting I can do 45 minutes so in the last three months compared to the first three months in the last three months of this year now, my brain is like if I can't get to the gym, what has to change so that I can be in the gym every single day.
I do weight, lifting that's something: I've never done before.
I'd always try I've always tried to do cardio and I.
Just could not like it, because, no matter what I try to just could not enjoy it and I love, weightlifting and so I found something that that brings me joy and the amount of productivity I get out of maintaining my body and my blood sugar and my energy levels is just staggering and it it's a I just share this because for 10 years, I just believed that it was not possible, and it is you just have to you just have to commit to it and, like I said those first three months were hard.
I had to like beat myself to get my own self into the gym, but then it became a habit.
You know I like how you just just minimize the burden of it right at first at least get in the habits like just get there.
You don't even have to do anything yeah as I was driving I'm like Elaine, you just have to walk in the door, and then you have full permission to walk out and be talking to my own self and then, when you're in the lobby, you're, like the the lady at the front desk, is going to think I'm pretty weird.
If I just walk away, I guess I'll walk to the locker room and then, when you're in the locker room, you're like I, guess I'll put my shoes on right like just have fun like give yourself humor and Grace I always like to ask you already talked about this a little bit, but very last question is how you like to give back.
We have our charity, the songberg Family Foundation.
The three causes that are really on my heart are public places for people to play and children to run around safe, green spaces, entrepreneurial education for young people um the way entrepreneurship has changed.
My family has has just been staggering: very much like a Rich, Dad, Poor, Dad mentality in our family and getting those ideas into the hands of young people.
As much as possible and then housing for women and children or in housing crisis, there are not enough units, there are not enough safe habitable units for everyone in the country.
So how do we solve that? So those are the three three causes that are on my heart is thinking about how can I chip away at those right like I, can't do everything but I built one playground and I can't do everything, but we built one Kitchen in a homeless shelter.
It was a residential home.
They just had a 50 year old residential pitch in and now they have a full-scale commercial kitchen, so they're able to feed dozens of people every day like just think about what are the causes that are like deeply on your heart and then how can you contribute? You know even just a little bit, because if we all just contribute a little bit, then big things happen.
Elaine, it's been a pleasure to meet you and have you on the show just like it was your husband I, enjoy learning more about your old business model and just your dedication to transparency and how you're caring for investors and in your attendance and your your employees and all these things, and just you know how you all have implemented that values driven thought just into your organization right and just how you've you've just been so dedicated to that so grateful for that.
Your desire to give back as well.
Thank you for sharing just many details, uh about how you all operate.
Your business I think we can all learn so much from you all.
How can the listeners get in touch with you and learn more about you? Our website is meetblackswan.com meetblackswan.com.
It has our Calendars our newsletter, our Facebook Community, our track record our portfolio.
Basically, everything you'd want to know is right there at meetblackswand.com and then, if you just want to book a call on my calendar and discuss something or talk about investing I always make myself available for that as well.
Thank you for being with us again today.
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