Josh Cantwell: Hey, there. Welcome back to Accelerated Investor. Hey, it’s Josh. Listen, I’ve got a great interview for you today. I’m interviewing a new friend of mine. His name is Van Sturgeon. Van is an experienced entrepreneur and investor with over 30 years of investing experience and then personally owns over 1,200 properties across North America. He’s pretty much semi-retired from the day-to-day operations of his business, originally born and raised in Chicago, and currently splits time between his portfolio and Chicago, Toronto, Miami Beach. He’s been experienced as a land developer, home builder, general contractor, done tons of rehabs. He’s an absolute animal, especially when it comes to renovations. He’s renovated thousands of homes and commercial properties across North America. His portfolio is primarily built in Ohio, my backyard, Michigan, boo Michigan, New Brunswick, and Florida. And he’s written books on renovations and has been published in various media outlets.

And today, we’re going to talk primarily about his success in real estate and primarily the process of really focusing in on those renovations. So, thanks so much for joining me today. And here we go with Van Sturgeon.

[INTERVIEW]

Josh Cantwell: So, hey, Van, listen, I’ve been really looking forward to having you on the show. Thanks so much for carving out some time.

Van Sturgeon: No problem. I really do appreciate, Josh, having me on. I know I’m a long-time admirer of yours, at least of many of your podcasts, so a lot of great content. So, I’m looking forward to having a great one-on-one with you, a tit for tat.

Josh Cantwell: Absolutely. Yeah, we’ll share some more stories here, for sure. So, Van, you’re semi-retired. I know you obviously are managing your portfolio, kind of overseeing it as a kind of an asset manager, but you coach some new investors on buying their first multifamily property. But tell me a little bit more about 2022, like what are some goals and objectives that you have and some projects that you’re working on?

Van Sturgeon: I’m really focused on helping new multifamily investors in acquiring once they’ve acquired their first property. And what are the strategies? And what are the things that they should be doing and being able to carry out a renovation or a value-add project? Like we all go into these types of investments with goals and projections associated with there but these assets, and I really do enjoy that engagement. I’m at that age and stage in my life where I’ve been very blessed in my life and I just enjoy the engagement with typically younger folks that are young whippersnappers to get involved in the multifamily space, and they’re looking for some sage old advice from a veteran of over 30 years.

Josh Cantwell: I love it. So, let’s peel back the onion on that sage old advice. I love it. So, let’s say, like I talked to a lot of even some students that I mentor and different people that I’ve worked with over the years, people in my mastermind group, a lot of them are trying to get in the game by that first 20-unit or 50-unit or 80-unit deal kind of stay under the radar so they’re not competing with the big boys that do the 100-unit, not deals. And so, they’re buying something, it’s distressed. Maybe it hasn’t been updated in 15, 20 years. And it’s, like you said, value-add. Maybe it’s unit turns, it’s commons, it’s water conservation programs. So, somebody comes to you and says, “Van, I want to do multifamily. I got a 50-unit deal I just bought.” Like, how do we unlock and schedule out and really evaluate this thing to do the best value-add program? What are some of the questions and some things you want to know off the rip to start to formulate a game plan?

Van Sturgeon: Sure. And typically, that is the case when folks reach out to me and typically, a new multifamily investor has done a tremendous amount of due diligence during that period of time in underwriting it and ultimately, finalizing that deal. So, there’s a wealth of information already there, and it really is my job as a coach consultant is to draw that information that you already know out to the forefront and put a comprehensive plan together in terms of what it is that we’re looking to accomplish in this particular asset.

And typically, I get started with my engagement in identifying what are the specific goals associated with this project. Like, ultimately a lot of pie in the sky kind of gray, we need to really define what it is, specifically what we’re looking to accomplish. So, that could be multifamily space. Typically, it’s raising rents from a certain period from a certain dollar amount up to a certain dollar amount. In some rare cases, it could be a flip as well, doing some quick renovations, and then putting the property back out on this overheated real estate market that we’re in.

And so, it’s really identifying crystallizing, what specifically is that goal? And once we have that established, I really want folks to go out there in the marketplace and validate those goals, like really on a granular level, like when we’re going through our due diligence and underwriting fees, there are those preliminary kind of junkets of information that we pull out of comparable properties in the area but are really in the process of trying to figure out our goals and validating them. I want individuals to go out in the marketplace and really fine-tune what it is that we need to do to the property in order to reach our goals.

So, specifically, going into comparable properties, if you have a unit, have an asset that has an average of $800 of rent and you want to jack up those rents to $1,100, well, what is comparable in the marketplace that is able to pull that $1,100? Do they have brand-new windows? So, they have porcelain tiles or ceramic tiles. What kind of amenity, common amenity features or amenities of the standard and the conditions of it? All of those really granular details need to be pulled out to be able to get to the point where we understand and validate the goal that we’re trying to accomplish. Rarely, there are situations where goals have been established, you can realize that because as much as we want to get to a point where we’re raising rents $1,100 to $1,200 a month if the unit sizes are comparable a thousand of square feet and yours is only $700, we don’t have a magic wand to be able to dramatically all of a sudden increase the square footage of those units, right? So, we’re limited in what we can do.

But typically, with multifamily investors who are smart, intelligent, we don’t get to that point, but really, we need to get in and find you what it is that we need to do to our property and establishing those clear objectives associated with what we need to do, and then we move on through that process. And once we’ve been able to get that, Josh, then we’ve got to go and really do an examination of the property itself. In that phase, what I call is creating a needs and wants list where you go out there and you do an evaluation of your property and identify things that need to be done, like if there’s a hole in the roof, a pothole in a driveway, those are things that have to be done right away. Like if you don’t treat them, then you’ve got liability or you’re going to cause further damage associated with that asset.

And then, on the one side, those are things that we put based on what we feel, based from the information we gathered from the marketplace. On the one side, those are things that we can address, we should address. So, things like that lime green carpet from the 1980s, that kind of carpet that even though is serviceable and functionable, that would be an item that we would put under the watch side so that in the event if we have the dollars to be able to throw at that, we will address that renovation, that repair. But if we don’t, then we can’t and we’ve got to try to raise that. And then, part of that, once you’ve been able to get that, evaluate your property, you need to figure out how much money you have in the kitty for this, and that will be part of that whole CapEx budget that you put aside. And it’s really there where you figure out based on your need and want list and amount of money that you’ve set aside, what are the things that you can do and you can’t do?

Unfortunately, we don’t have unlimited funds to be able to throw at and solve every single issue or problem associated right of your renovation we can think of in these. We have to be very selective, and I find often new multifamily investors who go and come into this space, everything’s changed, everything’s 10x depending on the complexity of the property you’ve acquired. Some properties got elevators, some properties have balconies, some properties have underground parking garages, and all of those have their whole hosts of factors and issues associated with them that you need to really be careful of because you can get into some real costly CapEx stuff, and I’m sure you’ve run across them, Josh, yourself, right?

Josh Cantwell: Absolutely. I almost lost my mind. A week ago, we bought a building. Actually, I bought three complexes all at the same time, a $15 million purchase, talked to the broker right before closing. He said, “Hey, this garage, this leak, is this repaired? This is part of the seller’s due diligence.” The broker says, “Yeah, I’ll go out and check on it. Yep, it’s repaired.” Well, of course, he went on a sunny day. And then, I was there after closing and I asked my partner, I said, “Tyler, it’s leaking.” Like we’re in the garage, it’s lea– so, the seller is going to go back and sent the contractor back to fix it, so it’s not going to be an issue. But it certainly could have been, and I was a little disappointed. I said, “What system do we have that just failed right before closing that this garage was supposed to get repaired and fixed?” And here we are two weeks after closing, and it’s obviously leaking on the cars inside the garage.

For a new investor, that could be a major, major problem. With our experience and our horsepower and the money we have, it’s not as big of an issue, but for a new investor, you buy your first 25 units or your first 75-unit, you don’t have that extra $25,000 or whatever cost in the budget, it could be a major, major problem. So, then I want to peel back down real quick on when you set goals, you’re raising rents, you specifically mentioned comps. Do you coach your people to actually physically go secret shop the comps and walk through the commons and walk through the hallways and act as if there are future residents on those comparable buildings?

Van Sturgeon: Absolutely. If you have that opportunity, nothing beats actually physically going into all these competitors of yours. These are all your competitors, and being able to experience how the property manager is dealing with you, seeing the actual individual suites that they like, the types of renovations, and you really need to create a detailed list of that experience so that you know what you are up against in terms of what you need to do to your property, get to the competition’s same level. I know it’s difficult for a lot of remote investors to do that. And so, they need to rely on pictures, they need to rely on property managers that you have a relationship with to be able to give you the lowdown on every single property that’s out there that’s comparable to the one that you’re about to purchase and really get down and know exactly what it is that you need to do in terms of that value-add, the money’s that you’re going to be putting in and the proper amount to set aside.

This is a relationship game, like there’s a whole variety of things that folks need to have put in place prior to making that first purchase of that multifamily. Having that relationship with property managers is important. Having relationships with subcontractors to get a sense of what’s out there in the marketplace in terms of the cost is important. And once you’ve been able to have those and you move on and you go out there, but at the same time, there’s a level of experience, Josh, that you have been able to obtain over the years as you’ve done this, that unfortunately, you can’t go to YouTube videos and read a book on. You got to get out there, and one other experience they share with you, you agreed upon, like the things that these certain areas of properties or buildings have their own perils or have their own issues.

And the only way you can figure out all is through the experience of actually acquiring one and going through that to know, like a building that’s built in the era of the 50s has certain things that you should be mindful of versus something that’s built in the 70s, right? And unfortunately, there’s isn’t a book or a YouTube video you can grab to be able to help you out than that. So, that’s where I step in and I’ve literally gone through thousands of renovations on the multifamily, single-family home, apartments, commercial buildings, you name it, I’ve done that. And it’s true of those experiences, and I’m so learning, by the way, nobody can outright learn new things that you pick up every single day. But just like yourself, you have a basket full of experiences that you can then rely upon to be able to go forward and turn lemons into lemonade.

Josh Cantwell: No doubt. Even like next week, we’ve got a leasing about next Saturday from 10 a.m. to 1 p.m. We’ve got about 24 units that are coming out of cutbacks, coming out of construction. They’re hard turns. So, they were 1960s construction carpet, some of them have original cabinets, original countertops years ago. We tore those apart. And now, we’ve got LVP in. We’ve got a 5.5-inch trim. We’ve got shoe mold. We’ve got the new white sugar cabinets, black matted hardware, stainless steel appliances, butcher blocks, and granites, the whole thing, right?

And even to your point, though, but next week, like Monday, I’m going in the field to that building to go see it all and I’m going to roll up my sleeves and put on my boots and work side by side with my makeready crews and my construction crews because when you finish up a renovation like that, that last 2 inches that matters, right? Getting the appliances set, making sure the gas lines are working to the stoves, making sure all the cardboard is thrown away, making sure the laundry rooms don’t have materials and supplies and all the appliances laying around, all this, you’re laughing, I could see you because you don’t…

Van Sturgeon: Because the last 5%, 10% of that renovation value-add is that you could see the light at the end of the tunnel, but it takes so long to get through those punch lists, all the items that you listed. And I’m chuckling because I know where you’re coming from. It’s really for that unseasoned person who’s involved in that, it’s very frustrating, but I know where you’re coming from. Those are very important stuff that you got to get in there and do. You’ve got to be mindful of, you’ve got to get in there and roll up your sleeves because that’s where ultimately, at the end of the day, nobody gives it. Look, I’m going to swear a bit crap. I’ll be what’s behind the walls. It’s the finished product is where the dollars are, where you are able to raise values up. What’s behind the walls, nobody cares about that.

Josh Cantwell: Yeah. And what’s interesting is I find that, like, that’s really where you’re learning if you haven’t tried to create a franchise type of model where you’re stamping out the same unit turns in that building or in your next building. Like, we try to buy a lot of buildings in the same markets and submarkets and then do the same product in every unit, like you’re learning about that last 5% or 10% the choke point that your contractors or your makeready crews, why are they not getting across the goal line? And if you can identify that and then create solutions, you can’t do that sitting behind a computer on a Zoom call or in a meeting, it’s only something you can see.

And so, I’m using this as basically a comparison point where you need to do that during your due diligence phase as well, which is what Van just described by going into the camps, walking through and acting as if you’re a prospective resident trying to get into a unit, get into the commons, see what kind of amenities they have and do it at the beginning, and then also be doing it as you’re doing that last 5% or 10%, right? How many times, Van, have you been into, especially when maybe you were new at this, and your contractor told you, like, yeah, we’re almost done, I just have a few things left to do, I’ll be out of there on Friday, and then you show up on Friday or Monday and you’re like, there’s way more than a small punch list here?

Van Sturgeon: All the time. And that is one of the things that I preach to folks is when you’re engaged with the contractor, identify that person you want to do business with, that you really got to– unless you have an established relationship with them, even an established relationship, you should always have instituted a progress and a payment schedule that coincides with one another so that at every milestone, as you’re moving forward through that 8, 12, 20-week whatever renovation value-add process, then you have these milestones where you have updated terms of what the progress is. And then based on that progress, you get paid.

And oftentimes, I find that a lot of multifamily investors, just real estate investors in general, they’re having a difficult time finding contractors to even quote on their work. And then on top of that, whoever they’re able to find, they get quotes all over the place and then they give up these huge deposits right from the get-go, 30%, 50%. I’ve even heard some people give 70% upfront before a finger has been lifted. And so, what do you expect in that situation? Like, what do you expect that contractors got you by the proverbial you know what, and he’s been jerking around which way they want? So, stop treating them like McDonald’s.

There’s a little saying that, if you’ve listened to some of the podcasts I’ve been on, stop treating your contract like McDonald’s. When you go to McDonald’s, you’ve got to pay upfront before you get your hamburger, stop doing that. When they produce, that’s when you pay. Yes, you give us a certain dollar amount in terms of mobilization costs or materials that you need to bring on your job site, on your project. But these ridiculous things are 30%, 50%, 70%, that’s outrageous. How do you expect to be in control of your own project? And that’s why people lose control, is that they’re sitting there waiting every single day with a pit in their stomach, hoping that this is the day that the contractor is going to show up and do some work. No, no, no, you don’t.

So, in your situation which you describe, yeah, yeah, yeah, everything’s done by Friday. If you’ve got a paycheck, if you’ve got money waiting for him, make sure you get it all done before you get paid, buddy. And trust me, when you have that type of relationship with them, and they understand they’re not going to jerk your arm, you’re going to complete everything because money, they want their money, and the only way to be able to control over our contractor is through money. It’s just the way it is, money controls everything.

Josh Cantwell: That’s fantastic stuff. So, Van, with all your 30 years of experience and your properties that you own, coaching investors on how to get going, is there a couple of things that you think are must-do’s? Like, what are the key elements to really get and buy that first multifamily property, in your opinion, and then do it right the first time and kind of get off on the right foot? There are so many people in our audience that already own multifamily, but there’s a fair amount that are trying to do their first deal. Maybe they’re a really good resi investor, trying to get into that first 50 unit, and they’re wondering, like, what’s really going to take to be successful? I’m kind of afraid. I wish I would have done it sooner. I haven’t done it yet. I’m kind of skeptical, like is this going to work for me? I’m really good at single family. I’m afraid to get on a commercial. So, from your perspective and coaching people, doing it yourself, what are maybe three or four or five kind of key elements to make that first deal go?

Van Sturgeon: Well, you kind of touched on this, and that you have to get into systems and processes and being able to scale your portfolio unless one of the things that when I get involved with new multifamily investors, I teach them these types of things that you, Josh, have already incorporated in your business. I guarantee that you have some sort of a broiler plate detailed scope of work somewhere that you are able to pump out to your contractors, and they know exactly whether it’s ABC or XYZ guy who comes in new to the fold or something you’ve done business within the past, they know what you want. You’ve got it nailed down to the particulars, that processes associated with how to paint that wall. Before you paint it, you’ve got to clean it, you’re going to sand it, you’ve got to dust, and then the types and the specification associated with that be.

A detailed scope of work, if there’s a one takeaway folk aside from a whole bunch of other nuggets that we talk about, create yourself a detailed scope of work where you do all of that homework beforehand so that when you go out and you tender this to a bunch of contractors that you know or don’t know, every quarter should get back. This compares apples to apples comparison. If you don’t have that to provide out there to tender, then you end up with quotes coming in that are all over the place. And if you go to your GC, shame on you. If you go to your contractor to get them to create that scope of work for you because it doesn’t work that way, you need to specify exactly what it is that you’re looking to accomplish within that renovation value-add project and then you tender it out and then you get quotes back that conforms to that. And it’s part of the contract that you have with the contractor that they have to abide by that. And that’s the number one, the biggest problem that I see, especially in a single-family home space. If you go into the commercial side, there is no risk. I don’t know of any projects of some scale that don’t have some type of a detailed scope of work where everybody knows what their roles and responsibilities are and how everything is possibly out, right? So, that’s the biggest one.

And then the last thing is, remember the whole thing about for sure. Whatever contract you gauge with, you’ve got to establish right from the get-go that we have a clear understanding of what the responsibilities are, create a payment schedule and a progress schedule. And on a weekly, every two weeks, whatever that case is, you have a meeting of the minds. Where are we? And then based on that progress, they receive payment so that you’re in control of your projects. So, if this guy or girl is not producing, you can bounce them out of there. So, often, I find folks, they don’t have, they ate up so much money, and they’re just hoping and hoping that the contract is going to come true. You can’t be in that situation. At the end of the day, we’re professional business owners, we have to act like professionals. Those are the two really big takeaways that hopefully people will get from listening because you need to do that.

Josh Cantwell: One other real-world solution is, right, the people don’t realize how cheap these Conex boxes are, these mini mobiles, 150 bucks a month to get a giant container, right? So, if you buy a 50-unit complex and you could put a medium-sized mini mobile Conex box on-site there and get a nice locking system which they usually come with, you can buy all the material at scale, buy it all, whether it’s slabs of granite, whether it’s butcher block, all the cabinets, the toilets, the LVP flooring, the black matted hardware, the tub surrounds, the tile, the vanities, stock it so that your contractor, you’re literally just paying them really for labor. That’s the scope of work. They’re grabbing the stuff out of the Conex box, the mini mobile, they’re walking it in, and they’re installing it. After the demo was done and after the walls are painted and all that kind of stuff is finished, bam, you’re going right back in and just basically, they’re slamming it all together.

We found that taking 800 square foot apartment unit, they could do that. If the stuff’s on-site and they just do labor for roughly two weeks, they could take a unit, hard turn it in two weeks because of all the things you said. We have systems and processes. They have a detailed scope of work. They have a payment schedule and the stuff sitting in the Conex box that they can readily go get. Now, the stuff disappears from the Conex box, come on, of course, there’s some stuff. They take a P-trap here or there, whatever they’re going to take. Okay, there’s going to be some bleed, I get it, but the speed, now that which we can operate to turn multiple units in two weeks end to end, and the other thing I would say, Van, is look, we’ve had contractors come on-site before and be like, yeah, I could turn 10 units at one time. PS, now they can if they experience.

So, what we found is the rule is we’re only going to give a new contractor or a crew that works for a contractor, two units to start with. Start with two, right? Let’s say it’s an $8,000 turn or an $8,500 turn, roughly half of that is labor, roughly half of that is material. So, that’s about an $8,000 or a $9,000 labor job for two units. We’ll give them that, test it out, knock that sucker out in two weeks. Then the next time around, I’ll give you five units, knock that sucker out. Then I’ll give you 10 and I’ll send you 10 at a time. No more than 10 per crew. Okay, no way. That’s the sum of our rules of thumb that we’ve used that have been successful because we had guys come in and be like, oh, I’m loaded with contractors. I’ve got all kinds of guys, give me 10 units. It’s essentially an $80,000 job, $8,000 a unit. And then you’re like, three months later, they’re not even done with the first two. It’s happened to me. Ask me how I know. So, those are some additional rules of thumb that if you’re a new investor, you’re doing your first deal and Van is coaching you up, some little nuggets there.

Van Sturgeon: Absolutely.

Josh Cantwell: We get a little bit of experience then, which is what’s cool. Lowe’s and Home Depot, we’re talking about these supply chain problems, the big box stores, they’re not really having supply chain problems right now. Actually, the prices are going down. Back in the middle of COVID, about a year ago, we were paying $2 a square foot for LVP flooring and started at a buck fifty, went up to a buck seventy-five up to two bucks. Now, it’s back down to a buck twenty-six for the same style of flooring. So, the big supply houses are able to get it.

So, now, they’re even offering lines of credit. Well, you can actually buy 50 toilets and 50 vanities and 50 units worth of flooring, and then they know that that order is coming in, but they’re not actually charging you for it until you take delivery, right? So, there are some other things if you’re going to do this at scale, once you’re good at it and get going, there are some ways now that you can leverage your capital. You could actually have a 30-day or 60-day payment term with Lowe’s, get the stuff moved in in-stock, but not get billed for it till you use it. You literally use it. It gets delivered within the next month, you’re using it all. Then you can go take your draw from your lender so the total capital that you basically borrow or get from limited partners actually goes down. And that experience comes with time. Maybe this is at your second building, your third building, your tenth building, whatever, like Van and I have done, but again, there are some tips there, so.

Van Sturgeon: All that stuff you just laid off, I love it. And I do the exact same thing. And it’s just a part of the process of you trying to get to figuring it out and implementing it. And when you’re working on your business sort of in the business, those are the types of things that once you’ve established a base, you start to tinker. You’re just like the great Oz behind the screen. You start to pull the levers and you see, okay, there’s an opportunity here, an opportunity there. And that’s one of the things that you and I can offer to folks who haven’t gone through, are not there yet. There’s a bunch of things processes and systems to be able to really elevate their game. And that’s what I really enjoy, and this is exactly everything that you just said, I love it because it’s the kind of stuff that I’ve gone through in my life and I’m helping others implement it, and they see tremendous success and be able to reach their goals of being a multifamily investor, a bonafide successful multifamily investor.

Josh Cantwell: I love it. Van, tell us a little bit more about your start, in particular, maybe some early challenges that you faced, and maybe even as a side story, some of the people that you’re mentoring and coaching and consulting with now, what are some of their chokepoints and trouble spots when they’re getting going?

Van Sturgeon: Sure. Well, I don’t want to go too far into just a product from the 60s. I was born and raised in Chicago, and how I got really started in this business was through my family, and directly in that, instead of my parents, we were living in a one-bedroom apartment in Chicago and instead of buying their dream home, they learned that the apartment building that we’re living in actually had gone up for sale. And that’s how as a child growing up, I got involved in this whole multifamily business. But because of the difficulties starting off, all the work that was associated with that building we were doing on our own, the electrical, the plumbing, the painting, all that kind of stuff I was exposed to early on in my life.

Then I went off to university, graduated, I moved on, become a lawyer, not accepted. But I didn’t feel it, I was told by someone just to go out there and find things that make you happy, and being that whole general contractor renovation is what really, I enjoyed. So, in the late 80s, I got started being a general contractor in Chicago and I started to develop a client list. I started to develop my business and I kept running in these real estate investors, these guys who would buy properties, flip them, and create portfolios. 1991 was my first fix and flip that I did, and I made 30 some odd thousand dollars on in there. Back then in 1991, that was a full-time salary for a good professional. And I made it in four or five months and I got hooked on it.

And so, as I was developing my general contracting business, I was doing real estate investing also as well. And I was doing really well, but it got to the point because I had a mindset coming from the background that I came with my parents of being a micromanager, doing everything myself that I started to hit against that ceiling that I couldn’t expand either my general contracting or real estate investing. It got to the point where, Josh, I was sleeping on job sites. And I remember one of the particular jobs I was sleeping there and staring at this freshly painted ceiling, wondering like at two o’clock, three o’clock in the morning, like, what the hell am I doing? This can’t be normal. This is not good. I remember going, like I bought a 48-unit building. I got married on July the 28^th, and on July 31^st, I did a closing for a 48-unit building. And I told my wife, “Sorry, I can’t go on my honeymoon.” We didn’t go on our honeymoon until a year later. That’s how driven and focused I was.

Josh Cantwell: Well, that’s hilarious.

Van Sturgeon: I’m still married. Got a great wife. So, it’s like really crazy stuff. So, I was focused and dedicated to being an investor. And right now, what I see a lot of the difficulties that multifamily investors are just general real estate investors going in is you don’t know what you don’t know. And so, you come across situations where you have an issue, a plumbing issue in a property. And so, you contact one contractor to tell you one thing. You contact another contractor to get another thing. You know you’re in a difficult position to figure out who to trust, who do you rely on? You can send out a request for a coach and you ask 20 people to give you a quote, and only four answer their phones, and only two guys will show up. Why? And those are the difficulties that I find with the engagement I had with clients in this multifamily space is really to figure out how do I create those processes and the systems to be able to– they can acquire the asset, they figured out that whole component of finding a great deal, but this whole other side that nobody really wants to talk about is how do you create the value? How do you do the renovation where you don’t lose your shirt that you actually are able to plan and manage successfully to get to your goal?

And that is where a lot of people struggle because nobody wants to talk about it. You go across the whole internet space there and talk about flipping houses, great stuff, or how to raise money, great stuff. But nobody wants to get down to the minutia about how the hell, once you acquire a great deal, how do you actually get it to the point where it is a great deal because I’ve seen so many great deals where they get screwed up, where they didn’t put enough money off this side or they over renovated. How many times do you come across properties that are over renovated? They spent too much money to get to their end goal. So, that’s what I love about this engagement with investors that I really love it.

Josh Cantwell: Yeah, for a while, we were completely vertically integrated, right? We were buying the properties, we were doing the acquisitions, we were doing the renovations and property management, and what we found was we had to give up something and we really found that the money was in the renovation, like you’re talking about, because essentially, it would run itself out or it would sell itself if it was a great product. You can’t sell a premium house or rent a premium unit if the construction work and the quality of the craftsmanship is bad. So, we put the focus on the craftsmanship, the focus on the system, the process, the billing, making sure that the right product was there. And then we were like, oh my God, we’re getting rent’s way over proforma way early.

And so, like you said, nobody really wants to talk about it. They just want, oh, how could we raise rent? How could we increase value, raise rent, raise rent, raise rent? Well, increased rent comes from either demand through population migration, like jobs and people moving into your area, or you simply have a better-looking product than all your competition. And we’re right back to the beginning of the interview, Van, when we talked about going and walking your cost. So, those are some real ways to provide value and increase rent. Like if you’re in the path of progress, you’re betting on appreciation, you’re betting on growth. There’s a whole strategy around that, and it works. There’s also, like what I do in Cleveland and what Van’s doing in Ohio, Michigan, like not these super sexy markets, but to buy deep value-add, create a great product, and then well, your comps are 1980s, 1970s, 2000s product, and you essentially have what looks like new construction on an older building. It’s a huge winner for us. Van’s done the same thing, it’s fantastic.

Van Sturgeon: Absolutely. Just to further this quickly, like in every area, Cleveland, for example, you named off, I’m active over there, even if those areas are submarkets that are doing gangbusters, it is us our job at identifying those tertiary markets and being able to exploit them. And what you just named off is exactly this kind of stuff that I preach that I’ve done in my life and I’ve seen tremendous results from. There’s something to be said, when you’re getting started off in multifamily to identify properties that cash flow immediately, and I find so many folks, depending on the geographical area that you are in, that some areas don’t allow you to do that. There’s just craziness in terms of the cap rates and stuff like that that you have to buy units, properties at.

So, identifying these areas where there’s a cash flow at the end of the day is what pays the bills, and then ultimately, then as a real estate investor, you might very well transition into acquiring properties for appreciation’s sake. What you’ve been able to identify, which is very, very smart, Josh, and unfortunately, a lot of folks can’t do that because– I’ve got clients that are in California that got properties in Cincinnati, I’ve got clients in New Jersey who’ve got properties in Tampa Bay. So, they’re doing this remotely, they understand the need to find, identify properties that are great, great deals and cash flow, but they got to do it out of their home areas. So, now, the struggle is being able to create processes and systems that you can remotely, which I have helped these folks in, being able to successfully plan and manage other renovation value-add and get them to the promised land, get them to hit all their goals and projections.

Josh Cantwell: Yeah, I love it. Van, we’re fortunate, people don’t realize, and now kind of let the secret out a little bit here. But look, I mean, in the Midwest, even if you’re just in Ohio, you got three really different markets, Cincinnati, Columbus, and Cleveland, right? Cleveland is a true rust belt, not a lot of growth, not a lot of population migration. So, you can buy deep value-add. 1960s, 70s construction do really nice value-add plays, no cash flow for really the first year or two or three. But then when you hit stabilization refi, the thing cash flow is like crazy. You put in a lot of work in upfront, you force the appreciation. It’s a great strategy. We do it all the time. Now, Columbus, there’s just wholly technology, wholly Amazon and Intel and Google and all these major players. Columbus is almost like investing in the Sunbelt. It’s an appreciation play because of all the population migration. So, if my wife would let me, I would move to Mansfield, which is like the least sexy place in the world. That is where they filmed Shawshank Redemption, right? Shawshank the movie?

Van Sturgeon: Yeah.

Josh Cantwell: The Mansfield Correctional. I would move there so I could be one hour to Cleveland, one hour to Columbus, and then I’d have a hyper-appreciating market and I’d have a deep value-add market. So, we’re investing in those markets now, but I live in Cleveland schools, it’s fun, it’s been here forever. So, Van, let’s wrap up with this. Let me ask you a couple of quick questions, quick answers. We call it our final 5, just kind of advice and some things like that that we haven’t touched on yet. So, let me ask the first question. What is your favorite way to find deal flow right now?

Van Sturgeon: Relationships. There isn’t a day that goes by that I don’t have or my team goes through an opportunity because of the relationships that I’ve been able to create with our teams in those areas that I invest in, that I’ve been in for over 20, 30 years. So, it’s from relationships.

Josh Cantwell: Relationships, long-term thinking, love it. Van, what’s your favorite way to kind of fill up your capital stack and get access to different types of capital?

Van Sturgeon: Well, right now, I don’t have to worry about that because I got enough coming in. And actually, just identifying opportunities is where I’m struggling with. But back in the day, JV’ing was how I got started. And I encourage even multifamily investors, there’s a sweet spot between that 5 to 30-unit building size that you can really structure up a nice JV so that you can go in with very little way of your own capital.

Josh Cantwell: Love it. Love it. Van, who do you think has been the mentor that’s had the biggest impact on your life? Like who’s helped you and kind of pulled you up?

Van Sturgeon: I kind of touched on this. I got stuck in a real bind back in the early 90s, and I came across a real estate investor who had a portfolio of a suntan. He was beautiful, and in my moment of weakness, I reached out to that individual and said, “Hey, I need your help.” And he charged me a lot of money, but he was able to set me down and show me the ropes, and I can’t express, and I’ve spent hundreds of thousand dollars on self-improvement, coaching, mentorship, all that stuff. I’m sure you have, Josh, too.

There’s something to be said, it’s like playing guitar. You want to play the guitar, you can go on YouTube and try to figure it out. In a couple of years, you might strum a song, or you hire a music teacher, sits you down, and stops you upside ahead if you make a mistake. I’d much rather have learned in my life that I’d rather pay for somebody to be able to sit me down and show me the ropes, and it’s a lot quicker and avoid a lot of mistakes because in this real estate market, this real estate in general, if you make a wrong move, it can be devastating. So, I’m a product of coaching and I’m a big proponent of it.

Josh Cantwell: I love it. I love it, Van. Listen, I know our folks are going to want to reach out to you and I know you make yourself available to do some coaching and consulting, especially for these newer investors. I know they can reach out on your main website VanSturgeon.com, V-A-N S-T-U-R-G-E-O-N dot com, VanSturgeon.com. Any other place, Van, that people can reach out to you and connect with you?

Van Sturgeon: I appreciate that, Josh. I’m all over social media from LinkedIn to Facebook, Instagram. I love talking to people. I really do this because I’m passionate. And so, if there’s anybody who’s really contemplating and struggling, you’re more than welcome to reach out, and I’ll do what I can. For a 30-minute, one-hour conversation, I’ll be able to give you some real tidbits, and then hopefully, that’ll help you to be able to reach your goals and aspirations of being a multifamily investor.

Josh Cantwell: Van, that’s fantastic. I appreciate you being on and carving out some time today for us and all your nuggets of advice. Thank you so much.

Van Sturgeon: Thank you very much for having me, Josh. It’s been a treat.

[CLOSING]

Josh Cantwell: Well, hey, guys, listen, I hope you enjoyed that interview with Van. Man, I love his energy. I love his passion for the value-add side of the business. And like we talked about in the interview, I really feel like the opportunity to raise rent is because of the product that you put out there and that value-add construction side of things is so critical. And so, Van had mentioned, number one, understanding your goals; number two, understanding the comps; number three, examining the property for needs and wants; number four, making sure you have enough money; number five, the systems and process to work with the contractor doing the work; and then finally, the detailed scope of work and the payment and progress schedule. So, those are some serious nuggets that I think will really help you in your business.

If you have any questions, comments, please reach out to us. You can go to our main website, JoshCantwellCoaching.com, and of course, I always love it when people leave ratings, reviews, feedback. If you can open up your phone and leave us a rating or review in Spotify or iTunes or YouTube, that would be huge for us. We’d love to hear feedback and what we’re doing right and wrong. So, thank you so much for that. And again, VanSturgeon.com, you can reach out to Van if you have any questions as well and if you’re getting started with your first multifamily property. Thank you so much for being here today, and we’ll see you next time. Take care.