The School Of Cash Flow

Are you looking for the safest place to put your money into? In this episode, The School of Cashflow Podcast welcomes Nick Stageberg, owner of Black Swan, who shares his insights on reaching financial freedom through dancing with your fear. Black Swan has delivered exceptional returns to hundreds of passive investors through their unique investor-focused private equity funds. Nick Stageberg and Dale Corpuz talk about how Black Swan gives back the profits and how they get those profits. Tune the volume up and dance your way through financial freedom with this episode. You can also connect with Nick and his wife, Elaine Stageberg, at meetblackswan.com

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Black Swan: The Dance Towards Financial Freedom With Nick Stageberg

One of my colleagues introduced me to my guest. I’m excited to bring him on this episode. He wears many hats as a real estate investor. He also owns a real estate investing company and a property management company. He’s able to juggle all that with his kids and his wife. His name is Nick Stageberg. Nick and his wife, Dr. Elaine Stageberg are parents of four children and the owners of Black Swan Real Estate Investment and Property Management Company. Their portfolio is now over 800 doors with more than $290 million in assets under management.  

The cool thing about Nick and Elaine is that they reached financial freedom in their 30s and they help others to do the same. Black Swan has delivered some exceptional returns to its investors with unique investor-focused private equity funds with no fees whatsoever. They do a 100% return of capital before any splits occur. Nick and Elaine are values-driven and socially conscious investors. They donate at least 5% of their profits to charity. That’s awesome. Nick, without further ado, let’s jump right into this. How are you?

I’m doing fantastic. How about you, Dale?

I’m excellent. For my audience that doesn’t know you, whereabouts in the world are you located?

We’re in Rochester, Minnesota, so southeastern Minnesota. It’s about an hour from Minneapolis.

I’m wearing a jacket right now in California because it’s on the colder side. I’m curious, how is the weather out over there?

It’s been snowing for about the last 24 hours straight. That’s how the climate is here. Here’s the funny thing. Minnesotans spend more hours per year outdoors than any other state except Colorado. You get good gloves and boots. You can go out skiing and snowboarding. People are very outdoorsy here.

Financial Freedom: Minnesotans spend more hours per year outdoors than any other state except Colorado.

That’s cool. Is skiing or snowboarding pretty big out there?

Yes. There’s a very nice ski resort ten minutes from my house. There are lots of small niche ski resorts. There are chairlifts and a couple of mountains. Everyone gets out and about. Every weekend there’s something downtown. After Thanksgiving at one of my apartment buildings, there’s a local tradition. It’s the former City Hall of Rochester and Santa Claus gets stuck on the roof. The fire department gets called. They have to get Santa Claus down with the ladder truck. There’s a little lighting of the Christmas tree for the city.

There are all sorts of winter vendors. You get coffee and hot cocoa. They’ll do ice skating downtown. That’s a typical Minnesotan weekend. There’s always something going on every weekend. Minneapolis-Saint Paul does an ice palace. They’ll go make a castle out of ice blocks and you go hang out and do snowball fights and stuff like that. It’s not for everyone.

That’s awesome. I realized we’re both in the same mastermind, GoBundance. How long have you been in that group? What has it done for you?

August 2022 was when I joined GoBundance. I’m in Tony Robbins Platinum right now. I do performance coaching with a couple of different specialized coaches in my industry. Probably about 25% of my time is doing mindset work, coaching and stuff. I’ve enjoyed GoBundance a lot. Tony Robbins for example is a pure mindset, and then I’d say GoBundance has a mindset component, but it’s a group of competent entrepreneurs and operators. Everyone there is doing something. You have a lot you can collaborate on. Having trouble hiring and retaining employees or having trouble trimming expenses or, “I need a software system for my property management company or my construction management company.”

In one of the chat rooms I’m in, we were talking about putting solar panels on top of our apartment buildings. There’s one guy who owns a solar company and another guy who can tell you how to buy all those solar panels wholesale. It’s a fascinating group. It’s very well connected. It seems like someone has a connection to just about everything in that group.

It’s a good sounding board to throw out ideas and get questions too. It’s a good social network. I’ve made so many friends that I’ve turned into business partners as well. It’s been pretty amazing. I joined in December 2020, so I’m approaching my two-year mark already. It’s been great.

We have our whole private equity fund to a certain extent because of GoBundance. One of my mentors is Christian Mack. He taught us everything we needed to know. He took me by the shoulders and said, “How are you doing all this in individual vehicles?” We had 25 deals under contract when I first met Christian all in different vehicles. He’s like, “You need to make a private equity fund and put it into buckets.” Daniel Casey leads the multifamily micro tribe in GoBundance. He’s one of our business partners in the most recent fund that we have. There are lots of very tangible outcomes as a result of my participation at GoBundance.

Christian Mack comes from the tech space because he was promoting the Lotus Fund.

We are doing a special-purpose vehicle for him, so we have a tech fund. That’s a special-purpose vehicle raising money for Lotus. I did fifteen years in enterprise software before doing real estate. Christian and I had a good connection from that. We shared our background there. There are a lot of real estate people in GoBundance, but there are a lot of different diverse backgrounds. It’s a good network to be able to draw from.

Financial Freedom: There are many real estate people in GoBundance, but there are a lot of different diverse backgrounds that it’s a good network to draw from.

There are a lot of people that do a lot of different businesses. Whether they have their other vertical type of business and whatnot, a lot of them are investing in real estate, which is why I created this show. Now that I know that you have a tech background, are you still connected to tech or did you fully break that off and go full-time in real estate? I want to know how that all came about like the transition.

Tech is pretty interesting. It’s a high burnout profession. People don’t go the distance in tech. It’s not how the culture works, unfortunately. I have a Bachelor’s in Computer Science and Bachelor’s in Ministry. For my first job out of college, I worked for Dell, which is a fantastic organization to work for. They walk you through your firing on your first day on the job and say, “If you can make it a year here, that’s the equivalent of a lifetime in any other employer. You work a minimum of 62.5 hours a week, 7 days a week, nights and weekends. I made it nine months, which is a long run for them. I learned a tremendous amount, but just your typical pressure cooker tech employer.

I then did a tech startup and over the course of nine years, I went from $13 million in venture capital to $100 million in private equity sales. That was an enterprise software company that did medical and banking software. I then did a startup for the Mayo Clinic. It’s a software development startup for the Mayo Clinic. It’s like how Amazon and Facebook are too big to innovate so they sponsor innovation organizations underneath their umbrella.

Mayo did the same thing and said, “We’re spending hundreds of millions a year on all these software development consultancy contracts with outside vendors. Not only does that money leave the enterprise, but that knowledge leaves the enterprise. Let’s keep that money and that knowledge in-house.” We created an organization that would then compete with outside vendors for these software development contracts and consulting engagements.

We went from a handful of people to thirteen teams of engineers that I led over the course of three years. We were doing about a third of all new development for the whole enterprise there. That would’ve been another nine-figure exit if that was its own independent concern. It’s cool getting to serve. We got to make software that saves people’s lives. I’ve got a lot of fun stories I could share about that like working on a heavy particle accelerator and echocardiogram machines, and wild stuff. That’s the only environment where you can work on that stuff. That was my whole tech journey.

Along the way on the side, I did research. Let’s say you win the lottery in tech and you have this unicorn startup or a couple of them, how do you take the proceeds from that and not end up like someone who wins the lottery and a year later, they’re bankrupt? What do you do with that? You have this big tax problem and you get this giant check.

All my research said, “Invest in real estate.” In tech, you do a proof of concept. You do a small experiment and iterate towards success. My wife and I bought a house for $35,000. It had four walls and almost a roof. We did a sweat equity remodel on it. My wife was carrying our first child as she was installing 1,000 square feet of tile in this house, which is filthy backbreaking laborious work. We put about $17,000 into it so we’re $52,000 all-in. When we were done, it appraised for $90,000 or something.

The wildest thing was we did a cash-out refi. This was before BRRRR was a word or whatever. That was the business model that we came up with on our own. I remember getting a check. We got a check for $59,000 or something for our cash-out refi. We had gotten all of our money back out plus some, and we still had this cashflowing property. I thought, “I have to figure out how to get as many of these checks as possible. This is the most magic check that I’ve ever gotten.”

A lot of people get rich in tech. I did okay, but the vast majority of people don’t get that big pot of gold at the end of the rainbow. At the end of the day, I had to make my own way. I ended up making a lot of other people very wealthy in tech and not so much myself. I ended up making way more money in real estate than I made in tech. That year, we bought one house. The next year we bought two houses. The next year we bought four houses. After a while, we had enough that we were financially free and could step back from our career in tech.

I still love being in touch with tech. I love doing this private equity fund with Christian Mack doing enterprise software. It’s fun to stay in the business and stay in touch with people and stuff, but we do full-time real estate. That’s when we started serving others like passive investors. It’s funny because the last day of my day job happened to be the day before a Tony Robbins event.

I’d never heard of Tony Robbins before. My wife got a free ticket from someone to one of his events, Unleash the Power Within. That was in July 2019. Tony has a way of getting you all jacked up and setting crazy amazing goals and stuff. I was retired for about 48 hours. That’s when the current iteration of our business was born. There’s a whole way along people would say, “We like what you’re doing.” They’d see us swinging a hammer on a sweat equity rehab hours after our day job.

We had to make a metaphor to turn people away. We’d say, “We’ve got a bunch of kids.” I’ve got four kids. I love raising our kids, but we don’t want to open a daycare. Tony pointed out the selfishness of that. He says, “How can you give, serve, and create the biggest impact possible?” We said, “We want to create this financial freedom thing that we’ve created for ourselves for as many other people as we can. We want to help as many people along the way as we can.”

In our private equity fund, there are no fees whatsoever which are unheard of in the industry. We don’t get any profit whatsoever until our investors have gotten full return capital. Five percent of our profit from the fund goes to our staff and a profit share, and 5% of our profit from the fund goes to charity. We just built a school here. We found an abandoned 40,000-square-foot office building.

Over the summer, we did sweat equity rehab, tore up carpets, and painted walls with teachers and staff members and stuff. Now, there’s this 40,000-square-foot school that exists that didn’t exist before with some of those charitable dollars. Answering the question, “How can we create the craziest impact or huge impact possible?” That’s the thing that gets me up in the morning and gets me excited to go buy something new to have another call with an investor to serve in any way I can.

You’re coming from a place of contribution. To your point, I interview a lot of operators, syndicators, and whatnot, and your model is very unique. When I read the fact that you don’t charge any fees, I wanted to even talk to you about that. My understanding then is there are no preferred returns and no waterfalls. It’s a simple equity split after 100% of the capital is returned. Does that sound about right? It sounds too simple.

I have a fifteen-minute conversation with someone and they’re trying to find the catch. That is a problem because people think it’s too good to be true. I’m being very transparent with you, we will eventually make a lot of money at it when our equity split kicks in. Amazon did pretty well running a break-even for ten years. In the tech industry, it’s very normal to have this type of business model.

It’s only in the real estate industry that everyone gets their payment on the front end of the deal. It’s crazy. You invest in syndication and that general partner might have this 3% or 4% acquisition fee on the front end of the deal. Before anyone is making any money, they’re getting probably the largest chunk of compensation they’ll get in the entire deal. That’s a pretty big misalignment of interest.

Financial Freedom: It’s only in the real estate industry that everyone gets their payment on the front end of the deal.

Our model is called the Lemonade Stand model like if you open a lemonade stand with your kid, it might be this exact model, but there’s no ketchup pref, waterfall, escalating splits or anything. You get all the profit from the deal until you get your money back, and then it’s a 50-50 split after that. That’s all there is to it. We think it’s a very favorable model for investors.

Maybe it is too good to be true. Selfishly, we’ve built a portfolio of over 1/3 of a billion in assets under management. We will make a lot of money from that at some point in the future when all that capital has been returned to the investors. Our future selves will thank our present selves for that. There’s a lot of good we can do along the way. We like the model. Are you familiar with the Warren Buffett pledge?

I am not. Teach it to me.

Warren Buffett created the pledge, which is if you’re a billionaire, you sign this pledge that says, “I will give it all away. This money is not my own. This is a gift from God or the universe, whatever you believe in. I have to pay it forward. I have a moral duty to give it away.” Warren made it not okay to be a billionaire that keeps it all. He changed capitalism permanently and bent the moral arc of capitalism towards justice in a very significant way. If I get my goal, we will do the exact same thing. Five percent of our profit from the fund goes to charity. What if every single private equity fund had to have a 5% giveback?

What if the first question that every LP asked a syndication fund manager was, “What’s your give back? What good have you done? What difference have you made? Why should I give you my money? Who cares about the return? What impact is there?” That should be the first question on everyone’s mind. Imagine what good could be done.

I’m not saying what that money needs to go to do. It’s whatever has had the biggest impact on their life or wherever they feel like they can make the biggest impact. The crazy thing is the LPs and the GPs love it. Everyone loves it. It just needs to be made normal. A 5% difference is not going to have a material impact on returns, but imagine if Blackstone or everybody was giving away 5%.

It’s a small enough number that’s not going to change anything, but big enough that if trillions of dollars are running through that 5%, we could rebuild every school in the United States, not just one 40,000-square-foot office building. We could be renovating a kitchen for a homeless shelter in our community. We could renovate every homeless shelter in the whole United States. Imagine the good that could be done if this tiny little change happened that it was not okay to put all this money in a big pile, and none of it gets given back.

I hope the hair on your neck stands up a little bit when you hear this. The Buffett pledge is a small idea. Who cares what happens to your money if you’re dead? It’s never yours to begin with, so you have to give it away. If you’re out there raising billions of dollars in capital, you have a more obligation to give a small portion of it away.

I love that. I don’t hear anybody talking this way. It makes you different. I love the fact that you’re helping people by teaching others to fish. You’re also bettering the community overall and leading your own legacy. Speaking of the charities, do you have certain charities that you continuously donate to for that 5% that you were mentioning?

Again, iteration and proof of concept, we’re figuring that part out. We have some ideas about what we’re going to do with this money. We’ve got a little bit of it so far. For example, we have a course. It’s a pay-what-you-can model, and 100% of the revenue goes to charity. We’ve raised a healthy six figures from that. A good chunk of that is what went towards making the school a reality. That has been so cool to be actively involved in that project. Writing a check is not a very compelling proposition for most people, especially if you’re an entrepreneur, a visionary or a creator. You want to make a thing happen. It turns out that running an operational charity or foundation is complicated from a tax compliance perspective.

If you’re a charity that just gives the money away, that’s a lot simpler. That’s the type of charity we have right now, but we do get very involved in giving that money away. You get our help along with the money, but we can’t be the ones that spend the money to make a thing happen. With the school, we built a playground. That was the most capital-intensive thing because we got sweat equity for flooring, paint, and stuff. We brought in the professionals to build a playground for your kids who are going to be climbing all over that. We should probably do that one right.

We’ve experimented with probably about 10 or 15 different causes now. We’re going to give away a little bit more. I read the book Titan, the book on Rockefeller. Rockefeller invented modern philanthropy. Giving away money is hard. As an entrepreneur, I want to see every penny used to its maximum potential, but a lot of charities aren’t run very efficiently. When you give that money away, you have no ability to necessarily influence the outcome directly. You get what you get.

I don’t have a magic answer to that question yet, but we specifically do love supporting playgrounds, housing opportunities, especially for women and children, and entrepreneurship education. Those are the three big causes that we like to support from a high-level perspective that is enshrined in our family foundation.

Another thing that jumps out at me that I wanted to ask you about is you’re doing this with your wife together and growing this business together. Was this the very first business that you guys worked together on or you guys have been in work together as business partners before as well? It doesn’t always work out. In a lot of real estate teams, husband and wife end up getting a divorce. I’m curious from a work standpoint because that dynamic has its own challenges, but you’re able to make it work. I’m trying to understand if you even had a working relationship with your wife like that even before you started Black Swan.

That is the number one question that my wife and I get when we get on a phone call with someone.

It’s rare to see it in this space.

We did a talk for GoBundance Ascend. If anyone has access to that content, they’re welcome to check it out where my wife and I got on a call and said, “Who here have challenges working with their spouse or being in close proximity to their spouse at all times?” A lot of people are doing work from home where you’re both working. You’re not working together, but you’re working together. When people talk to us on the phone, that’s the doorknob question. That was the real burning question all along, “Do you love each other that much or how do you not murder each other being together 24 hours a day?”

That is my question. How do you not kill each other? I’m asking for a friend.

You never have a mediocre day. Most people might spend 2 or 3 times more hours in the office with their coworkers than they do with their spouses. It’s sad, but that’s the fact of the matter. You might get home at 6:00 and go to bed at 9:00, so you only spent 3 hours with your spouse. You spent nine hours at the office or whatever. You need to lean into it because you’re either going to have a good day or you’re going to have a bad day, but you get to choose.

We talked about a few different tools on our call with Ascend. One of my favorite concepts is the concept of a three-dimensional or level-three relationship. There are three levels of relationship. In a level-one relationship, it’s egocentric. It’s all about me and how can my needs be met. There are lots of great times to have a level-one relationship like if you’re at a bank interacting with a bank teller. This interaction is about me and that’s socially appropriate.

There’s a level-two relationship, which is a quid pro quo, “If you scratch my back, I’ll scratch yours.” It’s all about equality. Particularly, in modern America, this is considered the paragon of relationship, but that’s probably shortsighted because there’s a whole other level out there if you want to discover it, a level-three or three-dimensional relationship. When you’re in a level three relationship, your partner’s needs are your needs. You will not stop or give up until those needs are met. Their emotions are your emotions. You take full responsibility for the feelings of your partner.

In eastern culture, that is a pretty normal concept. In America, if I hurt your feelings, that’s your fault that you have thin skin. In eastern culture, if I hurt your feelings, that’s my fault that I failed to take into account your feelings. I lose face that I offended you. Let me just ask, it’s hypothetical, you’re driving down the highway. As you’re pulling out of the garage, your wife who’s now seated next to you said, “One of the kids left their bike out. Go put it in the garage.” “It’s going to be fine. We’re late. We need to get going.”

Now, 5, 10, or 15 minutes have passed and your wife is silently fuming that you didn’t listen to her and that you didn’t put that damn bike in the garage. She’s checking the weather report. She’s looking at the forecast. She’s trying to think of the most deliberate but passive-aggressive way this can come up again. “We need to go home. We left the stove on.” She wants to put that bike in the garage. How happy can you truly be if your partner is furious? At that moment, you might be feeling almost a little smug like, “I can’t believe how petty they are, that they’re upset about this silly thing that I disagree with.” How happy can you be if they’re not happy?

I wouldn’t be happy because I could see a fight brewing. I’d be uneasy at that point.

The reality of the situation is that her feelings are your feelings. Her needs are your needs. You hold yourself back. You hold your happiness back by pretending that her needs are her needs and your needs are your needs. The way our creators wired us, it’s the wildest thing, but when you will go to the ends of the earth to meet someone else’s needs, your needs will always be met. Life supports that which supports life.

An elated partner who feels like their every possible need has been delighted is a delightful person to be in the presence of. They are going to make sure that you too are delighted. They will not give up until all of your needs have been met. You can’t fake it. You have to care. You can’t be too overt or too heavy-handed about it. When your partner says, “Could you put the bike in the garage before we leave?” Put the car in park, “Honey, I want to go right now because I feel like we’re late, but I know this is important to you. Your needs are my needs. I’m going to put the bike in the garage.”

Here’s the thing, you can’t be a jerk and be mad about it. You can’t be trying to win points. That’s back in the level-two land or equality. “Just because you want this, I want this. Is there anything else that I can do right now while I’m up? Can I get you a drink? Clearly, you don’t care about us being a little bit late. This is more important to you, so this is more important to me.”

You can’t fake it. If you try to fake it, the exact opposite of that desired outcome is going to occur. Living in a level-three relationship, there are a lot of things I could speak to. I have a Bachelor’s Degree in Ministry, so I talk to people a lot about this stuff over the years. It’s something I enjoy connecting with people on. I don’t talk about the weather sports. I say, “How’s your relationship with your kids? How are things going with your spouse or your parents?”

The relationship that gives you the most juice is, “How is it going,” because nothing else matters. This is the thing that trumps everything else. If you’re crushing it in business, if your health is an 11 out of 10, if you ran a triathlon and won the lottery, but your marriage is in the toilet, all that stuff isn’t going to feel good. The only thing that’s going to fill your thoughts is your relationship with your partner and vice versa.

The whole world could be burning down, but if you have the undying love and devotion, worship, and support of your partner, you can walk through fire for them with a smile on your face. It’s the thing that gives you the most juice. I love working with my partner. It took years for me to love it. It’s something I had to work at, but now it’s something that I wouldn’t have any other way. I’m glad that my path was guided to this course.

Can I ask if you guys have a complementary skill set to be able to divvy up the tasks of your businesses?

I would say so. My wife is a lion. She is a very strong and brilliant person. She is a physician trained at the Mayo Clinic, in parallel to my tech career. It’s almost silly. It’s very unexpected that we ended up in real estate. It’s the thing that makes the most money. It has the largest number of zeros behind it that most people interface with on a day-to-day basis. I find real estate the most accessible path to wealth for 99% of people. Most people can’t be the next Mark Zuckerberg or whatever, but most people can invest in real estate and can make way above-average returns and reach financial freedom that way.

Financial Freedom: Most people can’t be the next Mark Zuckerberg, but most people can invest in real estate, make way above-average returns, and reach financial freedom that way.

My wife is a psychiatrist and I have a Ministry degree. She’s a much more well-trained version of a somewhat similar skillset there, but she’s certainly much more sensing, thinking, and the typical masculine and feminine dichotomies there. She’s far more risk-averse and I’m much more risk-friendly. For years, I fought my wife. I thought she was trying to shut me down and resist the place I wanted to go, but thank God she’s always been my chief risk officer and had veto power over our real estate deals because I probably would’ve bankrupted us about ten times over by now if she wasn’t there trying to protect me.

It’s a question of perspective. That’s probably the second most common question that I get when I go in with someone, “I want to invest in real estate, but my partner doesn’t want to.” That was the call I did. The person asked, “You’re not really that in love with your spouse, right? How do I twist my partner’s arm to get them to go along with investing in real estate?” It comes down to meeting needs.

What’s the difference between financial freedom and financial security? Most people who are dominant masculine energy will articulate that a financial dream is a financial freedom. Most people who are dominant feminine energy will articulate it as financial security. I would argue they’re the exact same thing. I’ll get on a call with a husband-wife partner and they’ll say, “I want freedom.” “I want security.” “Are you sure you don’t want the exact same thing?”

If you try to communicate with your partner on your own terms instead of theirs, you’re going to talk past each other all day. When you see the reality that you want the same thing, all of a sudden, there’s no resistance and everything is easy. It’s effortless. It goes from this push or this friction to a pull where we’re guided in the same direction. “You want security, I want security too. I want so much security that we never have to worry or work ever again, and that our family is set for life. Is that what you want too?”

When you say, “No, you’re cramping my style. I want to let it all ride on XYZ crypto,” that’s probably not going to play on their desire for security too. It’s probably for the best that they’re shutting you down. That’s the brutal truth. Your partner, 99% of the time, there are righteous drives behind what they want when they disagree with your path. There is a third alternative that will make both of you happy, and it’s probably a better course than either of the options you perceive.

I thought it was interesting when you mentioned that very first property, but you guys were both working it together. She was installing flooring herself for that matter. I’m making an observation. I don’t see couples typically jump into real estate together and get both of their hands dirty on their first project. I usually see a lot of times the guy that’s doing it and then later on, if their spouse sees that it made money, they’ll bring the spouse on, but she was with you from the very first property sounds like it.

Think of a way to align your incentives. My wife is very fearful about this first investment and that we would lose a lot of money. Tony Robbins says, “Don’t let your fear hold you back. Let your fear drive you. Let it propel you. Learn to dance with your fear.” The greatest passion in life comes in the dance between what we want most and what we fear most. If you learn to live on that edge and dance with your fear, you can do crazy stuff.

It would be easy for me to say, “Babe, you stay home. I’m going to throw this project up on my shoulders and haul it across the finish line on my own. I’m going to show you, and then one of us is going to have a big chip on our shoulder for the rest of our marriage after this.” It’s not a very enlightened approach, and yet that’s what most people do.

I said, “I am so grateful that you want to support my vision. Are there any ways you see here where we can optimize the risk to make this as safe as possible or to minimize the chance that we’re going to lose money?” Let me be clear, we did not have $52,000 when we did that first deal. We had $35,000. That’s what we spent on the house. We’re maxing out our credit cards, buying materials and stuff. She was humoring me here with this project. Thank God we got our cash-out refi.

We had this thing we call the February challenge because we straight up ran out of money. We bought the property in November, and then when we got to February, we maxed out every credit card. We didn’t have money for food. We were like, “We’re going to eat all the food that’s in the house. We’re not going to do any discretionary spending.” Every February since then, we’ve had our February challenge of how do we not buy more food, not take vacations, and live on what we have. It’s like our Passover or something like that.

In any case, I tried to draw my wife in and said, “How would you like to help make sure that this is the safest possible investment? Do you want to come help work on it? Would that put you at ease to be involved in it to see the progress day-to-day? She’s like, “I guess, I would. Do I need to work or could I just hang out with you?” I’m like, “You can hang out with me if you want,” because she likes hanging out with me. I don’t know why. She loves me which I appreciate. I knew she would appreciate being included and invited. Even if she didn’t come, just being invited would make all the difference to her.

She is a warrior and a lion and there’s no way she’s going to watch me work. She was there laying tile with me, painting, and doing the most grueling possible work you could imagine. We had about 100 trips to Home Depot on that deal. How much better does that story feel than if it was just me doing it on my own to prove to her that we could make it? It would be a token victory. There would be ash in my mouth.

We got to do it together and share some crazy stories. There was no working furnace, so we had just halogen work lights. It was 30 degrees outside. It was so cold that we couldn’t get the thin set to mix. We were trying to heat it up with these work lights. It’s these funny stories from these challenging times because we did it together. We leaned into each other and met each other’s needs. Thank God we did.

Now, I come home and I’m like, “Babe, we got a $27 million deal under a contract that we’re working on.” She gets to be excited about that and not fearful because she’s been with me every step of the way. In fact, if I had not made sure all of her needs were met or if I said, “This real estate thing is my thing. Medicine is your thing, Stay out of my thing,” that would’ve held us back in our growth so much because I’d have to come home and explain to her why it’s not crazy for us to do a $27 million deal. Since she’s in the business every day, she sees the amazing team we’re building and the amazing investors we serve and everything, and then it works much better.

In fact, Elaine does pretty much all of our fundraisings. She’s an investor and a physician. She has a ton of thought leadership in that space. Many of our investors are physicians or other medical professionals, so the joke is she raises all the money and I spend all the money. It’s a ton of fun. She’s on my board of directors. She’s like, “What the hell are you doing with my investor’s money?” We have a lot of fun with it. If we didn’t, it would be hard for us to grow the way we’ve grown.

I got it. Thank you for sharing all of that. I was very curious and it sounds like a lot of people are curious too, since a lot of people are asking you about that dynamic. I wanted to go back. I wanted to ask more so about your company. What is the main focus? Is it detached, single-family, multifamily or something else?

We do all residential real estate. We do rehab, so buying existing distressed properties and doing value add, renovating them, improving the management, increasing revenue, and reducing expenses, and also ground-up constructions. We have a $45 million ground-up construction project right now building a subdivision of build-to-rent townhomes, but mostly renovating existing stuff. We’ve got a little over $300 million in assets under management right now. About 1/3 of a billion. It’s all single-family, multifamily or residential real estate of one variety or another.

We’ve looked at other asset classes, but as a technologist, I see residential real estate as being some of the most disruption-resistant. I wouldn’t say real estate, it’s across any asset class. The safest place you can put money in the entire world economy is US residential real estate. I never would’ve predicted COVID, for example, as a disruptive force, but it accelerated a bunch of trends that were already underway. Office and retail are on the way out. A lot of commercial asset classes are struggling there.

Financial Freedom: The safest place you can put money in the entire world economy is US residential real estate.

Residential real estate killed it. We’ve had a very lucrative time in our investing career here as a result of that. Not that we ever predicted a pandemic, we just looked at all the forces that work in the marketplace and saw that it’s more and more expensive to build. Replacement costs are constantly going up in residential real estate. It’s harder and harder to even get zoning approvals, permits, and stuff for new residential units everywhere in the country. I don’t see that trend changing anytime soon.

Our population is growing throughout the country. It’s a supply-demand thing. The value of that real estate in terms of rental rate and also in terms of its resale value is going to keep increasing. I don’t have a single dial on my dashboard that says otherwise. I don’t see a wave of foreclosures coming in the single-family world. Prices have gone down maybe 15% or 20% from their absolute peak in multifamily, but that absolute peak was also pretty silly. Their values are probably flat compared to where they were a year ago. This is about as worse as it gets in this industry.

We’re all in on residential. We’ve had a lot of success with that. We do a lot of deep-value add projects that other people won’t touch. We talked about ways that we give back with the profits, but how do we get those profits? We treat our tenants with dignity and respect. We think the tenant is the real client here, not the investor. We’re very self-aware and conscientious that we are at the bleeding edge of gentrification. We better be making the world a better place to live in the most tangible sense of the word if we are potentially dislocating or displacing people.

An example that might tell you everything you need to know about us and our business model. We bought a 100-year-old apartment building in this historic neighborhood. It was a very prestigious neighborhood. There are $1 million single-family homes right next door. We bought this apartment building for $64,000 a door. It’s an extraordinarily low price because this 100-year-old apartment building had never been renovated in that entire time period.

We bought the building. In one of the units, there were drugs and prostitution going on. They hadn’t paid rent in two years. The previous management group said, “There’s the COVID Eviction Moratorium, so we can’t evict them.” We said, “We’re going to have a conversation with her.” The day after we closed, we did a safety inspection of the unit and walked through the unit. We had to leave and come back with a bucket because we filled up a gallon bucket with drug paraphernalia from this unit. We’d never been in the unit prior to closing.

We met with this woman and said, “We’re moving some safety hazards from the unit. If you do want your personal property back, let us know. We’re legally obligated to return it to you. We’ll make sure the police are there when we remand custody of your personal property so that that happens appropriately. By the way, we’re going to be back tomorrow, and the next day. We’re going to be here every day until you’re able to find help. We suspect that you’re a person who could use some help. We support some organizations that we think could potentially help you. We have no judgment of you. We love you. We want to serve you. We are sorry that your previous landlord let you down and allowed you to hurt yourself in this way. This does not happen on our watch. Do you understand?”

We only had to visit her two more times, and then she sought help and she’s in drug rehab now. We took care of her and served her as best we could through that process. We removed all the safety hazards from that unit and renovated it. In-place rents were $650 a month. It’s now $1,200 a month. We bought that building for less than $70,000 a door. It’s probably worth $140,000 a door now. We took this awful dumpy old building and made it this classy historic building.

We’re rediscovering, refinishing, hardwood floors, patching in new floors to match up the old floors, and totally renovating the kitchens with quartz counters and stainless-steel appliances. We had to rewire and re-plumb the whole building. When we got done, we had this treasure or this building that you couldn’t build it now for three times what we have in it because it’s got all stone veneers. It’s a handsome building.

We got to impact people’s lives for the better and we got to create a financial outcome that is unrivaled. Most syndicators repaint countertops and cabinets, and they have to sell them after a year or two before the rehab wears out. This building’s good for the next 50 years. It’s set. We didn’t just increase the value of the building by 10% or whatever and make money on the margin. We doubled the value of this building.

This is a historic building you said too. You kept the architectural integrity of it all too. You brought it back to life. This sounds amazing.

Every deal is different for us, but that’s an example of a deal that we’ve done. That’s the asset class we’re in. It’s residential real estate, but it’s people, relationships and hopefully, making the world a better place to live in the most tangible sense of the phrase.

You’re very aware and making sure that in everything that you deal with, you’re looking at the decision that you make, how it affects you, and how it’ll make the world and community a better place. I could see that in the way that you talk. I applaud you for that. In terms of geographic location, are all of your real estate projects around your area, outside your area, or a mixture of both?

It’s mostly in Rochester, Minnesota. We’ve got a couple of deals in Tacoma, Washington which by coincidence happens to be on the same latitude line as Rochester, Minnesota. It’s just on the other side of the country. We’ve got a couple of incredible deals in flight there. We love the transition story that’s at work in Tacoma, Washington like our most recent deal there, Tanara Villa Apartments. It’s your typical 1970s workforce housing, but it’s 1.6 miles from Point Ruston. Point Ruston used to be the largest copper smelting facility in the world for half a century, and then it became an EPA Superfund site. You can imagine the devastating environmental contamination involved with such a site.

It took a very long time to clean up. All of a sudden, there’s this 100-acre, 1-mile oceanfront site right on the sound. It became this multi-billion-dollar master plan community. Within a period of maybe fifteen years, it went from a toxic waste dump to a multi-billion-dollar master plan community. Think about the impact that has on the surrounding community. That’s what’s going on throughout all of Tacoma right now as the path of progress moves south from Seattle.

We love the Tacoma market. We’ve got a couple of successful deals there. Our property that we bought that’s right next to Point Ruston was going to go from probably $20 million to $24 million to $36 million or $40 million in asset value in a couple of years on that particular project. There are not a lot of places in the country where you can have that delta in value. There’s such an incredible transition story that’s happening in Tacoma right now.

That sounds awesome. I have some final questions for you. What are you excited about in your business right now?

Hiring people and growing. We have 27 full-time employees right now. At one point, I was managing 75 people or something in my most recent career in tech. I’m accustomed to leading a lot of people. In real estate, people sometimes pride themselves on not having any employees and that’s like a badge of honor, which is a little silly to me.

Mark Zuckerberg doesn’t pride himself on not having responsibilities. We have a team and we’re responsible to them. We’re growing the team and it’s our biggest asset by far. We’re in the real estate business, but it’s about people, not property. We’re hiring and training an incredible team. Very few of our staff members have any prior real estate experience. One of them is a former military policeman.

Financial Freedom: We have a team, and we’re responsible to them for growing the team because it’s our biggest asset. We’re in the real estate business, but it’s about people, not property.

Another one would fix troubles at Marriott, so she’d travel around the country and even the world. If a Marriott was struggling, she would come in and fix it. There are lots of skillsets that apply very directly to our business model of turning around department buildings, but with a radically higher level of customer service or a hospitality level of customer service. Whereas sometimes there tends to be a low level of customer service expectation in the multifamily industry.

We’re bringing together a diverse group of people to serve our tenants and investors. In accounting roles, we’ve found incredibly exceptional people. I’m a big people development person. We try to take our people to Tony Robbins’ content and practice mindset. My only key performance indicator in the company is once per week, everyone in the company is to answer on a scale of 1 to 10, how much energy they have, how happy are they, and how much value they feel in their work in the company. That’s my only metric on the whole board.

Every week we measure vacancies, maintenance tickets, and all these different key performance indicators. My KPI is how is the team doing. If the team is doing great and every other metric on the board is in the toilet, things are going to turn around. If everything else looks great and our team is in the toilet, we’ve got some rough times ahead. That’s the thing I’m most excited about right now in the business.

I like to ask people, “What does success mean to you?” You could answer that any way you like.

Living your life in accordance with your values is success to me. When you live a life that’s out of step with what you think is right, it’s very hard to be happy, fulfilled, and feel successful, even if you have all the money or your health is great, or your relationship is great, or whatever. If you are doing it in a way that’s out of step with your values like if you yelled at someone at the office that day, and that’s not who you are, that’s going to eat you. You’re not going to be happy until you make that right. For me, success isn’t even necessarily achieving your goal. It’s making progress toward your goals that make you happy. It’s getting there and making that progress happen in a way that’s in alignment with your values.

Any final words or any advice to leave with the audience for newer investors, or even experienced investors?

Start small, grow fast, and scale infinitely. If you’re hung up on what your next step is, think of the next most incremental step that you need to take to make progress toward your goal. That’s all you need to do. Maybe all you need to do all day is to make one phone call, or one email to a broker, lender, seller, or whatever it is. You’re going to feel good about yourself. I talk to people all the time, big and small. They get stuck in analysis paralysis or they just make excuses. They know what they have to do.

I was feeling sick. I was at a Tony Robbins event last week. Sometimes you get hungover, and you pick up a bug or something at the conference. I’m not at my best. I have a commitment to myself. I go to the gym five days a week. One of the days, all I did was I stretched for 45 minutes. I do a 45-minute workout, but that’s my commitment. I go to the gym even if I feel like crap. I could not lift a weight to save my life, but I’m there.

That’s my next step. I’m probably losing ground right now because I’m recovering from this flu or whatever, but show up for yourself and take that next step, whatever it is. I can fall asleep happy that I went to the gym. I took whatever step I had to take to make progress on my health, even if all I did was stretch for 45 minutes.

Thank you. The last question is, how can somebody get ahold of you?

Anyone out there, you’re welcome to go to MeetBlackSwan.com. There’s a link to my calendar and my wife’s calendar. If anyone wants to schedule some time with us, they’re welcome to reach out. We’ve got a course. It’s a pay-what-you-can model and 100% of the revenue goes to charity. We lovingly call that The Cookbook. We give away our whole business model. There are over 100 videos there. You can reproduce everything.

We give you the light fixture, we put in our rehab, the exact piece of flooring we use, and everything. If read The Cookbook and you think that sounds pretty good, but I want to go to the restaurant, that’s our private equity fund. We do have a fundraiser open right now. It’s got a few million left. You can check out our most recent investment opportunity there if anyone wants to get involved.

My calendar’s open if anyone wants to talk about their relationship with their wife, their kids, their health, or whatever they’re struggling with or want to connect on, I’m here for you. I probably talk to 3 or 4 people a day about whatever, and it’s the most fun thing ever. You go to MeetBlackSwan.com and everyone’s welcome to connect with me there.

Thank you very much, Nick. I appreciate your time. I will remember this episode. You’re being very socially conscious in real estate in the investing space. I’ve never talked to anybody who talks the way you do. You rehab, build houses, and whatnot, but you do the same thing for people. You rehab and you build. I’m getting all of that from our conversation. That will stick with me. I love how you’re putting a lot of educational content out there, and teaching every people how to fish for themselves. You’re doing good things. I applaud you for that.

I hope to connect with you in person over at a GoBundance event. To my audience, feel free to reach out to Nick directly, should you have any questions or if you want to connect with them. Also, thanks for checking out this episode. Remember to leave a podcast review on iTunes as it helps me attract more great guests like Nick. Until next time, live life abundantly. Thanks, Nick.

Thanks, Dale.

Important Links

• Black Swan Real Estate Investment and Property Management Company
• GoBundance
• Christian Mack
• Titan
• iTunes – The School of Cash Flow Dale Corpus