Jenny and Steven are both managing partners at Vertical Street Ventures; a real estate syndication company.
Previously, Jenny was an executive at Procter & Gamble, managing a multi-billion dollar portfolio in Market Strategy and Planning. Jenny now focuses on asset management.
Steven was previously an executive at MetLife and now has grown his multifamily portfolio to over 2,500 units. He focuses on acquisitions, sourcing capital, and building key strategic partnerships.
Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.
Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Jenny Gou & Steven Louie. Jenny and Steven are both managing partners at Vertical Street Ventures; a real estate syndication company. Previously, Jenny was an executive at Procter & Gamble, managing a multi-billion dollar portfolio in Market Strategy and Planning. Jenny now focuses on asset management. Steven was previously an executive at MetLife and now has grown his multifamily portfolio to over 2,500 units. He focuses on acquisitions, sourcing capital, and building key strategic partnerships. So thank you so much for both coming on.
Jenny:
Thanks for having us, Charles.
Steven:
Yeah. Thanks Charles.
Jenny:
It’s great to have two people on that run different parts of the business, and then we can cover a ton of different ground and answer a lot of questions that listeners might have. But as we’re starting off Jenny, give us a little background on yourself, both personally and professionally prior to getting involved in real estate investing and vertical street.
Jenny:
Absolutely. so Charles, as you mentioned, I am recovering sales executives. <Laugh> I spent 13 years at Proctor and gamble working with fabulous people. It’s a great company, loved my team. But you know what, while we were there, both my husband and I worked there, we wanted to diversify our portfolio. And so we started looking into real estate and I’m sure like many of your listeners, we started with single family and then quickly learned that there has gotta be a way to scale and grow faster. So we learned about multi-family and I actually did it backwards. I, I believed in this model so much so that I actually left my corporate job retired if you will before even purchasing a single multi-family door. So I burnt the bridges left and fast forward two and a half years later, we’re managing, you know, a $200 million portfolio. So that’s kind of the, the long and short of it, but I live in Southern California with my husband and two kids, and we are just loving our life by design. Now
Charles:
Before I get to Steven Jenny, would you do that again? What, how you had done that in burning the bridges, burning the ships, as they say, and would you do it if you could do it all over again?
Jenny:
I would say I think my timeline would’ve shortened, so everything that I’ve done has been successful because of my experience in corporate America. So I wouldn’t give that up, but if I had known this 15 years ago, I think you know, my, my track would’ve been slightly different.
Charles:
Do you think that you would’ve gotten more involved with purchase properties first and then left your job? Or would you have kept that same where you left and then started investing in a multifamily?
Jenny:
Well, I mean, we meet capital to invest yeah. At some point of another. So I would certainly still start my career with P and G. I think what I would’ve done personally was instead of buying that first house that everybody thinks is successful, maybe I would’ve house hacked and bought a duplex or fourplex instead, there’s things that I would, I teach, you know, friends and family now that I would’ve done earlier on.
Charles:
Yeah. Awesome. Awesome. So, Steven, what was your background prior to getting involved with vertical street and Jenny?
Steven:
Yeah, no thanks Charles. No, absolutely. I was a corporate America guy all my life as well. I spent about 25 plus years in corporate America and started really on the finance side, transitioned into sales role and then into leadership. So really covered all aspects within corporate America, fortunate enough to start in a cubicle and end in a corner office. And about halfway through my career, I started investing in single family homes, very similar to what Jenny and Ronnie have done and so built a pretty strong portfolio up, but then realized that there has to be something else just like Jenny had mentioned and was introduced to multi-family about five years ago. And the great thing about multi-family and commercial real estate is you can force that appreciation and where I say create appreciation within those assets. And so that was kind of the eye opening moment for me.
Steven:
And as I continued to build that right when co after COVID hit right around COVID time, I had met Jenny and her husband at a meetup in kind of the rest was history in terms of building a business that the platform that we’ve built and really enjoy what I do. I left corporate America and that’s where we started vertical street ventures. And so I think you asked any of that same question. What would you have done this earlier? I say, absolutely. I spent most of my time as a W2 way, earner focused on what I was supposed to do, invest in my 401k, maxing out my 401k, doing all the right things, climbing that corporate ladder. I think I probably would’ve exited probably halfway through my career. But I can’t thank corporate America enough. They’ve given Jenny and I all the skill sets to take this company vertical street ventures to that next level.
Charles:
Yeah, no, that’s, that’s fantastic. So Steven, with staying with you for a little bit, Steven cuz you’re dealing with a lot more, as I understand with a lot of the acquisitions and give us a little overview of what your current investment criteria and strategy is. And then, and also I see that you guys have some larger properties and you also have some, I would say smaller, but not really, I mean, 28 units or some other stuff. So are you kind of, how is your investment criteria set up? Yeah,
Steven:
I think like, like any business you do have to make some plans and you, you plan out your year on what you want to accomplish. And I think goal setting is super important. So when you’re first getting into this syndication business or any type of investing in business, you do set that criteria. And so I was always a fan of starting a little bit smaller and actually understanding how all of the, the details worked. And so my first initial apartments that we focused on were just things that we could afford from a joint venture perspective. At least that was my perspective on it. I can look touch and feel and understand it just like single family homes, but then after realizing some of that, you do scale and you change some of your criteria. So I’d say my criteria originally was, Hey, that 20 unit, that 25 unit, those were really perfect in terms of trying to drive overall NOI growth, understanding how property management works, understanding how a whole entire syndication works.
Steven:
And then now if we fast forward where we are today, Jenny are the vertical street venture team, Jenny myself, it’s really focusing on a hundred units and above. So our criteria a hundred units above were really laser focused in the Arizona marketplace class B class B minus C plus property, where there is the opportunity to drive value, maybe taking it over for somebody that owned that property for 20 plus years. And there, there are those opportunities out there. And as you build more relationships, whatever market you’re in that can take you to that next level. And then you build those relationships with brokers and key stakeholders that actually help you drive that, that drive drive some of the results based on the criteria I just mentioned.
Jenny:
Yeah. One thing I’ll add to that too. Charles, if you don’t mind strategically we have an academy as well, where we teach other syndicators how to do what we do, cuz like I mentioned earlier, I wish somebody taught me this 15, 20 years ago. But part of the, the, the smaller portfolio strategy is we also partner with some of our students on their first deals. And so a lot of those that you see en listed, there are steals that we’re partnering with our students on to help them get their foot in the door as well. So that’s why you see such a wide range of sizes.
Charles:
No, that’s fine. I own a bunch of different sizes. I own smaller properties myself and I own larger ones and joint vendors and the larger ones indications. I just, it’s just something that I picked up as I was doing my research. And I kind of see that where I like seeing that a lot actually, because I like seeing you have people that are looking for returns and looking for deals and everybody, I feel, you know, 75 plus a hundred plus units, but I also also always put a caveat in there myself is if it really makes sense and it’s close to that, we’re gonna, our group’s gonna bend the rules a little bit because we’re looking for returns, especially in where we are right now in this crazy market. So it’s one of those things that I just, that’s one thing I just wanted to kind of dig into when I saw, cause it’s not something, you know, most people are just kind of like dead set syndicators only this and above and or we, we pass on it. One thing with you, Jenny, I wanted to say, cuz both of you had started off in smaller properties and you’re dealing lot more with the asset management. So was I found it with larger properties that were operating that we’re buying with investors it’s much easier to manage our managers, contractor, everything else that goes with it. Are you finding that that it’s, it’s easier to man asset management properties that are larger than ones that are smaller.
Jenny:
I would say each one has its pros and cons. I wouldn’t necessarily say it’s easier. I would actually say it takes the same amount of time. Right? So what I mean by that is, you know, we have weekly calls with our property management team. I am on the same one hour call on a 28 unit as I am on a same one hour call with 252 unit properties. So I’m spending a disproportionate amount of time per unit, if you look at it that way. So it just takes more time. The challenges are the same. You look at occupancy, vacancy, you know expenses. It all is the same type of work. Now what I’ll tell you also is on larger properties, you just, you certainly have less risk, right? So if you have a 30 unit property, your vacancy risk is a lot higher than you do on a 200 unit property. So it just depends on how you’re looking at it, but from a amount of work standpoint, that’s why I always tell people where you can scale up faster because it literally is the same amount of work whether it’s five or 150 units.
Charles:
Yeah. And that might have, I must have reformed that question as being time intensive per unit because it’s much scalable with larger units, more units under one umbrella. So Jenny staying with you one on a second, what are the, if people are interested in seeing exactly cause we have two people on that have different roles that work together in purchasing properties with investors. Are you able to describe the different roles on a multifamily and or commercial real estate syndication team?
Jenny:
Yeah. So you could break it down really into three major components. You need somebody to lead acquisitions. So that person is the relationship builder. They’re working with brokers, they’re underwriting the deals, making sure that we can actually it’s the right property to purchase. You also have a capital razor or investor relations lead. So this person is the main single point of contact for finding capital for the project and handholding the investor through the entire process. And then last but not least. And the lease talked about, I would say in this industry is the asset manager. So once you close on a property, that’s when the, you know, rubber hits the road and for the next five or so years, all that work is on the asset manager to make sure the business plan is being executed. Those are the three, I would say, fundamental roles and then everything around is support and peripheral.
Charles:
Nice. Okay. When you’re taught in asset management, you’re usually you’re gonna be focusing a lot more with working with property manager and then working with any kind contractors you have or any type of value add scenario in kind of play you’re putting together there, the with your property managers, cuz you’re buying a lot of properties in I think I saw like four different states, something like this. How are you finding your property management companies and, or vetting them something like this, which cause I feel the property management is probably one of the most important strategic partners that a any type of investor has, whether it’s indication firm or just a mom and pop.
Jenny:
Absolutely. They are probably you know, outside of the, the asset manager themselves, like what I do the property manager is essentially your make or break <laugh> on the, on the property mm-hmm <affirmative> so it’s super, super critical to find the right ones. I would treat them as if they’re part of your team cuz they are and go through the whole entire interview process. So meet with their entire team look at their reports, walk properties that they currently manage. That’s not currently your own. So is the property clean? Does it look well run? Is it low deferred maintenance? I would also ask for referrals, right? So can you gimme the name of, you know, two or three current owners? Obviously if they don’t, that’s a red flag, but call them and say, Hey, how’s your experience been with, you know, X, Y, Z property management. You’ll get the really released that way. But you know, we always say in any industry higher, slow fire fast. So if they are not performing, you wanna quickly give them a, you know, 30 or 60 day kind of probation period before you move on, because that’s not something that you can afford with investors.
Charles:
Yeah. That’s great information. Thing I found is asking for referrals from other property owners in the area. And then also you’ll see on their websites, the property managers they’ll put properties up there and just a drive by of seeing just small things. There’s a little trash here, there’s this, this is this hallways, you know, whatever it might be. And it can kind of give you a background into where you’re going, whether than the problem is I always ask for referrals and I always feel I’m being put to these perfect partners that they have investors that they have that love them. And that’s who you’re getting referral from. So it’s kinda, you know, you, you gotta do your own due diligence too, so that’s great information. Absolutely. Mm-hmm <affirmative> Steven, I wanted to know cause you do work a lot with strategic partnerships. So when you’re, when someone’s looking to scale into larger properties you know, how important are partnerships? I mean, I imagine they’re crucial when you’re going into larger properties is what I’ve found. Do you have advice for investors looking to make the leap into partnering and how to find partners that will both grow their business and their partners business?
Steven:
No, that’s a, that’s a great question, Charles. I think one of the key things that I always that I built my kind of entire career on is relationships. And so with the partners that you partner with, you have to really have a, a strong relationship with and it’s beyond cuz really that relationship is for at least five, maybe six, maybe 10 years potentially. And you don’t want to try to just kick the tires with anybody. So I’m a fan of understanding who the, who we’re working with. You have to do background checks on it and be honest with them. I’ll actually ask them, have you ever had a felony before? And if they, you know, or have you, how many tickets have you had? So do you have to understand the character of the individuals that you’re partnering with and you know, with all social media and podcast, everything that we’re doing right now, we only see all the positives of everything that goes on and really, you know, my first couple partnerships that I actually had, you know, where I started as a key principle, just signing on loans and not really even getting compensated for it just so I understood the business.
Steven:
Some of those partnerships just didn’t turn out as well because I didn’t understand really what they were doing on the property. They gave me. I had no insight, it did gimme the ability to sign on loans on my own in the future. So I thank folks for that, but at the end of the day, choose your partners wisely and find out a little bit more about them outside of what you see on social media.
Charles:
Yeah, that’s great. The other thing too is I think kind of testing a deal with them. So maybe not going full in with a complete partnership right away and maybe doing a deal where they have a different LLC you have for <inaudible> just set up one for deal specific and see how it works. And you know, see if, what your expectations have been met on both sides.
Steven:
And that’s why sometimes we do say when you start with the, so everybody’s like, Hey, go with, start. I see people pushing, Hey, start with a hundred units involved, nothing else. But sometimes it’s okay to go with the 20 unit. Yeah. And that’s your first opportunity and that’s your first partnership? The risk is a little bit less. Yes. The vacancy and all the things that Jenny just talked about are a little bit more challenging, but it is easier if you do have to break that apart and you could probably UN unwind that a little simpler than maybe a 280 unit or a 200 unit versus a 20 year. So, right. That makes some
Charles:
Sense. Yeah. Especially, especially if it’s a joint venture and there’s no passive investors with it because then you have a whole different part of the business that now needs to be brought into the fold of what’s happening and why this is going this way.
Steven:
Even going into the relationships, things do change over time as well. And so I’d say make sure that your operating agreements, all of the legal ease are actually checked off. A lot of times we, we so quickly want to scale because we see everybody else doing it. But we forget to kind of check off, oh, who’s getting compensated on what? And then things change. Even if we had a discussion on this. Oh yeah. Didn’t we talk about specifically this, but if it’s not documented somewhere maybe that cuz the discussion didn’t happen or if it had to stand up in a court of law, where would that stand? And so building those processes all up front, which we’re pretty good at from a team perspective of doing when we build those partnerships is really crucial to the success of a syndicator or an investor out there.
Charles:
Some great information. It’s funny cuz the first pro multi-family property I bought in oh six we were sitting at the closing table and one of the investors was telling me he was saying that his old, his, this is a new partnership for him. His first partnership never worked out because they were, he was in his twenties and the guy that was funding, everything was like in his fifties or sixties, which obviously there’s gonna be a difference of how you wanna invest and what your goal is. One just wants to make some, I wouldn’t say quick cash, but not long term. And someone else wants to build like a whole thing. So it’s not just that you just it’s different alignment of interest, I guess you would say too. And like you said, Steven, it changes. So it’s very important to kind of find out what people’s 5, 10, 15 year plan is when getting into business with them. Cuz usually these transactions are gonna last the five, seven years it’s been shorter these days. But at some point when everything goes a little sideways, it’s gonna be longer again. So Steven, tell me just staying with you. What are the common stakes you see real estate investors make?
Steven:
So from a, a limited, there’s a couple things there’s also the limited partner side in the general partner side. So limited partner side, I think I see a lot of individuals, just the fear of missing out. They want to get in an opportunity. And so they are so quick to just jump right on the opportunities. I did that myself. I mean, when I first started into this multi-family business, I started as an LP and I just said, oh, I gotta get in as many as possible. And you know, the market has been awesome for probably most of the investors that are listening to the podcast at this point. But there are points in times, some just don’t work out or some, you you’d have no cash flow when you were expecting 8% cash flow. So I’d say as a limited partner really vet out that general partner, ask them the heart, the difficult questions, ask them about how their returns are, ask them for some performer information.
Steven:
Don’t be afraid to challenge them on some of the questions that are super important in terms of running a business and how many syndications have they done? My initial ones were people that were all brand new. Fortunately they all worked out. They all for the most part worked out, but I would probably not invest with somebody that, that didn’t have a lot of experience or who wasn’t partnered with somebody who had some experience. Cause it’s kind of the, the chicken or the egg you do need, like when you graduate college and you’re trying to get your first job, but you have no experience and you’re getting beaten out by all those people that have experience, but sometimes you have to find and build that relationship with that individual. And so really understand that that, that particular person then on the general partner side like we just mentioned, just choose your partner wisely, do the due diligence’s on it.
Steven:
It, you know, I know things are moving so quickly. Hey, we need the paperwork signed by tomorrow. If it really does then take the time and say, Hey, one more day probably will not hurt us. And if they don’t wanna partner with you, maybe you take a step, a side step and look for someone else. But the key thing is you do have to execute eventually. So you can sit on the sidelines and analysis analysis, I call it and never kind of lean in that, that won’t get you anywhere, but do your, the best due diligence you can. And then once, once you’ve done that lean in and this business and ecosystem is, is a wonderful place to be
Charles:
Awesome. Jenny, what would you say to that? I mean, what kind mistakes do you see at real estate investors make and you’re in a different side of the business. So you’re probably cleaning up a lot of mistakes when you’re taking over properties or changing management and you know, on that side of it.
Jenny:
Yeah. So I can hit it on both sides as well. So an LP similar to what Steve mentioned, but on the flip side also, you know, I meet a lot of investors who I’ve talked to 2, 3, 4 times and they’ve still yet to do their first investment. So again, whole agree with that analysis paralysis yesterday was the best time to invest, you know, today is the next best time. So don’t delay because we all know how the stock market is performing right these days. From a GP perspective, I would say common mistakes investors are making right now. They’re not, again, COVID just hit everybody by surprise. So there’s a lot of things we couldn’t control or didn’t predict now that we’re in it a couple years, we have to make sure if you’re looking at underwriting to expect certain expenses to go up dramatically, things like insurance taxes, materials, labor payroll is going up. So as investors start to look at deals and underwrite, we have to make sure they’re, you know, raising expenses to certain degrees to account for all of these unexpected increases.
Charles:
Yeah, I think that’s very good information. I think insurance is something that people are not, they’re not writing that at increasing at what it should be. And I, you know, if I’ve seen this insurance rates going these to be, you know, three, 4% now it’s five and seven I’ve other partners telling me it’s, you know, so depending on where you are in the country, but the cost of materials and replacement costs has just you know, the cost to replace. I properties is just very expensive now compared to what it was just a couple years ago. So just following up with you, Jenny, one last question. What do you think are the main factors that have contributed to your success? It could be personally and or professionally.
Jenny:
Gosh, I would say if I look at the people who I admire to and who I believe are successful in this industry and fortunately, both Steve and I have this skill set is just sales and relationship building. So we’ve learned a lot of things in our corporate experience to be able to influence people our investors, our partners to sell. And this is a people first industry. So you’re always building relationships. People have to like you, they have to trust you. So I think the people who are most successful have been able to sharpen that, sharpen that skill and really Excel in that area.
Charles:
That’s great. That’s fantastic. Relationships are very important in this business. Steven, what would you say to that as main factors that have contributed to your success over the years? Personally or professionally?
Steven:
Yeah, I think one thing that I’ve always had through my corporate career and Al also through real estate is a strong mentor and somebody that is mentoring me across the board. So I was fortunate in corporate America where they I was considered a high performer. And so what they do with high performers, they give them mentors and those mentors meet with you every week or every, every quarter. And they go, they review things. They, they ask you to re read a book and basically do a book report review on that particular book. And they give you some of the guidance to help you climb that corporate ladder, same thing with real estate. If you ask me five years ago, I was only in single family homes. I went, I soughted out a mentor, hired a mentor that mentor helped, helped me give me all of the basic operation and skillset to do what we are doing today, Jenny and myself and all the vertical street ventures.
Steven:
And so that’s a crucial piece of growing is having somebody that knows more about you. I think one of the things too, I, I always say Tony Robbins has a quote out there and it says success leaves clues. And so why should we go out and try to recreate the wheel? We probably don’t need to do that. Somebody else has done that. Why not go and partner with that individual? And that’s how this great ecosystem we all kind of work together. It’s one of the unique ones where you know, some of my friends say, why would you want to be helping and teaching other people how to do this? Aren’t there gonna be your competitors? And I said, well, there’s, there’s so many apartment complexes out there that I can’t own all of them. And so why not teach others similar to the processes that we put in place to build our company. We can do the same for others as well.
Charles:
Awesome. Steven, that’s great. So Jenny, how can our listeners learn more about you and vertical street ventures?
Jenny:
Absolutely. You can visit us at verticalstreetventures.com and our contact information is on there. If you’d like to connect. We are also hosting our first ever national investor conference. This June 4th and fifth in Scottsdale, Arizona. Tickets are selling fast. We are gonna be teaching everything that’s alts. Again. We wish somebody taught us the sooner and day two. We have a bus tour where we’ll take you around our properties, so you can see the business plan come to life. So you can visit VSV con.com for tickets and more information there as well.
Charles:
All right, sounds great. Well, thank you so much for coming on today. Looking forward to connecting with you in the near future and have a great rest of your week.
Jenny:
Thanks for having us Charles, Charles,
Charles:
Talk to you soon.
Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.
Announcer:
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Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar, LLC, exclusively.
Jenny and Steven are both managing partners at Vertical Street Ventures; a real estate syndication company.
Previously, Jenny was an executive at Procter & Gamble, managing a multi-billion dollar portfolio in Market Strategy and Planning. Jenny now focuses on asset management.
Steven was previously an executive at MetLife and now has grown his multifamily portfolio to over 2,500 units. He focuses on acquisitions, sourcing capital, and building key strategic partnerships.
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