Welcome To The Real Estate Underground Show #97!
In today's episode, we're joined by Nick Huber, the founder of Sweaty Startup and Bolt Storage. Nick's journey started back in college when he established a pickup and delivery student storage company. Despite the challenges, they managed to grow the business to incredible success, with four full-time employees and millions of dollars in revenue. This venture taught Nick the importance of cash flow, which he believes is the lifeblood of real estate.
In 2015, Nick and his team decided to take their expertise and venture into building a self storage facility from scratch. Fast forward to 2019, they did a cash-out refinance at a valuation of $5.2 million. By 2021, the facility was generating nearly $100,000 in revenue per month. This experience opened Nick's eyes to the potential profitability of real estate and prompted him to sell his moving and storage company in 2020.
Since then, Nick and his team have been acquiring more storage buildings. They've successfully purchased three additional properties in 2018 and 2019, and a couple more in 2020. Along the way, Nick discovered the power of Twitter and networking with like-minded individuals.
In this episode,
If you're hungry for more wisdom from Nick, you're in luck. He hosts two podcasts - The Nick Huber Show, where he dives into real estate, entrepreneurship, and management, and Sweaty Startup, focused on entrepreneurship and management. Additionally, Nick shares his insights, thoughts, and advice on Twitter @sweatystartup all day long.
To stay up to date with Nick and his expertise, subscribe to his weekly newsletter on sweatystartup.com. It's packed with valuable content on management, entrepreneurship, wealth building, and real estate.
Don't miss out on this episode where Nick Huber reveals the deal that changed his life and provides invaluable insights into the world of real estate and business. Tune in now!
Resources:
Additional Resources:
Welcome To The Real Estate Underground Show #97!
In today's episode, we're joined by Nick Huber, the founder of Sweaty Startup and Bolt Storage. Nick's journey started back in college when he established a pickup and delivery student storage company. Despite the challenges, they managed to grow the business to incredible success, with four full-time employees and millions of dollars in revenue. This venture taught Nick the importance of cash flow, which he believes is the lifeblood of real estate.
In 2015, Nick and his team decided to take their expertise and venture into building a self storage facility from scratch. Fast forward to 2019, they did a cash-out refinance at a valuation of $5.2 million. By 2021, the facility was generating nearly $100,000 in revenue per month. This experience opened Nick's eyes to the potential profitability of real estate and prompted him to sell his moving and storage company in 2020.
Since then, Nick and his team have been acquiring more storage buildings. They've successfully purchased three additional properties in 2018 and 2019, and a couple more in 2020. Along the way, Nick discovered the power of Twitter and networking with like-minded individuals.
In this episode,
If you're hungry for more wisdom from Nick, you're in luck. He hosts two podcasts - The Nick Huber Show, where he dives into real estate, entrepreneurship, and management, and Sweaty Startup, focused on entrepreneurship and management. Additionally, Nick shares his insights, thoughts, and advice on Twitter @sweatystartup all day long.
To stay up to date with Nick and his expertise, subscribe to his weekly newsletter on sweatystartup.com. It's packed with valuable content on management, entrepreneurship, wealth building, and real estate.
Don't miss out on this episode where Nick Huber reveals the deal that changed his life and provides invaluable insights into the world of real estate and business. Tune in now!
Resources:
Additional Resources:
And this is Real Estate Underground. Greetings and salutations, real Estate Undergrounders. This is Ed Matthews with the Real Estate Underground. Thank you so much for joining us today.
Speaker 1:You know you've heard me talk about stalking people on Twitter and LinkedIn and elsewhere, and one of the things that I have recently discovered rediscovered is Twitter, and I had kind of gotten off Twitter mainly because of I referred to it as the cesspool of social media, and the reason being is that you know from all the politics and vitriol and all that it was just bringing me down, and so the reason that I started to pay attention was Elon Musk bought it and I thought, all right, well, let's give it a second chance. And a lot of the capability and a lot of the content allowed me to curate the subjects and the people I wanted to listen to and learn from, and today we are. I'm really excited to introduce Nick Huber, sweaty startup bolt storage. I'll let you talk about your podcast, but, nick, welcome to the show and thank you for joining us today and thank you for all the information and content you've been publishing lately, because I've learned a lot.
Speaker 2:Ed, thanks for having me.
Speaker 2:I had a very similar view of Twitter. I almost didn't join it. Brent had to really nudge me twice because he said he said, nick, there's deal makers on Twitter Like this is where you learn and you can get to know other people that are like us. And I'm like no way man, people go on Twitter to argue about politics and just make themselves feel like crap. But then I got on and I realized that there's subsets in Twitter about small business, about management and about real estate where you can mute and block and get a lot of things out of your feed and you can hang out with unbelievable people and you and I can talk about how Twitter has changed my life, but it's a resource, yeah without a doubt.
Speaker 1:I mean, I don't care who you voted for and I don't care why you voted for it. I don't care why the other guy's bad. What I care about is the value system up on which you base your business, the process and procedures and systems you put in place, how you go to market, how you serve your customers and a whole bunch of stuff in between. So I'm glad we discovered each other and welcome and let's get into it. So for those of us who have not stalked you, why don't you tell us a little bit about you and your business and then we'll get into the details?
Speaker 2:I'm 33 years old. I live in Athens, georgia, with my wife and five three and one year old two boys and a little baby girl. In 2011, as a junior in college in Ithaca, New York, I started a pickup and delivery student storage company a moving company. It was a really hard business. We grew that company In 2015,. A couple of years later, we were four full-time employees doing a couple million dollars a year of revenue and we were making a couple hundred grand a year, with a big team in 12 states, 25 colleges and a big part-time team of 200 plus part-time employees who would work during the busy move in and move out season. I learned a lot about that business and it also gave me what I believe is the lifeblood of real estate, which is cash. You have to have a lot of cash to get into real estate. In 2015, we decided to build a self-storage facility from the ground up in upstate New York. I went from dinner table to dinner table to raise the money to get that deal done. I put in me and my business partner put in a half million of our own dollars to build a self-storage facility for $2.9 million all in after we went over budget and you know how development is. 2017, we got the doors open on that building and fast forward to 2019, two years after we opened it we did a cash out refinance at a $5.2 million valuation, fast forward to 2021, the thing was doing almost $100,000 a month of revenue. We did another cash out refinance and we bought out our partners at an $11 million valuation, and that one deal changed my life forever. It showed me just how much money you can make in real estate. It showed me that I needed to get the heck out of my moving and storage company, which we did. We sold that in 2020. And then we started buying more storage. We use the proceeds from that. We bought three more buildings in 2018, 19, and then a couple more in 2020.
Speaker 2:And in the middle of 2020, I got on Twitter, started meeting like-minded people. I was at a point in my career where I could not raise any more cash. I wasn't a country club kid and surrounded by hedge fund managers and wealthy people. Turns out, my dad, to invest in that very first deal, took a mortgage on my childhood home and I didn't know it. I'm glad I didn't know it looking back, but yeah, so I was out of cash. We needed more cash to buy more storage. We were finding tons of opportunities, but I couldn't raise the money. Got on Twitter, started being radically open about how we do business, how I buy deals, how we find deals, how we think about real estate, how we operate self-storage. I was radically open. I was showing pictures of my profit and loss statements and things like that on Twitter. So come on, and soon a lot of people started following me and reaching out in the direct messages and setting up meetings and we got face to face on a video call, just like this, ed, and we were able to raise some serious money. At the end of 2020, we bought four more buildings, raised five or $8 million from five to $8 million somewhere in there of investor capital from Twitter.
Speaker 2:Only 2021 gangbusters, it was on my company grew. In 2021, we grew from six employees to 45 employees. That year we bought $50 million with a storage, raised 23 million from outside investors, 99% of which came from Twitter Built, a full real estate private equity company. We manage all of our investors. We raise the money ourselves. We manage all of our debt relationships. We manage the actual asset with a team of 45, 20 of which are in the Philippines and 15 of which are in Columbia. We hire an employee all over the world.
Speaker 2:We can discuss a little bit of the advantages of that, but 2022, my following just kept growing, but the real estate market started to really get harder. Interest rates went up. We stopped buying as many deals. We went from buying 50 million in 2021 to 30 something million in 2022. And so far this year, we're halfway through 2023 and we bought one deal for $1.2 million. But my team is intact. We're sustainable. We've got the right fees in place to manage through this downturn, which I think is really important. I've kind of gotten interested in other areas of entrepreneurship. I've invested and co-founded seven other companies since that day and it's having a lot of fun. I think we go back to kind of Twitter, but it changed everything.
Speaker 1:Yeah, so so you, I want to unpack all of that, but we're gonna do it one at a time. So, as far as the, let's talk real estate first. So you know you mentioned that real estate is heading for a downturn, and you know, regardless whether you talk to, you know, the truly optimistic or the truly pessimistic or someone in between. You know it doesn't, it doesn't sound like there is a lot of no longer a lot of Question about whether a recession is coming. It's just when right and how deep, and so you know, I know you've got some pretty Specific and hardcore views on on what's happening.
Speaker 2:So you know, why don't you walk us through kind?
Speaker 1:of what your viewpoint is of the market, particularly in commercial real estate, and and then we can, we can, talk about that.
Speaker 2:So, first of all, I think anybody who predicts with certainty when it comes to real estate interest rates, the economy, has a.
Speaker 2:Completely full of. It's crazy. So when you're listening, when you're listening to me, just take all this with a grain of salt. I don't know what's gonna happen. My job as a real estate GP, as a sponsor, is to protect capital. We've been very blessed that a lot of our early deals are worth a lot more money. We had a great 2021, early 2022 or actually middle of 2021. We made the decision to stop using as much leverage. We dropped our LTV at acquisition from 60% to 50% and now we're buying all cash. So we're not in a situation where we have some super stressful debt maturities coming up where we're scrambling. But, that said, my net worth has grown quite a bit. We have a lot of investor capital under our roof now and I'm in one mode.
Speaker 2:I'm in a different mode than I was at the very beginning. In the very beginning in 2017, I was risk on like I needed to make money. I had not a lot to lose. Now I have a lot, a lot to lose and I have a lot of investors trusting me. So I'm worried about one thing protecting the downside. Like my job, my investors don't pay me the big buck to be bullish and go out and buy everything and fly by. You know why? By the seat of my pants, my investors are paying me the big bucks to make sure that we don't lose any properties and manage this real estate well through the downturn.
Speaker 2:So do I think a severe, 2008 level real estate recession is coming? I don't. I don't think so. I think 30% chance. If I was a gambling man which I guess I'm in real estate, so I am. But I think a 70% chance here is that just straight start to tether back and and some sponsors get blown up, but business as usual.
Speaker 2:For many of the families and groups of people that are holding real estate for the long run, 2021 was a crazy year. A lot of people overpaid. Beginning of 2022, a lot of people overpaid and, yes, there's severe stress going on right now. I always talked to the debt brokers. I talked to the debt brokers to get a real beat in the market because they're the ones interacting with the sponsors trying to find Debt and they're interacting with the banks. Lending regional banks are getting really bad. The executives are saying, hey, we got to get some of these loans off of our balance sheet because we you know, our deposits are shrinking and if a debt crunch happens at the regional bank level. It will crush commercial real estate because nobody wants to go to CNBS, nobody wants to go to life insurance. All of our, all of our loans are with regional and local banks. Those banks pull back and they can't loan anymore. It's just gonna cause a lot of pain in what we do.
Speaker 2:So, yeah, if nature straight, stay here for another 18 months. Total chaos, yeah, total chaos. I know that these unlike residential real estate on commercial real estate is on those three, five, seven year terms and a lot of them are balloons and then in the loans mature and you have to find additional loans. People think in 2008 Everybody went broke because their cash flow went away. That's not true. People went broke because their deaths there, their loans mature and they couldn't find placement. That's happening right now.
Speaker 2:There's a lot of sponsors in the weeds, stressed out as heck right now trying to replace debt on properties and they can't do it. A couple days ago it was released at prime storage one of the big players in our game, their indicators and a big fund that they bought. They bought 300 really nice properties over the last couple years. They just went to CNBS $400 million at 6.15% on 10 year loan right now in this market. They went to CNBS north of 6% on a loan for $400 million for the fees and saw in that five years from now is going to be Absolutely insane. They would not place debt at 6% with CNBS unless it was serious, serious stress, right.
Speaker 2:So that's just a sign. That's a sign that even the big well-capitalized groups are starting to feel the pain and also the economic trends in self-storage are not that great and I know multifamily. In a lot of markets rents aren't going up anymore. Nobody's moving. You know, velocity of new tenants is very slow in self-storage right now because a lot of people rent storage units between moves. So it's a very interesting time and and yeah, I think real estate market was kind of due for an event that separated them in from the boys. I mean, we had what 13 year run where nobody lost money because properties only, property values only went up.
Speaker 2:Everybody was a genius a lot of people in the real estate game that are maybe not that good of operators. So, yeah, and we can count. We can talk about running a business, but real estate is a business and if you don't know how to manage and run people and keep properties clean and lease them, then it's a. It's a. It can become a nightmare really quick right on.
Speaker 1:Yes, you know, I it. It kind of drove it home for me. When I was on that. I was listening to the replay of a Moody's forecast for 23 and and the the economist on there said that 23% of the of the loans that were maturing this year were not going to be refinanced and that you know bloodbath to ensue.
Speaker 1:And you know, it's interesting boy oh boy, yeah, I mean one data point right. And so I got curious and started talking with some of the loan officers and executives at our regional banks here in Connecticut and you know I sat with the folks at Liberty Bank and a few others and and said you know, all right, how true is this? And you know, to a person they said it could be catastrophic if you know Rates stay where they are or go up over the next. You know, I think it's probably 18 months, but just based on what I'm hearing. But you know, like you said, I mean that if, if I'm gonna predict when the, the interest rates, are gonna go, we're all gonna be in trouble because I guarantee you I'm wrong, the you know.
Speaker 1:So, in terms of leverage, I think that's a valuable lesson for a lot of the folks listening here Is that there's been so much dumb money on the street here in the Northeast, where I am, you know you could.
Speaker 1:You used to be able to buy a building at an eight cap which would clash flow very nicely, right, and you know it was a fair price and and you know you could operate the business Responsibly, have the you know they're the right reserves and be able to serve your residents. And you know, then the game is resident retention, right, you know, once you get them into a unit that is clean, safe and upgraded, and and, and then you know the what started happening pre-covid even, I'd say 19 into 20 is that there was a massive amount of I mean, I've in the background I called the bigger pockets effect, right, that you know it's that everybody wanted to get into real estate and everybody was throwing money at it and they started buying stuff that you know Four caps, five caps, six caps, and, and you know they thought well, you know, I'm getting dead at three and a half percent, so it's gonna be okay, we're gonna be fine, not, you know, not understanding that this is like everything else, is a cyclical business, and you know interest rates go up, rents go down, and, and if you don't understand that, you know whether you're in industrials, self-storage or multi-family or something else, that is an economic reality and usually the cycle is about seven years. So good luck if you're.
Speaker 1:If you're, you know, buying at a four cap and rent and your debts at at three and a half percent Box stick and you're a dead man walking. You just don't know yet, and and so it's interesting. So so let's talk about you know, you and I share Not knowing this until I really started to dig into your Twitter feed.
Speaker 1:You know, you and I share a lot of similarities. You know I'm a Process and technology guys, so I'm always about, you know, process and procedures and enabling technology, and you know you leveraging Teams and technology to create force multiplier right. I fundamentally believe you know, being a former recovering techie, that that technology, if used correctly, is a force multiplier right. And so you know, I'm curious about two things With technology, with process. You know, one of the things that I was always prone to and I have to really guard against is Creating complexity out of what should be a simple process, right? I don't know if I was trying to prove to myself how smart I am or what, but you know I found and I think you agree with this that you know simple, clear, always better right. I think I remember reading one of your, one of your blogs about you know, your business process should be like a simple email, right? 90 words, keep it simple, get in, make your point, get out, right.
Speaker 2:So, anyway, I'll let you comment on that as a, as an entrepreneur, we thrive in chaos. We thrive with, we thrive with on the decision-making. We thrive with Unstructure. We thrive making decisions and not knowing the outcome of those decisions. That's an entrepreneur mindset and an employee has a mindset that's a lot different and an employee has a mindset of hey, I've been taught my whole life that If there's a problem, I turn the page back three pages and I look up the answer to that problem Since public school days and college days and now at my job, where I have a task to do, I can turn back and I can look at the answer and I have a structure and I have a clear way to do things. Most corporations, large corporations that's the way it is. It's a simple way put your butt in the seat and this is how you succeed at this job. This is what you need to do and this is what the deliverables and this is what you need to do.
Speaker 2:Small business owners like us. We think that everybody thinks like us. So when I hired my first five employees, I thought that everybody liked chaos, everybody liked decision making, people wanted autonomy, and you hear all the advice on Twitter and all over social media. You hear like employees want autonomy. Employees want to make their own schedule. Employees want a different day every day to kind of have excitement and new things. That is all bullshit. Employees want to be told how to succeed. They don't want chaos. They don't want constant decision making. They don't want uncertainty. If they did want those things, they would become entrepreneurs. They wouldn't be going to you to pay you every two weeks. So it was a mindset shift for me that, hey, I thrive in chaos. I like making decisions. I don't care if tomorrow is totally uncertain for me. That's who I am my employees. They want a very stable workplace, they want reliability and they want me to tell them how to win.
Speaker 2:So I came into real estate from running a really hard small business with tons of moving parts and back in 2013, that small business was growing and we were hiring people and me and my partner at the end of every workday, we'd be sitting in a room, crack a beer open and we would just complain about how our employees were incompetent. They weren't making good decisions, they didn't care about our business, they were costing us money all over the place. The next year and one of the days, my partner and I he looks at me and he goes Nick, it's our business. We need to take ownership over this, like we can't just blame our employees all day for being bad at what they do. This it's our job. And we looked and then we kind of dove in. We got some really good advice from some mentors. We dove into what they were needing to do. What our employees were doing Turned out we needed them to do about 30 different things to do their job.
Speaker 2:Well, their days were complete chaos. There was unstructure. They needed to create invoices, they needed to do customer service. They were making schedules. They were unloading trucks. They were counting items. They were labeling items. They were taping boxes, they were moving boxes, they were driving trucks, they were navigating. They were doing all these different things and we realized that, oh my God, when you tell an employee to do 30 different things, well, they're not going to do any of them well, they can't. So we installed structure.
Speaker 2:We took a lot of tasks off their plate. One of the jobs, one of the big part of the job, was creating an invoice to collect the money, and we were having our drivers, our movers, create an invoice to collect the money. Probably not a good thing to be doing so. Instead they just took a picture of all the items and the picture went on the computer on the internet and it went to one person on one desk in one table. We did all the invoicing and they got really good at that.
Speaker 2:One thing Right. Then it was like we had to make in the schedules, we had to make in the schedules the next day, but in reality one person at one spreadsheet on one computer can make all the schedules that all the companies get really good at making the schedules. Take that off their plate. Maybe they shouldn't be unloading the truck. Maybe the guys that are good enough to go out and service customers shouldn't be at the warehouse unloading the truck. Let's get two different crews. Let's separate that. And we got it whittled down to about five things they needed to do. Well, drive the truck, label all of the items, tape all the items and put it in the back of the truck. No customer service. When a customer asks some questions, hey, I don't know the answer. Call this number on this card.
Speaker 2:And when we simplified their job down to that level and really set up some structure and system around it, amazing things happen. Our business doubled from 2013 to 2014 and it was less stressful. We made twice the money and it was half the stress. And that's when my mind exploded and it opened up to me that, hey, employees want to be told what to do. They want you to give them the tools to win.
Speaker 2:And too many business owners are running around looking for I call it like unicorns. You're looking for people who care about your business the way you care about your business. They're people who can make decisions like you can and people who can do the job as well as you. Those people do not exist. You have to build a business where normal people can come into your company and execute and do things well, and the employees want that too. They want to be told what to do, they want to be told how to win and they want to just succeed and make customers happy and be treated with respect. And then they want to go home at five o'clock and watch Netflix.
Speaker 1:Yeah, right on, man, there's a reason why only two, maybe 3%, of the world's population own businesses, and the reason being is that everybody else just wants to go to work, do their job as well as they possibly can go home, can, like you said, watch Netflix and hang out with their kids and their wives and go have a life. And the one thing that I heard you say which really resonates with me is that I always talk about passion players and paycheck players. And when I talk about passion players, who are the folks that I hire, it's not that they care about my business as much as I do, because no one will. It's that they care, they take pride in the work that they do, and that's a huge difference, because when I had a company years ago, when I was much younger, I expected everybody to care about the business like I did, and I was absolutely shocked and appalled that they didn't. And so one of the things that I think I've heard you say is that our job as a business owner is to make a normal person, an average person who brings an average capability to the table. Our job is to help them succeed, and that kind of dovetails into what one of my mentors.
Speaker 1:Rob Bernstein had always said he is the CEO at a software company I used to work at and I said every penny we spend on human beings is an investment and I expect a return on that investment. And the only way to do that is to keep it simple so that everybody understands exactly what they have to do on a day-to-day basis. And I'll take it one step further. Not only is it understanding what their job is, but it's also communication, right, and I think you've talked about this as well. I'm a huge fan of Tony Robbins and I learned the value chain process years ago with him and through him. And it's not just hey, nick, I need this, it's hey, nick, I need this for this budget in this time frame. Confirm back to me you understand and confirm back to me that I'm telling you that you can do what I'm asking you to do. And it's that value chain that is the basis of pretty much all the successful businesses I've seen, because it eliminates surprises. It eliminates.
Speaker 1:I'm a stress guy too right, I look at on a quarterly basis okay, all right, team, what's stressing us out? Right, and we fix it in one way, shape or form or another. Right, it's either we delegate it, we outsource it, we automate it or we just stop doing it. And so that exercise is similar to what you're talking about is that you start here and you slowly but surely funnel it down to the main thing. Keep the main thing, the main thing. And if in your business it's five and in my business it's probably seven things and everybody owns their specific piece of it, they're crystal clear on it and there's no ambiguity.
Speaker 1:And I know that it works because a couple of months ago I had an appendectomy that I was not expecting and I don't recommend them there, not as anywhere near as much fun as people say they are and I was down for the better part of a week and my wife caught me negotiating a contract on my phone as I'm sitting on the gurney in the emergency room and I fell asleep and she took my phone and I woke up and like, hey, where's my phone?
Speaker 1:She goes yeah, I took that away, you're not getting that back. And so I was completely disconnected for a week, thinking, holy crap, my business is going, I'm going to come back to a smoking hole, and you know, lo and behold, I, you know, I show up, you know, seven, eight days later and all the residents were cared for, they all paid their rent, the contractors got paid, utilities were paid, you know. All the work orders were managed properly. All the social media went out, just as it was supposed to. Podcasts got produced and edited, produced and, and you know, published. I'm like, wow, okay, cool, mission accomplished, they don't need me anymore.
Speaker 2:I mean they did but, but but yeah well no, it was a poo moment.
Speaker 1:Right, it was a huge relief.
Speaker 2:That's a sign that you're running your business well, that you should be proud.
Speaker 1:That's good. I was proud you mentioned.
Speaker 2:You mentioned thought a lot about what stresses me out personally, and it's always the gap between what somebody expects of me and what I'm actually delivering. The gap between expectations and delivery is what stress is for me. So the best way to keep people from getting stressed out is to over communicate the expectations and manage expectations that people don't talk enough about. Managing expectations all day, everybody has. I tell the two contractor story, right, there's two contractors. One contractor is going to tell you oh yeah, we're going to get that done tomorrow and we're going to be right on this budget and I'll be here. I'll be here first thing in the morning. And the other contractors, like you know what? I got some things outside of my control. I don't know when the woods going to get here. I don't know when my plumber is going to get freed up from a, from a job he got pulled to. And if we're being honest with each other, this is, I'll probably be able to get here to start within the next two weeks. There's one contractor that knows how to manage expectations and then there's one that's going to over promise and under deliver. Which one do you think is stressed out? Running around all day putting out fires, right, right, it's the contractor that doesn't know how to have the hard conversation at the beginning, like you have. You have two opportunities to have a hard conversation. You have one opportunity at the very beginning and you have another opportunity after somebody's already all up your butt because you're not delivering what they needed from you. Right, it's way way easier to have that hard conversation at the very beginning and save yourself from three to five hard conversations down the road.
Speaker 2:And in my company we have. We have an email rule. In my company you get off the phone with the contractor, you get off the phone with a vendor heck. You get off a meeting with another employee and there was something discussed in that where they need to do something and you need to do something and you're expecting them to do X, y and Z, especially when it's for a dollar amount of money. We're going to follow that up with an email right away says hey, just wrapping up our call to make sure we're all in understanding. You are going to do bullet, bullet, bullet, bullet and I'm going to pay you this amount of money and I'm going to pay it to you on this schedule bullet, bullet, bullet.
Speaker 2:And you'd be very surprised that I. You just got off the call with a contractor. You just had a very clear conversation about who's installing that toilet and when. But he calls you up, says Whoa, whoa, whoa, the plumber is going to do the install. I'm not doing the install. That is not in my scope of work. The written word is so critical because in a conversation you're talking and while the other person's talking you're thinking about what you're going to reply, and a lot of stuff is meant when you have a half an hour conversation with a contractor. The moment that the phone is hung up, that contractor has forgotten two thirds of what you've said.
Speaker 1:Right.
Speaker 2:How can they possibly? How can they possibly remember? How could they possibly remember the 3000 words that you said in a half an hour conversation? So critical to over communicate, especially when it comes to expectations, so that you reduce stressful, you reduce the amount of stressful situations because very clear to both sides who's doing what on what timeline.
Speaker 1:So it's clear to me that you've had a lot of people in your life who have given you really good advice, and so I'm curious, in terms of the folks that have mentored you over the years, what is the best advice you ever got and, frankly, who gave it to you?
Speaker 2:Well, when it comes to syndicating and buying real estate. I got some advice from a friend of mine, chris Powers, who runs Fort Capital in Dallas, fort Worth, and he's a Twitter personality and he's built an amazing business I'm talking about. They've acquired over a billion dollars worth of industrial real estate. He has a team of over 100 people. He's a couple years older than me, is 36 years old. It's incredible.
Speaker 2:He told me very early on in my real estate journey that I needed to build a sustainable company, a fee perspective. He said, nick, very early on, you're doing your first couple of deals. You're raising money for the first time. A, you're going to have LPs that want you to do work without fees, that they're going to beat you up on your fees that you think you can charge. And, number two, you're going to think that's warranted because you don't have experience and you might as well not charge a market management fee. Or, you know, remove the AUM fee, or maybe the acquisition fee needs to get removed, or maybe there's no refi fee or disposition fee. All the work that you're doing as a real estate syndicator, when you're raising outside capital, it's natural when you're early on, when you're starting out, so just discount those fees. All I need to get paid. If everybody wins, we're in the promote together. He told me all this at the beginning of 2021, before we bought $50 million worth of storage, and I pushed back to the LPs that said hey, nick, your acquisition fee is too high. Hey, nick, your 6% of revenue management fees too high. Hey, nick, your refi fee is too high. Hey, nick, your AUM fee of 1%. We got to get rid of that. I pushed back on all that stuff and now here we are in the middle of a recession where we stopped transacting and I can afford to pay my people. I have 1.3 million a year of payroll in my company, which, if I were 100% in America, it would be, you know, 3.5 $4 million because I have 45 people, but I can pay them and my management company. Of course, it's not sending my kids to private school, it's not a big profit center for me, but I'm charging 1.5 million in management fees and I'm bidding out 1.3 million to pay my people. That was just the best advice that I ever had, because in order to attract and retain and hire and keep great people for the long run, you have to charge fees. If you're doing work, you have to charge fees, and good LPs the wise LPs know that investing with a sponsor who's getting strangled on fees is not a wise deal, because when the recession hit, when they stop transacting, how are they going to pay their people? Then they start neglecting the property, then they're taking you know, taking shortcuts and that's how an entire real estate portfolio can come unravel. So that was really good advice and just advice.
Speaker 2:In general, I get advice from everybody. There's a lot of people out there that say, nick, don't you know why would you take advice from people who haven't been there, who haven't done it? And yes, there's a ton of arm chair quarterbacks in this world that'll sit back and tell you how to live life when they haven't done anything, they've never run a company, they've never hired anybody, but they'll sit on Twitter and tell me that, even though I've hired 300 people, that I'm doing it wrong. That's natural. So, yes, I weigh the advice that I get based on the outcomes that these other people have accomplished. But there's also the truth that there's a lot of extremely accomplished people, especially in the real estate world, that are just average joes. And look, when you're an entrepreneurship and you're putting yourself in the game, there's 500 decisions that you have to make, and if you make 100 of them right, you're going to get rich. Like, there's a lot of dumb people who have made a ton of money in real estate. I'm one of them. Right, you don't have to be spectacular to get to get rich in real estate, and that's what I love about it. That's why it's so approachable, because it's simple.
Speaker 2:That said, I'll get advice from everybody and I'll just throw out this stuff that doesn't apply to me.
Speaker 2:There's not a single person that I follow on the internet. There's not a single mentor of mine where, every single word, they say I'm going to hang on and I'm going to, I'm going to treat it as the gospel Everybody. I'm looking, I'm looking at what they say and I'm saying does this apply to me? No, it doesn't apply to me. I have a different perspective. I'm going to throw that out and I'll take what works for me and I'll throw out what doesn't.
Speaker 2:And it's worked really well for me. I've gotten phenomenal advice from my 86 year old grandfather, who never ran a company, never ran a business. I get, you know, just the street smarts and it turns out that decision making, it's all decisions. All of life is just a decision of which way you're going to go. This decision making is extremely nuanced and extremely difficult and there's so many different factors involved that there's no one way that you know everybody can do things. If you read, if you read, elon Musk, you know biography and you're trying to model your business career after Elon Musk, you're going to have a rude awakening when what works for him doesn't work for you.
Speaker 1:Yeah, Not everybody can create billions of dollars in net worth and when you, when you're the founder of PayPal, you know, in 19, whatever, 98 or 97, it's very helpful. It's very helpful when you need to dump 10 million you know, 10 million dollars into Tesla to keep it cooking.
Speaker 2:You know when you've got a billion in the bank.
Speaker 1:It's okay, right, so you mentioned, you mentioned, elon's biography. You know I'm curious about, I'm always curious. You know leaders are readers. They tend to be right, and so you know, these days that can mean physical books or audio books, or you know YouTube videos or podcasts, like you know yours or mine or another. You know I'm curious how you, you know, given that you are, you have a lot of things going on, right, and so I don't imagine that you know you're putting on your smoking jacket and slippers at, you know eight o'clock, after, after the kids go to bed, and you know, sitting down with a book. I imagine it's a little more chaotic than that. So I'm curious how you know you consume and information and you know, and and also I'm also curious about who you're paying attention to these days.
Speaker 2:I love reading and I think that there's so many business minds out there that I just the books that I've read in the past that have shaped me is really amazing. I could kind of go through a couple of books that I really like. I love Seth Godin, I love, I love Entry Leadership by Dave Ramsey. Gold by Eli who. Goldrad is a really good book about bottlenecks and getting people through. But I'll kind of take the other side of this and some advice that most people probably wouldn't hear and it's perfectly applicable to somebody who might be listening to a podcast or watching a clip of mine on YouTube or something like that.
Speaker 2:Is that delegation management, entrepreneurship, business it's not really a science. It's not a science. It's not something where you can read a book on it and it's an algebra. You're reading a chapter on algebra and you see, you see a problem and the answer to that problem is two pages back. Business is not that way. It's not as straightforward. There's 200 factors that are influencing every decision. You never have complete data. You never have complete data to make data driven decisions. So many entrepreneurs are come, or people who want to be entrepreneurs come from an analytical background. They come from a science background. They come from a data driven approach.
Speaker 2:background where hey in order to make a decision, I got to have all the info and in business there is no situation where you have all the info. Okay, I can. I can go see a property, I can feel a property, I can look at the rent rolls, I can talk to the owners, I can study the market. I can do all these different things and at the end of the day, I don't know if I'm going to be able to charge the rent I want to charge and how many people are going to move in and move out when I buy the building. I just don't know what's going to happen. So so many entrepreneurs they study, they read, they analyze and they feel a sense of productivity there, like when I, when I buy a business book, when I click purchase and it's on the on its way to my house.
Speaker 2:I get a sense, I get a sense of accomplishment. Sure, in reality, that can kind of handicap your, your propensity to get things done. If you think that studying and reading because there's an unlimited amount of NICubers and eds and people who are teaching people about entrepreneurship and we're writing about business and writing about management and reality those things are, they're not. They're not sciences, they're, they're arts and they're. And the only way to get better at it is to practice it. Right, okay, I can.
Speaker 2:I've been using, I've been using a weightlifting analogy a lot lately. It's hey, you want to get stronger, you want to build a muscle, you want to build this bicep up, you want to make it bigger. Are you going to read about building biceps or going to watch Arnold Schwarzenegger's documentary? Or you're going to build up, spend a bunch of time building this whole fitness plan, or are you going to go to the gym and pick up a freaking weight? Right, okay, business is the same way.
Speaker 2:Like, I see way too many people who they don't have a business. They never tried to sell anything, they've never tried to hire somebody, they've never been an uncomfortable situation when it comes to money, finances or starting a company, but they've read 400 business books. What the heck is the point of that? There's one way to get better at business and that's doing business. And once you're in it this is an amazing thing that happens Once you're in it, once you're in the thick of it, once you're doing business, then those business books start to make sense, right, those books are like oh my God, I can actually apply this to what I'm working on right now. If I got a company and I've got, and I'm selling customers and I have five employees and I'm trying to build something, then a business book, I'm reading a business book I'm like whoa, whoa, whoa. All this is applicable to me. I can apply. I can't even get this today. Right, that doesn't apply to me. The Elon Musk book about how he's investing and trying to save SpaceX this doesn't apply to me. But, oh wait, dave Ramsey's principle on delegation in this book, right here, when he's talking about problems and bottlenecks in a company and he uses the monkey on the back analogy which I love so much I can apply that right now. I can go back to my office in the morning and I can apply that. That's the difference. That's the difference If you're listening to this podcast and you're getting a sense and you're getting a dopamine hit and you're feeling productivity.
Speaker 2:By listening to me talk and me and Ed Riff on businesses and talk about our own companies, it's just a super comfortable place to be. Business is uncomfortable period. It's very comfortable. It's comfortable to study business. It's comfortable to read about business. It's comfortable to think about all the data that you need and do in the market study and analyze in the properties and underwriting things. All that is super comfortable. Going out and signing a personal guarantee for $3 million as a 25 year old, that's not comfortable.
Speaker 1:Yeah, you know, and there's a stat that I've heard, and I've since kind of proved it out on a small basis that 95% of the people that buy coaching courses or business books, for instance, never crack it open, which is astonishing to me, right, I was. I bought into a business a few years ago as a local, rhea, and I asked the owner how many of your coaching students actually bought a property? And she said, yeah, about 4% or 5%. And I was astonished, and so I got curious and I dove in and called every single one of the folks hey, how's it going? Where's your, where are you on your journey in terms of real estate investing? And, yeah, it was true, almost 95% of the folks of 600 people who spent 12 weeks and thousands of dollars hadn't done a darn thing. Right. And the reason being? I got three basic answers right.
Speaker 2:I don't know where to find the money.
Speaker 1:I don't know where to find the deals. Oh, I've got so many responsibilities that I don't have time, right, and when you kind of dig into those responses, I found that most people are just afraid, and that's okay. Right, and one of the things that you said really resonated with me, and I wholeheartedly agree with it, is that the difference between being a dreamer and being an entrepreneur is action. Right, the only way? You're never gonna know everything. There's no way. It's impossible, and I know this cause I'm wired that way and it's something that I battle every day. And the but the fact is is that the only way you're going to move forward is to actually move forward. Right, you've got headfirst. Go in, make your 10 decisions, pray that you get two of them right and that you can fix a portion of the other eight and move on.
Speaker 2:So really action. I'll give some really actionable advice as we wind this thing down. Action is the key. But look, if you're setting goals and you're trying to conquer. You build a $20 million real estate portfolio. You're trying to raise $10 million for a startup. You're trying to change the world. You're trying to look at your maybe you're looking around social media and you're comparing yourself to other people.
Speaker 1:Yeah, don't do that.
Speaker 2:If you set really high goals. If you set really high goals and really steep cliffs to jump off of, of course it's even more scary. The key to all of this, ed, the key to all of this is starting really small, starting low stakes, starting not that scary, setting really achievable goals and just jumping in when the stakes are low, like do something. That's really boring. Really small to get going, cause business, as we know, is about momentum. It's all about momentum.
Speaker 2:12 years ago, 12 years ago, when we founded my company, I was in a college dorm or a college apartment and I had a car and a couple of boxes and I stored some boxes in my apartment and we made money from day one. I would have had the goal if I was that day, if I was reading Elon Musk's biography and I was like and I was like I wanna be an entrepreneur and I was gonna change the world with a new business idea I would have done it for a couple of years, failed and went and got a job. Instead, I took, put one foot in front of the other, didn't take any crazy risk, went out and made a little bit of cash the next year. My capital, my network, you know the three things that you really need to grow a business, which is skills, capital and a network. All three of those were a little bit better and I did a little bit more Fast forward five years and, oh my gosh, now I got some real skill, I got a little bit of capital and my network has grown even more.
Speaker 2:So I know more people and I know more. The amount of people in my web that are helping, all helping each other, is bigger. I can do even bigger things and better things five years later. So, yes, it's fearful and, yes, taking action is hard. You don't have to go try to conquer the world and, as a matter of fact, that's a way to actually fail.
Speaker 1:Yeah, hit single.
Speaker 2:Go out, do a little bit, put one foot in front of the other, take little things. The problem is like nobody's willing to do work now and get paid for it five years later. I did that first building. We started that first building, planning for it 2014. Broke ground in 2015,. Got it open in early 2017. I made my first dollar from that in 2019.
Speaker 2:Five years the late ground of two years, five years it's really hard and it seems unsurmountable. And when you're starting and you got nothing you got no network, you got no capital, you got no skill it all seems totally insurmountable. It seems like a mountain that cannot be climbed. What I'm gonna encourage people to do the main takeaway that should be is like lower your goalposts, move the goalposts closer to you, start taking steps and take little small risks. Maybe you're house hacking, maybe you're getting that first duplex. You're starting a little entrepreneurial endeavor to start to build some capital. You're gonna go under, write a small building. You're gonna go try to buy a $80,000 rental property in your town and get it on section eight something to get the ball rolling down the hill.
Speaker 1:Yeah, start, as I always say, hit singles, be okay with hitting singles, and then eventually you'll hit doubles and every once in a while, one of those doubles will turn into a triple and then it just snowballs, right. So, hey, nick, I know we have a hard stop coming up, so I wanted to thank you so much for your time and your experience and sharing your wisdom and your lessons learned. I'm grateful. So if people wanna learn more about you, what is the best way for you to for them to get in touch with you?
Speaker 2:So, if you like listening to podcasts, I have the Nick Huber show and Sweaty Startup. The Nick Huber show is about real estate, sweaty Startup is about entrepreneurship and management, and I have a newsletter that I write every week that I spend a lot of time on. If you go to sweatystartupcom, you can subscribe to my newsletter. It's all management, entrepreneurship, wealth building and real estate related, and then, yeah, I tweet my thoughts all day long on Twitter at Sweaty Startup.
Speaker 1:Yeah, and as a subscriber to your newsletter, it is. I can't recommend it enough. It's absolute gold. Every day, every week, I learn something new, so and I've been doing this a long time, so even an old dog like me can learn new stuff. So, nick, thanks so much for your time today. It's really good to see you, my friend, and we'll look forward to stalking you more on Twitter.
Speaker 2:Ed, keep up the great work. I love what you're doing, too, and spreading the message, and I'm sure we'll have this conversation again, so I really appreciate it.
Speaker 1:We're really looking forward to that. Thanks All. Right bye. This has been the Real Estate Underground podcast. Thank you so much for listening. Don't forget to rate, review and subscribe. It helps us grow. Until next time, happy investing.