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Show Summary
In this episode of the Real Estate Pros Podcast, John Stevick shares his journey into real estate, discussing his early influences, the dynamics of the South Florida market, and the challenges of investing with family. He reflects on the importance of mentorship, the difficulties of scaling his business, and the need for diversification in investments. John also shares valuable lessons learned from a failed property flip, emphasizing the significance of due diligence in hiring contractors.
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John (00:00)
I think trying to flip my first single family home over the last several years didn’t go as planned and I didn’t make money on and provided some very powerful learning lessons for me. My bread and butter is buying and managing multifamily.and having immediate return on those investments. I took on a single family home in Lake Worth Beach, Florida. This is when interest rates were kind of creeping up, but still very, very attractive at 3 to 4%. I took on investments with my family. We did an all cash purchase.
and we started renovating and we didn’t go with the right contractor. He wasn’t able to secure permits properly. And so our flip time, our period of selling, which we thought we’d have maybe a six month hold on this property eventually turned into two and a half years. And we had a budget originally of 60 to 70,000
and after going through not two but three contractors we found that budget to creep up to closer to 300,000. Holding costs in that area aren’t cheap. We’re still facing kind of, I want to say, weekly and monthly ⁓ utility bills coming in.
because the city shut us down the first time because we didn’t have the permits properly secured, they were all over us throughout the process, which meant we had to pay for things like lawn maintenance and landscaping throughout this entire hold. And typically you wouldn’t experience expenses like that.
I think that the market also turned where you saw interest rates go from 3 4 % back in 2022 all the way up to 7 % now and we just sold it 6 months ago.
I think we took a loss of maybe 80 grand or 75 grand and I think it could have been a lot worse.
Kristen Knapp (03:04)
Welcome back to the Real Estate Pros Podcast. I’m Kristen and I’m here with John Stevick, who is an investor out of South Florida. Thank you for being here, John.John (03:10)
Thanks, Kristen.Kristen Knapp (03:11)
So let’s go back to the beginning. How did you fall in love with real estate?John (03:15)
I was always interested in real estate. I grew up in an apartment building in Berkeley, California, a couple blocks from the university. my mom traveled the world several times over before I was born and really enjoyed connecting with international scholars, professors, students. So she would rent out our neighboring apartments to people that were visiting for the semester or academic year.And it was really enjoyable just to meet people from different cultures and provide them with something that they needed while they were visiting. providing housing was something my family did throughout my childhood. We moved to a single family home when I was five years old and we continued to manage the apartment that was a block away and my mom would also rent out every bedroom in the house. So it was just something that…
was introduced to me since I was born and I kind of enjoyed that as a potential career, I enjoyed the thought of that as a potential career throughout my childhood.
Kristen Knapp (04:08)
and you’re exposed to it early. And when did you really make that leap? Like when did you start to realize this could actually be a career for you?John (04:15)
I, growing up, I came from a family that was half engineers and half more real estate investors and managers. And I thought I would be an engineer for most of my life growing up. And then applying to colleges was all engineering. And then I thought I would go into finance while I was in college. I thought that was going to be the path.And then through internships and work experience, I decided that that wasn’t something I was particularly interested in in terms of, I want to say, investment banking, mergers and acquisitions. A lot of it, you’re just sitting at a desk and you’re getting to evaluate these very large companies in emerging industries, which could be really exciting, but you don’t really feel like you’re part of it. It’s hard to put your hands on that kind of
industry. It’s hard for me to really conceptualize what I’m working on.
Throughout college, I started thinking a little bit more about real estate after a few investment banking internships. I decided, I think it’s better for me to accept the fact that I’d make less money going into real estate at the beginning. But at least I’ll be running around and interacting with people from all different industries, getting to work with design teams, getting to work with banks, getting to work with your tenants and actually interacting with the person you’re doing business with, you’re providing a service for. That excited me a lot more towards the end of college.
I took the first job in real estate I could find after college. I went back to San Francisco and worked for Duff and Phelps, which was a real estate accounting firm. I think it was general accounting, but I was on the real estate team.
I learned all I could in the first six months and then after that I decided that there was nothing more for me to learn in terms of basic real estate accounting. So I was lucky enough to be hired by a real estate developer in the Bay Area and I worked with them for about three years learning all the ins and outs of the development cycle for condo buildings. So that was great learning experience for me.
Kristen Knapp (06:57)
Yeah, it’s great that you had that mentorship right away. That’s so important in this industry.John (07:01)
Yes, that was lucky. I’m forever grateful for that. And all the people that were there, it was a small team, but everybody was really experienced. And I was very lucky to be able to support them and learn from them for several years. And after that experience, I started to invest in smaller multifamily deals. A lot of the capital was coming from family, kind of supporting me before I was able to really take on deals myself. And that was a great experience as well, just beingable to buy some multifamily in the Bay Area in 2015, 2016. And I learned a lot from those first few investments and I wanted to keep investing and was looking at opportunities all over the place.
I decided I had to move to Texas or Florida in order to keep investing by 2017-2018. So I had a few family connections in Florida. I had an uncle out in South Florida, a godmother, so I moved out there and was able to find some 8-12 unit buildings that were really great deals that I was able to get into pretty quickly once moving out there.
Kristen Knapp (08:04)
Amazing, yeah, and tell us more kind of about the South Florida or Florida market and what makes it special.John (08:09)
At the time, 2017, 2018, was such a great market because I had grown up in the Bay Area, I had worked in San Francisco over the past seven years, looking at rents, renting out what I owned out there. I think it was around $3,000 a month in Berkeley or San Francisco for a one-bedroom apartment. If you wanted to buy one of those places, you had to pay $400,000 a door. If you went over to South Florida at the time, you’re dealing with rents that aremuch lower, cut them in half at around $1,500 a month or a little bit lower. But you could buy the door, buy the apartment at $100,000 a door or $150,000 a door. So the ratios were way off. And it really benefited me at the time being in Florida and being able to buy at that time, just because the returns were 30 to 40 to 50 % greater over in Florida. Of course, throughout COVID,
it’s really leveled out and it’s actually gone the other way a little bit. In the Bay Area you can buy at a better ratio right now if you’re talking about rents to purchase ratio and that’s just because
Kristen Knapp (09:15)
same.John (09:16)
Not as many investors want to be in California. Tenants have a lot more rights, which makes it little more scary to go into ⁓ larger assets over there. And the politics have moved a lot of people with the means to other states all over, you know, Texas, Florida, the Carolinas. You have a lot more capital that wants to be deployed there relative to California at the moment.I think that if I had a lot of capital right now and was able to deploy 5 to 10 million, I would seriously look at Berkeley and Oakland and San Francisco over South Florida at the moment, just because the returns are better.
Kristen Knapp (10:27)
Yeah, that’s so interesting. That’s an interesting take on it or perspective on it. So you were doing things on your own. Did you go right into multifamily, you said?John (10:36)
Yeah, I went right into multifamily just because that’s what I knew. My family had the apartment building that I was born in. They lived a block away from that while I was in college. They bought a boarding house, which I started to be involved in managing, you know, my junior and senior year of college.then several years into me being part of the development team in San Francisco, I had enough savings to go into an additional investment. So my family and I found a…
five unit in Berkeley and we took that on and that was kind how we grew over the years in Berkeley and we took on a couple more buildings over the last decade but it really became more favorable to invest in Florida so we focused our attention on that since I moved there.
Kristen Knapp (11:22)
Amazing, yeah, you do your investing with your family, like with a lot of members of your family. How is that?John (11:28)
I do, I do. I think it’s challenging. think it’s challenging but really enjoyable. My family and I have always been extremely close. We talk about pretty much everything together and we invest together. We invested in that first five unit deal together. a 50 % owner. My mom’s the other 50 % owner. And we go back and forth about how we think it’s best to manage that asset.We butt heads a lot in terms of what we think is best. over the years, I’ve been lucky enough to take on 100 % ownership in other assets in Florida. And I share a few assets with my brother in South Florida. He is a full-time engineer in the Bay Area. And he lets me make decisions unanimously, which is really nice. So he’s more of a silent partner. he…
can appreciate the decisions I’m making. mom and I still to this day, any assets that she owns in California or that we split 50-50, she really wants to be more in control and I have to accept that. Another dynamic that we have trouble navigating is the fact that…
We have a lot of these assets paid off. I want to continue growing. There’s an opportunity to leverage the portfolio more in the interest of growing it faster and being able to grow our wealth as a family at a much faster pace than me buying.
properties with my own savings every three to four years. So we argue about that because it’s in my interest to grow the portfolio because I have a 40, 50 year timeline. My parents are more wanting to enjoy the returns they have now without taking on more leverage, which I completely appreciate. And so we’re always trying to find a balance because both of us are interested in seeing the family continue to grow in terms of wealth and
meet hopefully finding a partner and having kids one day so we’re both invested in that thought process but it seems to be a matter of do we want a portfolio that’s 30 to 40 to 50 percent larger in 20 years or do we want a portfolio that’s 200 to 300 to 400 percent larger and it’s all possible it’s just a matter of which trajectory we want to choose.
Kristen Knapp (13:33)
Absolutely, and you brought up the two sides of it, which both are very understandable. Everyone grows their portfolio at their own pace for what makes sense for them. Yeah, and it’s interesting working with family for sure. It presents another challenge, but it’s the same as working with any business partner, I suppose. There’s always gonna be challenges. As you’re thinking about scaling and you’re looking to grow, how are you building your team out? How did you go about finding your system?John (14:00)
Yeah, I think that is a very big challenge for me. I don’t think that I’m the best at scaling. I feel that I…haven’t really embraced that concept as much as I want to. I have an interest in growing my portfolio as fast as I can and yet I have this inability to expend the capital and resources and time to build out a team that could take a lot of the work out of my hands. At the same time, I’m young and I’m able and I’m capable of fixing a lot of the problems that come up and I do enjoy putting a lot of time into managing these assets. I’m also able to save
money that way in order to put it in my own pocket and allow me to buy assets more quickly. So it’s this constant question and I have talked to a lot of people about this
and ask them at what point do you hire a full-time manager? At what point do you offload a lot of this work? And it seems like I’m in a little bit of this no man’s land. There’s a lot of people that manage a couple buildings, 20 to 30 units themselves, no problem. And then there’s a lot of other larger players that I’ve met over the years that say once you get to around 100 units, you can really take on a full-time manager and still have margin to play with.
And I’m not to 100 units, so I’m somewhere between 70 and 80 right now. And I am in this no man’s land where I could afford more management, but I’m also capable of doing it myself right now. So I would really like to force the decision by growing my portfolio. I would really like that to be the way things go, but…
At the same time, I’m not seeing any returns I’m really over the moon about in California or Florida or even West Virginia where I’ve seen eight to nine caps over last 18 months. And we’ll do a deal here and there once a year with a few friends, but still not returns that really excite me. I would much rather take the savings I have now and put it in the market.
Kristen Knapp (16:39)
Yeah, well what’s your perspective on the market in general? What would you say to someone who’s a little reticent to get into investing right now?John (16:46)
I think that it all depends on how you’re.current savings and investments are distributed. think for somebody like me that has 95 plus percent of their wealth tied up in real estate, you should definitely tilt that more on the scales of going into alternative investments. You should look at other opportunities out there because I’m not very well diversified. I think that somebody like me should continue to put money into the market, whether it’s index funds or commodities. I think that that would help me feel more balanced.
So I’m definitely encouraging people to put more money into the market. think that we are looking at highs over the past decade. I think lots of people describe it as frothy. I think that that may very well be true. I just think that we still have a good six to nine months of runway with the general market and S &P 500. And then I think that the current administration
the government and
A lot of other very, very large tech companies are in support of bringing money towards, I want to say mining critical minerals in the U S. So I think that there’s a lot of stocks, individual stocks and index funds that would capture that growth over the next three years. got, you got over three more years of the Trump administration. There’s going to be a lot of, I want to say.
a lot of growth in the American mining industry. So that’s a lot of my concentration of what I have in the market is concentrated on that.
Kristen Knapp (18:16)
Yeah, yeah, so you’re really a proponent of diversifying and not putting all your eggs in one basket. I think that’s good advice for sure. Can you talk about a time, because you do so much yourself, maybe a time where things just didn’t go as planned and something you really learned from it?John (18:32)
I think trying to flip my first single family home over the last several years didn’t go as planned and I didn’t make money on and provided some very powerful learning lessons for me. My bread and butter is buying and managing multifamily.and having immediate return on those investments. I took on a single family home in Lake Worth Beach, Florida. This is when interest rates were kind of creeping up, but still very, very attractive at 3 to 4%. I took on investments with my family. We did an all cash purchase.
and we started renovating and we didn’t go with the right contractor. He wasn’t able to secure permits properly. And so our flip time, our period of selling, which we thought we’d have maybe a six month hold on this property eventually turned into two and a half years. And we had a budget originally of 60 to 70,000
and after going through not two but three contractors we found that budget to creep up to closer to 300,000. Holding costs in that area aren’t cheap. We’re still facing kind of, I want to say, weekly and monthly ⁓ utility bills coming in.
because the city shut us down the first time because we didn’t have the permits properly secured, they were all over us throughout the process, which meant we had to pay for things like lawn maintenance and landscaping throughout this entire hold. And typically you wouldn’t experience expenses like that.
I think that the market also turned where you saw interest rates go from 3 4 % back in 2022 all the way up to 7 % now and we just sold it 6 months ago.
I think we took a loss of maybe 80 grand or 75 grand and I think it could have been a lot worse.
⁓ Luckily we found a buyer that was really attracted to the house and was able to pay cash and it was a good fit for her. But just seeing the market turn in terms of interest rates rising, demand plummeting was a big lesson for me just to show you how quickly things like that could turn.
Kristen Knapp (20:32)
Yeah.John (20:51)
Also, think paying a little bit more attention and giving more due diligence to contractors that you’re going to hire and also paying a little bit more money going with somebody that may be more expensive but has a track record and the references in order to prove that they’ve done this before in your same neighborhood is huge. think we kind of.rolled with somebody that was able to do smaller renovations for us successfully and weren’t really understanding the fact that they weren’t used to taking large single-family homes through the permitting process. So several very large lessons for me throughout that process.
Kristen Knapp (21:28)
Yeah, absolutely. Now I think it’s good to mention that and also at building a team, it’s probably the hardest part to get the right people around you and to figure that all out. So thank you so much. getting towards the end our time, but tell everybody where they can find you.John (21:43)
Let’s see, I keep a pretty low profile, but I do have a small condo building on the beach in Delray. It’s right on A1A, and you can find small furnished studios and one bedrooms right there, and you can reach us at CoralCoveDelray.com.Kristen Knapp (22:02)
Awesome, well everybody reach out to John and thank you so much for being here.John (22:06)
Thank you, Kristen. Appreciate it.Kristen Knapp (22:07)
Thank you everyone for listening and we will see you back next time. Bye.
