Why Scaling Too Fast Nearly Broke a 586-Unit Rental Portfolio | Andrew Syrios

Andrew Syrios (00:00)
a year later you realise, wow, we really went too hard and now we’ve got to pivot. And that’s led to a probably two and a half year period of time where we were just cleaning up our portfolio, which was selling properties, selling houses that didn’t cash flow well too big, too far away, condos with HOAs, selling ones that needed tons of rehab, raising capital.

it was a difficult two and a half years and a lot of it was my own fault. you end up realizing that when you’re too aggressive and you’re too reckless, you end up you pay for it. And you pay for it for a lot longer than you were the time you were reckless for.

Joseph Crooms (01:32)
Hey everyone, welcome to Investor Fuel Real Estate Pros Podcast. We’re here today. My name is Joseph Crooms. I am your host. Today I’m joined by someone I’ve been looking forward to chatting with and have just been chatting with. His name is Andrew. Andrew’s going to talk about

his move in real estate but also his additional business. I’ll let him break that ice to you. Andrew, glad you’re here. Say hello to everyone.

Andrew Syrios (02:01)
Hello everyone. Thank you, Joseph. I appreciate you inviting me on. It’s good to be here. I’m glad I was also like awaited for this this

Joseph Crooms (02:08)
All right. Thanks, man. I think our listeners are really going to take something away from this, Andrew. They they’re gonna give so their approach. So let’s jump right into it. So first of all, for people who may not be familiar with your world, give us the short version of your world, what’s your main focus these days, and what markets are you operating?

Andrew Syrios (02:30)
There are people who are not familiar with my world. No, I’m not that I’m not that No we are in Kansas City, Kansas City and we basically operate throughout the entire metro area. We came out here in 2011. I joined my father’s company in Eugene, Oregon, and we were flipping house out there. He had a bunch of student rentals and we eventually came out to Kansas City to get into a more less expensive market, we’ll say. And also our extended families all out here. And so I came out and my brother joined me.

Joseph Crooms (02:33)
Wow.

Andrew Syrios (02:58)
And we spent a bunch of years just buying and hold you know, holding as best we can. We kinda rode that wave after the after the O eight crisis, especially there’s tons of REOs, just like dilapidated properties you’re buying left and right. And, you know, we used private lenders. We did the BRRRR method a lot and then we then we bought a few apartments, we got into buying portfolios, which is I think a good method, or at least it was, and I’m sure it will be again, for

For mid-sized real estate investors, you know, not the huge companies and not the not people are just getting started, but you know, buying ten houses or you know, seven houses and two duplexes or something like that. They just almost always sold at a discount. So if you can hold if you can if you can stomach holding them, you know, you can make you can get a good chunk of equity there. And then around 2023 we realized we grew way too fast. Then we particularly in 2022 we kind of bought like crazy and interest rate went up and we like, okay, we’ve got to stabilize and spent

the next two and a half, three years just basically going through our portfolio and finishing all the inherited, all the capital repairs projects we’ve been slacking on, all the inherited all the vacancies and rehabs we had we sold a lot of them to, like the gut jobs and a lot of inherited residence and dilapidated properties that really were on the edge. And so finally got through all that then realized

We built our own construction company and it’s really hard to buy real estate and have a cash flow these days. And so we started our own construction company called we call it Stewardship Renovations, or our investment company, Stewardship Investments, and Stewardship Renovations. We do third party and construction work for anyone throughout the Kansas City area, pretty much everything but routine maintenance and developing properties or luxury. We don’t really do that. Well, if you want us to, we’ll do it, but we do not guarantee we’ll do it right. So but you know, we kinda focus on the investors and property managers and

kind of mid-sized area. And I’ve really been working on growing that. So that’s kind of a I guess that’s the long and short of the last 15 years of my life.

Joseph Crooms (05:33)
And so Andrew, take me through the beginning of your real estate when you were really rolling well. And what was it like when you s when you guys were going through the portfolio and when did the it’s a three part question? The idea of pocket, jump in your mind, you know what? We gotta do something to develop cash flow to support the purchase of real estate. Can you can you walk us through that?

Andrew Syrios (05:58)
Well, I’d say I really wish I could just be like, you know what, I sat down with a pen and pad and my giant galaxy brain just came up with all these ideas, but more or less they’re all they’re all sort of reactive. I mean, when we came out to Kansas City, you know, buying these properties and whatnot, it just we started off wanting to get apartment complexes and realized there were so many houses and duplexes that have been foreclosed on that were just in terrible shape. It was just like a perfect market and our private lenders wanted that size of loan. And so it’s like, okay, this makes perfect sense, we’ll just do this. But we kinda actually that was my brother’s idea. So we kinda fell into

that. And then portfolios, honestly, we just they just kind of came across our desk and we were in a weird position. We were kind of in between the big players and the small ones. And it’s like there weren’t a lot of people that were interested in those portfolios. And because they know they got to sell them at a discount, it’s like, okay, well, we we’re just we don’t need to, we’re not trying to parse these out and sell them. We can stomach a bit of negative cash flow on them for a while. So you know it makes perfect sense because we’re getting a good solid discount. And then the construction company, I sort of came up with that independently.

Technically my rehab manager came up with it, but I forgot that he came up with it. So I came up with it independently. But basically we built our own I mean we got to the point we had one point where it was just ridiculous. Like we have 50 properties in turnover and rehab, and it was just like it was just an absurdity. And then we ended up taking a handful of and selling them because it’s just we needed to we needed to get that down. But we really expanded that department and it’s like, well, what do we do with this? Either we just downsize, lay people off, and tell

contractors we’re never gonna you know we don’t need to use them anymore or we built we pretty much built everything but a client management system and found c find clients. Let’s be have everything other than that. And so let’s just do that. And so I would say that’s not uncommon in business. You know it’s like you’ve got to be careful because shiny object syndrome is a really dangerous thing. Like a lot of people get like that’s you know get bored of what they’re doing right and they say here’s this shiny object but at the same time it’s like

A lot of times, you know, you can’t just sit down and plan it all. Like this stuff happens and you’ve got to be able to sit, kind of be able to sort out whether this is a real direction you should go in, because there’s a real opportunity there, or whether it’s a shiny object. And I think it’s pretty simple. If a shiny object like a side thing, or it’s like it seems interesting, or it’s like, we’ll do it here, we’ll do it there, we’ll add it here. A real opportunity is it’s really a pivot. That actually makes perfect sense.

And we’re looking at our biggest problems are cash flow and that creates problems with liquidity. And the way to fix liquidity is either to sell which is not the opposite direction where we want to go, or to refinance, which makes cash flow worse. So it’s like, what do we do to fix that? And it’s like, well, we built a construction company. So let’s do that. And so yeah, I think I think a lot of it is you’ve gotta be constantly have your ear to the ground because it’s like y we like to think of it that you just sit down with the in front of a computer and use your giant super brain and

figure it out but a lot of it is just the it just comes to you and you have to be ready to take advantage of.

Joseph Crooms (08:49)
Thanks Andrew. Andrew, where is your book of business at in real estate? You know, in as and s in in reference to monthly volume or revenue? Where you where you’re landing at and before you

Andrew Syrios (09:02)
Yeah, I mean our rental revenue is like is about just about seven hundred thousand dollars a month. And so you know, we have about five hundred and eighty six units, I think, about I think four hundred properties, a mix of you know, mostly houses and small multis, but a handful of larger multis and a couple of commercial properties. and we don’t as far as the construction company, it’s really hard to tell you because it’s been it was it was very small until a c you know, early this year and it’s been starting to grow lately.

Yeah, but it’s also fits and starts, you know. So it’s like it’s hard to say, but I’m hoping that we can gross a million this year with it. Not net. I’d love to grow net a million, but gross a million and then next year really, I think we can grow pretty quickly. But it’s all about I think the biggest challenge we’re gonna have is making sure that our systems can handle it and that we have enough people in our administrator that know what they’re doing. And so as we grow at a relatively fast clip, we don’t things don’t just don’t break everywhere, which is

unfortunately very common when you do this.

Joseph Crooms (10:37)
Gotcha. Andrew, he’s talking about your brother. can you tell me what your operation looks like? You know, w you know, how do your how your partnership and what

Andrew Syrios (10:45)
Sure, sure. So I mean it started with my dad you know, my it was my dad, my brother and I, my dad William, my or Bill and my brother Phillip and me. And so I was I invested, I worked with my dad in Eugene and I came out here in twenty eleven, my brother joined me. At first we split it where basically my dad was in charge of financing and we were all in Farbus Strategy because you he was also the the money bags, you very lucky in that way. And then

And then he all you also the back administrative I was in charge of financing or I was in charge of refin of rehab and acquisition and my brother’s in charge of property management. As we moved on, both of us have sort of moved out of there. And so I like I I’m now more in charge of kinda overseeing everything as well as being in charge of acquisition and financing and just making sure like meeting all the parts. My brother is involved deeply in property management and also STR general strategy. But he also started

his own e-commerce business. It’s called Syrios Gifts where he sells all sorts of stuff online. So he’s kind of he’s basically half in each company. But I mean that’s also another cash flow source that could be very, very valuable. And my dad is focused mostly on overall strategy and then also he’s focused on his company in Oregon. he’s got the student rentals and they’re starting to do Section 42 development.

And so those are pretty wild and sound like just a nightmare red tape and stuff like that. But so yeah, that’s I think that’s the general thing. Yeah. I right now I oversee most of the like oversee all the departments and heavily involved in financing and acquisition.

Joseph Crooms (12:14)
Section 42. Can you explain what that is?

Andrew Syrios (12:19)
can

although I can’t give you very detailed rent because I’m not involved in this. But Section 42 is a HUD contract like Section 8, but it’s tied to the building and it’s not where it’s like you get most of your rent paid for. What it is that the landlord is subsidized in order to keep rents at a certain level. And I think it’s like there’s two different types. I think one’s eighty percent of the median and one’s sixty percent. So it’s just keeping rents on new construction

you know, below market and make it easier, more affordable for people to live in. It’s very complicated. But and there’s all sorts of different moving pieces in order to get those buildings built. And I wish I could explain it to you better. But yeah, it’s part of the U.S. Department of Housing and Urban Development and it’s a program that’s tied to the apartment complex and it basically subsidizes the landlord in order to keep rents below market value.

Joseph Crooms (13:09)
Thank you for that. How much of your business is residential versus commercial?

Andrew Syrios (13:15)
Yeah. The vast majority is residential. I’d probably say we have let’s see, we’ve I think we’ve we have like four commercial properties and one industrial. And so it’s like seven percent of our portfolio maybe. Or no, it’s like a couple like two or three percent of our portfolio is commercial. We’re really heavily focused on residential and it’s what we’re by far the best at.

Joseph Crooms (13:37)
Andrew, do you find that when you started your sort of renovation business, was most of your customers already on your books?

Andrew Syrios (13:48)
Sort of. I mean it was mostly like most of our customers were in our milieu. So it’s like the first thing we did is just start calling people we knew, you know, start calling, you know, real estate agents we work with, like do you want you know, do you have any clients who need renovation work or need pre-listing work or calling you know, bankers, do you have any REOs or calling our other contractors, you know, do you have you know, when you have you know, we could when you have too much work going on, you know, we can maybe sub for you. If we have too much, maybe you can sub for us and all sorts of stuff like that.

Various business contacts, other real estate investors, that was a big one. We got you know, we got a job that’s almost two hundred thousand dollars we have from a real estate investor right now. That way. So that’s been our main thing. We’re eventually gonna start marketing more extensively for that. But right now the main thing is just basically networking and calling all the people we know and then yeah, go from there.

Joseph Crooms (15:18)
Now let me ask you this question. Every operator I know, at the moment when things just get real, would you share a deal that went sideways or a time or two that you had to pivot fast? Anyone in those moments was.

Andrew Syrios (15:29)
Yes.

Yeah.

Sure. Yeah. So I think I mentioned in 2022 we went way too hard, you know, but and one of the ones we did was about five portfolios over the course of a year, technically bled into 2023, but it was it was too much. And one of them there was three that were good. One would have been good, but it needed a lot of work, and one was a disaster. It was 21 houses.

The HVAC appeared to all be good, but it was not. And there was a and it was just bigger and I was too low on the rehab expectations. And the apartment complex next door was just significantly worse than I thought it was. and it just ended up just being a huge gut job every single time we did this. And like we already had a problem we already had a backlog of rehabs. And then we already it bought all these other portfolios and it just turned into

Basically it turned into we realized we had a liquidity problem because we were not gonna be able to get through all of our rehabs with the money we had and money we could realistically get by refinancing. And so we had to pivot hard and start selling properties, which we hadn’t done en masse. So selling properties that we liked and peeling off ones that didn’t work and all the rest of that. But I mean was that was one of those deals. And the problem there was a significant amount of competition for this one.

And so I didn’t have like it was basically like I had to waive inspections and stuff like that. And I think I could have done it by bringing like an inspector with me to just look at one unit one property or you know, different things like that. I think I got a little cocky and exaggerated my own ability and just made some pretty rudimentary mistakes on that. And you know, when you’re dealing with a deal that’s in the seven figures and has a significant amount of rehab.

That can really, really set you back, especially when you’re before that you have a significant amount of re rehabs and then after that you buy a bunch and then, you know, a year later you realize, wow, we really went too hard and now we’ve got to pivot. And that’s led to a probably two and a half year period of time where we were just cleaning up our portfolio, which was selling properties, selling houses that didn’t cash flow well too big, too far away, condos with HOAs, selling ones that needed tons of rehab, raising capital. Just I mean it

It was a difficult two and a half years and a lot of it was my own fault. You end up realizing that when you’re too aggressive and you’re too reckless, you end up you pay for it. And you pay for it for a lot longer than you were the time you were reckless for.

Joseph Crooms (17:54)
Thank you, Andrew. Yeah, that’s the kind of information that separates from those that are dabbling to those that are long, especially when you came to the conclusion about yourself. And thank you for being transparent so that’s big. Especially when you’ve already got two things actually three things in place. You got the real estate, residential, commercial, and now this business.

Andrew Syrios (17:55)
Of course.

Of course, of course.

Joseph Crooms (18:16)
The next move can either compound things or create chaos depending on how you play it. Now I know a lot of our listeners are early in their journey and they’re looking to level up and I think they’ll benefit from this from hearing this. When it comes to building relationships and growing your network, what’s made the biggest difference for you?

Andrew Syrios (18:37)
I think the main things I would say is one, being active, like making it being proactive and doing it. Like there are multiple real estate groups. Make it a thing to attend them. You know, I was not very good at that for a long time. I was good at it for a long time and then I was bad at it for a long time. Then I started being good at it. But I would make that a a major priority. And I’d also think, you know, remember when you’re approaching this, people don’t want to come up people don’t want some stranger to come up to them and tell them like

Hey, I want to become rich in real estate. Will you teach me how to do it? Will you make it you know, it’s like you’ve gotta be willing to offer something. Like so I’ve you know, I’ve had people just send me like messages saying like, Would you like to you know, I’d like to talk to you or something like that. I don’t really have any interest, even though it’s just a phone call. It’s like, I don’t know. But then people say like, Would you know, would can I buy you a coffee? I mean just something as simple as that and it’s like, well if you’re gonna buy me a coffee, of course I’ll talk to you for an hour or whatever, you know, so it’s like and so

You know, it was just or just being really humble and appreciative about it, especially if they know more than you know. A lot people are shy about acknowledging ignorance. But I mean, I’ve been in this for one degree or another, twenty years, and I’ve realized very quick very often that I do not know what I’m talking about. And you know, it’s just like the wisest amongst us are those who are willing to admit what they don’t know. And so, and especially if you come off that way, people appreciate it ’cause they feel smart and then they like you more. And so I would

Try to approach other people by what can you offer them? And it’s like if it’s you’re looking for you’re looking for a contractor and you need them to help you evaluate how much work it’s gonna be done because you don’t haven’t done that before, you know. Offer to buy lunch, offer, pay a hundred you know, a hundred bucks or something to put together a just a a broad scope for you. I mean, they very well decline it, but just like just by offering it, they know that you’re not you’re not just kicking tires. You don’t just expect something from them. If you’re willing to give them something, even if it’s not much, even if it’s just appreciation.

It’s gonna go a lot further. So I would I would keep that in mind. Be proactive and try as best to offer something, and not just ask for something.

Joseph Crooms (20:29)
Sort of off the same, but on the same subject, how many of those relationships organically started and are still going for you?

Andrew Syrios (20:37)
God, I think so how many hard to tell how many relationships we’ve had over the course of I mean I say most relationships tend to fall off just because there’s no real need to continue them. But it’s not like it’s not like a negative thing. It’s not like I have a problem with this person. They’re still in a f sort of file somewhere and every once in a while I’d be like, you know what, I remember this person, they might have something to do with it. So I should reach out to them or you run into at one of these events. I just ran into a wholesaler at one of these events that we bought a property from I think

Twelve years ago. So that was interesting. But yeah, all sorts of stuff like that. But I’d say, for those that we’ve established a significant relationship with, we’ll put it that way, those we’ve done a significant amount of business with, it’s pretty uncommon for that relationship to fall off completely. With the exception of contractors who just fall off. Like that happens sometimes where they’re just they’re doing really well. Usually they all do really well and then they’ll start doing d really bad and they’ll get back. Sometimes it just

Those tend to just disappear. But for the most part, if it’s a significant relationship it continues or at least stays kind of in the in the file to be re reborn or something like that every once in a while. I don’t know. You know, if the occasion calls for it.

Joseph Crooms (21:42)
Thanks for sharing that, Andrew. So you can’t fake that. Relationships are everything. All right. Before we wrap up, if someone wanted to reach out to you, Andrew, connect with you or maybe collaborate, learn more about what you’re doing, and you can share, you know, your real estate and your renovation, how can they get in touch with you?

Andrew Syrios (22:01)
Yeah, and remember I love coffee. Keep that in mind. The best way to reach out to me is probably BiggerPockets. Andrew Syrios I’ve written quite a few articles for them. I check it fairly regularly. I’m also on Facebook, and I have a Substack, The Syrios Brother. That’s S Y R I O S. But I would say and then I’m like on LinkedIn, but I don’t check that very often. And then of course there’s our website.

which is StewardshipRenovations.com. So BiggerPockets is probably the best you should want to directly reach in.

Joseph Crooms (22:29)
Hey Andrew, share those two again, the pockets and your website.

Andrew Syrios (22:32)
BiggerPockets.com. So just yeah, BiggerPockets dot com and you should search for Andrew Syrios, you’ll find me. And then our website is StewardshipRenovations.com. And if you’re in the Kansas City area and you’re looking for a contractor or pretty much anything other than maintenance or development, please give us a call. I think we’re quite good. And bring coffee and bring coffee. Bring coffee. I mean if you got a if you got a deal you want me to quote, you don’t need to bring coffee.

Joseph Crooms (22:50)
And break.

Andrew Syrios (22:59)
But if you wanna pick my mind for hour, yeah, I’m gonna need some coffee.

Joseph Crooms (23:04)
Andrew, perfect. Well, listen, I appreciate you, Andrew. I appreciate the joy that comes through and your perspective and also your insight that you need to pivot. We need more people in the space who are doing it the right way. Thanks again for being here, my friend. Yes, man. And for those of you tuning in, I know you got value from Andrew and his coffee. I don’t know what kind of coffee he likes, but he’s a great guy.

Andrew Syrios (23:09)
Thank you.

I appreciate it. Thank you for inviting me on.

Coffee.

Joseph Crooms (23:32)
Make sure you subscribe to Investor Fuel Real Estate Pros. We got more conversations coming from operators just like Andrew who are out there building real businesses, helping people and communities. We’ll see you on the next episode of Investor Fuel Real Estate Pros Podcast.