From Architecture to Real Estate | Mark Shuler’s Journey & Investing Tips

Mark Shuler (00:00)
The last reason in the world to get involved in real estate is for the money. Because there’s plenty of ways to make money that are a lot easier and a lot less risk than this. you just gotta wanna do it. And the people who I know who are the most successful at this line of work really enjoy the game in spite of all the stress and the zaniness of what’s going on right now.

Kristen Knapp (00:00)
Welcome back to the Real Estate Pros Podcast. I’m Kristen and I’m here with Mark Shuler of SGRE Investments. So we’re going to get all into kind of the market, how it stands now, capital raising and yeah, just general investing. Thank you for being here, Mark. Awesome. Well, you’re an architect. That’s where you kind of got your start here. I’d love to hear how you made your way into real estate from

Mark Shuler (00:13)
Thank you for having me.

Mark Shuler (04:23)
So yeah. I got into real estate through my architecture career. I actually had been practicing for a number of years. And along the way, I had a lot of developer clients, as you can imagine. I’ve done several large apartment buildings here in Seattle. And just kind of looking over their shoulder, I got really curious about what it is they did and how they did it, and figured that if they could do it, I wanted to do it, because they were making a lot more money than me.

So in the early aughts, I went back to business school at the University of Washington and got a degree in commercial real estate development. And then it took me a minute to get going with it, but by about 2012 or 13, I started doing some deals. I think my first deal was here down by our airport, SeaTac. It was a 30 unit deal that I tied up.

I think I tied it up for about 2.3 million, brought some partners in. We did a big value add play on it. We renovated all the units, upgraded the elevator, gave it better curb appeal. And I think that exercise cost us about $900,000.

four years later sold it for six million bucks. Wow. Wow. Yeah. So a really nice pop on the valuation. My investors really happy. They made 23 north of 23 % on their money. And then after that, I just started doing deals. About a year later, after I bought that one, I bought another one here in Seattle that I still own.

Maybe a year and a half after that, I bought a little 14 unit in the South Sound area, renovated that. ⁓ I actually made more money on that one than on the 30 unit. ⁓ It’s crazy ⁓ how you can do that. I profited really nicely on that. And then after that, I just got tired of the Puget Sound. It’s very regulated. This is a very blue area ⁓ of the country. And so I wanted to.

play in an environment where the rules of engagement were not so ⁓ skewed. So I went down to Houston and ⁓ met some guys down there and I’ve been doing deals with them ever since. I still do deals with them to this day. So we’ve done.

8, 10, 12 syndication something like that. Got about 6,000, no excuse me, it’s 4,000. We have about 4,000 doors under management and it’s about a 600 million dollar portfolio now. So, challenging, challenging business right now. ⁓

Kristen Knapp (06:54)
Absolutely. mean,

that’s amazing. Out of college, essentially your first deal really hit. Kind of gives you some unrealistic expectations.

Mark Shuler (07:04)
There’s

a little distance between when I graduated and when I did my first deal. So, you know, be candid about that. yeah, I mean, but more to the point, you know, I did a huge career pivot that a lot of people don’t execute in their lives, but, know, I’m kind of maniacally focused and. ⁓

knew that I really, really wanted to get into this line of work. I just wanted to be a housing developer from as long as I can remember. And so it just felt like it was a natural progression for me along my career path. it was a hard transition, I can tell you that. It’s a business. No question about it.

Kristen Knapp (07:42)
Absolutely. I think a lot of people get into real estate and just expect a big sum of money to be put on their desk, but it requires a lot.

Mark Shuler (07:53)
You know,

I do try to dissuade people of that fantasy because it’s not what happens. It’s a lot of work. There’s a lot of risk. You’re constantly drinking from a fire hose. And if you don’t have the background in construction and real estate, ⁓ it’s going to be tough. It’s going to be really tough. ⁓ I have a tremendous resume.

And there isn’t a day that goes by that I just don’t get hit with something. And it’s like, man, how do I deal with this? So ⁓ that never ends. So just be careful what you sign up for. You’ve to want to do this. ⁓ I can tell you, what I usually tell people is the last reason in the world to get involved in real estate is for the money. Because there’s plenty of ways to make money. ⁓

Kristen Knapp (08:37)
Yeah. ⁓

Mark Shuler (08:43)
that are a lot easier and a lot less risk than this. you just gotta wanna do it. And the people who I know who are the most successful at this line of work really enjoy the game in spite of all the stress and the zaniness of what’s going on right now.

Kristen Knapp (09:02)
Of course, yeah, you have to ride so many market shifts and there’s so much unpredictability in this line of work. You have to just love it.

Mark Shuler (09:08)
Yeah, I mean, that’s the only way you’ll sustain yourself. Otherwise, you burn out.

Kristen Knapp (09:13)
Yeah, and maybe talk about that a little bit. Have you ever experienced burnout? Yeah. At 12 o’clock you’re burned out, by 2 o’clock you’re back in it.

Mark Shuler (09:17)
Every day.

You know, you’ve heard the phrase grinder. You know, you’ve got to be a grinder in this line of work. And you just want, you have to want to do this line of work. And you know, once the train leaves the station, there is no getting off. ⁓ but that said, you know, I continue to enjoy the process for a lot of different reasons or the business. ⁓

In addition to kind of the business side of it, I mean, we have a little social cause. We’re trying to create safe, affordable housing. We’re workforce housing guys, my partners and I, so we do these value add deals and they’re 250 to 500 door projects. that’s generally the worker piece. Come home and after we’re working on it.

day or a night shift. Our little thesis is everybody has the right to have a dignified place for their head to hit the pillow at night. And so, you know, we’re really pimping out these units. mean, they’re really nice. Their condo quality finishes in a C-class deal. And ⁓ generally speaking, for that demographic, it’s the nicest place they’ve ever lived. Yeah. And we do the rent premium for it. That’s the business model is ⁓ people, you we have internal

migration within each deal from classic units to the renovated units and there’s generally like a hundred to a fifty dollar a month rent pop people line up to move they really want to live in a nice place yeah so our thesis we’ve proven our thesis time and again ⁓ so you know I feel pretty good that we’re trying to provide affordable clean housing for a lot of folks who normally wouldn’t have access to that

Kristen Knapp (11:45)
Absolutely, that must feel very gratifying to kind of help. I mean it’s helping someone in their day-to-day life.

Mark Shuler (11:51)
Well, it balances out all the headaches. Yeah. No, it does. Just not to be, you know, facetious or anything like that. you know, it helps. Really does.

Kristen Knapp (12:03)
Yeah, and at SGR-E, you guys are very vertically integrated. So you guys are, it seems like a very tight operation here.

Mark Shuler (12:12)
We’re trying. Again, it’s like drinking from a fire hose. ⁓ You know, we have over 200 people on the payroll. ⁓ And just, you know, full disclosure, I work with another private equity firm and I’m their main capital raiser. So I run my own private equity firm and then we JV on all these partners, ⁓ on all these deals. so, ⁓ yeah, I mean, they built…

And I’ve helped build this large company that we’re going through a massive reorgan right now. But, you know, we do everything in-house. We do asset management, we do construction, leasing. Yeah, we do a lot of this, you know, the tasks that are normally third-party by a lot of ⁓ operators. ⁓ We do all that in-house. That’s all designed to control the expense side of our ledger.

⁓ and drive returns at the bottom line for our investors. But also, it’s all about control with a capital C. It allows us to control everything within the business model and even then, know, stuff happens on an almost daily basis it’s happening. And in this current…

⁓ environment with ice running around. I mean, it’s challenging. I was on a partner call today for a different deal and you know, tenants are just disappearing overnight. They’re just skipping. ⁓ We came to an asset two days ago and just found the keys in the door and they were gone. know, workers just skip, you know, they’re just gone. So trying to ⁓ maintain ⁓

full occupancy and full employment in our business model. It’s proving challenging right now. ⁓ That’s why we’re doing this big reorg. It’s not an opportune time ⁓ in the deal environment. So we’re taking advantage of this downtime to kind of just really tighten the screws, maximize our efficiency, and keep our costs in check.

Kristen Knapp (15:01)
Yeah, and with the integration and all that, sounds so easy and obvious to have everything in house, but I feel like most people can’t do that. It’s so difficult to have everything in house.

Mark Shuler (15:14)
Yeah, with a big Y. ⁓ It is challenging. You have to build it piece by piece slowly over time. ⁓ And it’s not like you wake up one day with a large portfolio and you want to build a company around it. You sort of…

you leapfrog you buy a deal and then you hire some people and you buy another deal and you hire some more people and next thing you know you’re hiring regional managers or you know head of HR or head of accounting or you know you just you know we bootstrapped this company together grew it organically and

I personally think that companies reach a point where they get to a level of maturity where they have to step back ⁓ and evaluate everything, all of their processes to make sure that they’re doing things in as streamlined a fashion as possible. And I got news for you. Change happens and not everybody likes it. So ⁓ then you’ve got to deal with that. And, you know, some people leave and now you’ve got to hire new people.

go through the interview process that’s why we poached this this really competent woman from Amazon and she’s a high level C-suite HR director and she’s doing a great job I mean I mean it’s really turning around it’s probably going to take us another quarter

And we should have our ship righted at that point, but I don’t anticipate us doing any deals until 2026 at earliest at this point. So it gives us plenty of opportunity to kind of fine tune all of this and get it dialed in.

Kristen Knapp (16:55)
Yeah, and I think there’s importance in saying no and to be really particular in the deals you take on and not rush things.

Mark Shuler (17:03)
No, we probably analyze three, four hundred deals for every one we go after. Yeah, no, we have two full-time underwriters who sit there and play with Excel all day long. I mean, we’re not doing any deals right now. ⁓ You know, the bid-ask spread between what we offer and what the sellers want to sell them for are just too far apart. The lending environment is not ⁓ great. ⁓

Kristen Knapp (17:08)
Wow.

Mark Shuler (17:29)
10 year bond rate is still too high for your listeners. Real estate loans are ⁓ priced on ⁓ a lending rate bond rate typically plus a spread. And that spread gonna be anywhere from like 1.8 to two and a half points. ⁓ And given where the bond rates are right now.

interest rates on deals are too high. so, you know, we can’t, and the underwriting doesn’t work. We’re pretty happy to wait. I don’t have to buy deals. ⁓ So, you know, I’m pretty happy fixated on the operations side of things right now.

Kristen Knapp (18:05)
Yeah, definitely that’ll hold you over for sure. And so you are very skilled in capital raising and you’ve been very involved in that. I know this is a really tough market. I would love for you to kind of talk about capital raising during this time.

Mark Shuler (18:18)
Yeah, it’s challenging. It is incredibly challenging. I’m raising for a little side hustle right now. ⁓ And it’s just proving challenging and it’s a small little raise. people are wanting to hang on ⁓ with all of this uncertainty coming out of DC, all the chaos and just the…

whiplash back and forth. One day we’re doing tariffs, one day we’re not, then we’re back on them. It is very hard to predict what you’re going to be doing in six months. And so the business environment, the thing it likes is uncertainty.

And so if nobody can make business plans, you can’t make investment plans, you can’t purchase inventory, ⁓ you don’t know what labor rates are going to look like. Are we going into a recession? Are we not? ⁓ Is the Fed going to lower the rate? Should they have lowered it last week? Just all this.

information you’re trying to synthesize and try to make a business plan and it’s challenging right now. So a lot of people see that and they’re standing back. They are not deploying. ⁓ so, let me close this out. ⁓ So ⁓ yeah, you know, that said, you know, I’m grinding through and this little raise and I have no choice. I got to get it. I have to get it done. So.

Yeah, I mean, I’ve raised probably close to $50 million over the last eight, nine, 10 years. And this is hard as it’s been.

Kristen Knapp (19:57)
Yeah, and

how do you push through? ⁓

Mark Shuler (20:00)
figure that out I’m gonna bottle it and sell it. ⁓ Or I don’t want to give up my secret sauce. You know I think it starts with how you present a deal. It starts with your credibility ⁓ and ⁓ clarity. So if you are clear in your

Kristen Knapp (20:07)
Exactly.

Mark Shuler (20:26)
business model and clear communicate clearly about ⁓ the economics of the deal, the marketplace, ⁓ all the stuff that people generally want to see to evaluate a deal. You stand a better chance of raising it’s not you’re not going to be perfect because I can’t tell you the number of times I’ve heard this quote. I want to keep my powder dry. ⁓ just didn’t know just

palm the forehead every time I hear that. So, but that said, you know, have to be respectful and you can’t be needy in the game, the Rays game. The best you can do is talk to lots of people and create some excitement and you know, people who want, I mean, the good news is if you can, if there’s any positive about all of this, there is like $7 trillion sitting on the sidelines looking for a place to park itself.

So money never sleeps, capitalism grinds forward. We’re going through an era of creative destruction. ⁓ We are coming off ⁓ a multi-year.

environment of very easy credit, very low interest rates, very easy money. Too many people got into the business who had no business getting into the business. And I’m seeing a lot of those folks lose their deals right now. That is not lost on investors. And so it helps that my partners and I have a lot of experience doing this.

And that, you know, we’re seasoned and we control, you know, everything from, you know, supply chain management to the last screw and the last switch plate on the wall. Yeah. And, ⁓ you know, so that counts as something in the minds of a lot of our investors. You we are, you know, I’ve had more than one investor tell me they’ve invested with multiple sponsors. ⁓ They are not so certain that they’re going to get their money out of the

those deals, but they have no concerns with us. I hope that’s not misplaced ⁓ whatever you want to call it. But I’m going to try my hardest to make sure that we get out of these. We may not get, I doubt we’ll get the returns that we initially promised when we underwrote the deal. ⁓ We’re going to do our best. No one’s going to lose money on our deals. I can tell you that.

Kristen Knapp (22:54)
There go.

That’s awesome. And then to wrap it all up, what’s maybe a piece of advice that you wish you learned at the beginning of your journey?

Mark Shuler (23:02)
You know, don’t be afraid to take risks, but make sure they’re calculated. ⁓ A lot of what you see in this industry are, you know, a lot of cowboy attitude, ⁓ which is misplaced exuberance that cannot be a substitute for experience. And so, ⁓

But don’t let fear hold you back. Start small, grow in your skill sets, grow in your understanding of the business. It’s a complicated business. Just keep putting one foot in front of the other. Do not think you’re going to do one deal and then go to Hawaii and drink Mai Tai’s on the beach. It’s not going to happen. It doesn’t happen.

Kristen Knapp (23:46)
That sounds great

though.

Mark Shuler (23:47)
But it’s,

it’s, you know, you see too much of this on Facebook and LinkedIn. And I just roll my eyes every time I see someone put up another post that is just, I mean, I don’t know if I have an adjective to describe it, but it, it, it’s not real. ⁓ and it’s, sort of,

I don’t know, exuberance, ego, whatever. I try to keep my ego tucked in my back pocket. I’m basically an engineer, I think in terms of systems and underwriting and structure. so, ⁓ and believe me, I’ll bloviate with the best of them if I’ve got a good deal that I believe in. But just to, you know, go out there and blow a horn, just simply to blow a horn, it’s like a waste of breath. You don’t get that back. You don’t get that life energy back.

So and it also dings your credibility and that’s not what I’m trying to do. I’m trying to You know be credible and provide people with good opportunities and hopefully they’ll come back time and again

Kristen Knapp (24:53)
Yeah,

yeah, mean, transparency is so important and. ⁓

Mark Shuler (24:56)
Transparency and alignment.

I’ve been thinking a lot about alignment ⁓ in the last month. It is a challenge in this environment. But you want to make sure that you and your investors are all pulling in the same direction. that you’ve got to treat the investors. They come first in any deal. In all of our deals, investors get paid first, always.

So ⁓ I don’t get paid until we exit. And so that’s a lot of years that tie up a lot of equity. ⁓ And so it ensures that I’m doing the best job possible on behalf of my investors. And so the whole notion of just, know, bloviating about it, it’s kind of an exercise that’s lost on me.

Kristen Knapp (25:45)
I think that’s good advice and I think that’s a good direction for people to take. Where can people find you?

Mark Shuler (25:50)
⁓ you know, I’m in of this box all the time, so if people want to hit me up with an email, you can send it to investor at s-g-r-e investments. That’s plural.com. ⁓ Or you can use my architecture address mark at schullerarchitecture.com. Schuller is spelled S-H-U-L-E-R. No C.

Kristen Knapp (26:15)
Amazing. Well, I encourage everybody to check Mark out. He has a lot of information to share with everyone. Thank you so much for being here today. thank you everyone for listening and we will see you back next time. Bye.

Mark Shuler (26:23)
pleasure. for having me.