Our guest for today is the owner of Black Swan Real Estate. A family-owned and operated real estate investment company with over ten years of experience owning and managing a rapidly growing portfolio of homes in Oklahoma City, OK, and Rochester, MN. We believe that the success of our business is not measured in dollars or doors, but by its reputation and relationships.
Let’s dive right in and learn from Nick Stageberg on how to invest in real estate.
[00:01 – 11:36] Opening Segment
- We introduce our guest, Nick Stageberg
- Nick talks about his background
- Nick goes over his city Rochester, Minnesota
[11:37 – 18:45] Tech Start-Up For 9 Years To Real Estate
- Nick talks about venture capital to private equity
- Being creative and blending tech and medical into real estate
[18:46 – 27:16] It’s Not A Quantitative Game
- Bad Investing Tip
- The basic safety culture
[27:17 – 40:24] What Would A Perfect Situation Look Like?
- #1 KPI is happiness
- Using an energy index
- Tracking residential satisfaction
[40:25 – 47:20] Closing Segment
- Final thoughts
- Nick’s book recommendations:
“We want dynasty assets is what we call them, assets that we hope to die with.” – Nikolai Ray
“I can promise you that every other KPI on any dashboard, on any metric is subordinate to the happiness of your staff.” – Nick Stageberg
“So something we were kind of working on in the side for many years. And then eventually, you know, it just got to a point where that was clearly what we should be doing full time with our time and we got to financial freedom” – Nick Stageberg
“You have to have people with complementary and if she wasn’t there kind of keeping an eye out for risks, I probably would buy every deal, lease every tenant, like I would have run us off the cliff ten times over by now” – Nick Stageberg
Connect with Nick Stageberg! See the links below:
Go to his Facebook page to connect with Nick Stageberg. Visit his Website.
From Tech To Real Estate with Nick Stageberg
Anthony Vicino: [00:00:14] t-shirtHello and welcome to Multifamily Investing Made Simple, the podcast that’s all about taking the complexity out of real estate investing so that you can take action. Today, I am your host, Anthony Ticino of Invictus Capital, joined as always by Dan. I’m not wearing a black V-neck t shirt today. Kruger What? No, black me. You’re not wearing a black V?
Dan Kreuger: [00:00:36] I think the dress code. I don’t know.
Anthony Vicino: [00:00:38] You’re wearing a white V, so you’re still some on brand, but I’m wearing the black V. I came prepared.
Nick Stageberg: [00:00:45] I came in to get the memo. I was supposed to have the.
Anthony Vicino: [00:00:50] No, you look great. You look great professional. Like, you know, we just, you know, dress codes. They’re important
Nick Stageberg: [00:00:56] For you. Look very good to Anthony, but not big in the white. I’m sorry.
Dan Kreuger: [00:01:01] I know it’s dangerous. I like spaghetti and I also like white t-shirts.
Anthony Vicino: [00:01:04] I always panic when I wear like it’s a stressful day for our listeners at home who are not watching the video and they have no clue what we’re talking about. Like this is this is making for a weird audio program. I can’t see the visuals. Let’s talk about real estate. You know, if you’re at home, you’re on the treadmill. If you’re driving to work right now, you probably noticed another voice on the call with us. That’s because we have a very special guest with us today, another fellow Minnesotan holding it down up here in the Great North. We have Nick. I don’t actually know how to pronounce your last name. Is it Staggs together?
Nick Stageberg: [00:01:37] It’s the Scandinavian last name, very appropriate for Minnesota.
Dan Kreuger: [00:01:40] You’re a little bit far off. Where are you going to go on stage? Big stage right
Nick Stageberg: [00:01:47] Now. We’ve been wrong. My wife’s a trooper for taking my last name. I can’t believe it. Yeah, yeah,
Anthony Vicino: [00:01:52] I like it. I think it’s a good name. So for the listeners at home, let me give you a little bit of introduction to Nick and what he’s cooking with over at Black Swan Real Estate. They’re a family-owned and operated real estate investment company with over ten years of experience owning and managing a rapidly growing portfolio based in Rochester, Minnesota. For those that are not from Minnesota, that’s where the Mayo Clinic is based. Out of just a little bit of context there. It’s a very awesome Little City. And they believe that the success of their business is not measured in dollars or dollars, but by its reputation and relationships. So without further ado, Nick, welcome to the show, man.
Nick Stageberg: [00:02:24] Thanks. It’s a pleasure and an honor to be here.
Anthony Vicino: [00:02:27] Yeah, I’m always psyched when we talk to fellow Minnesotan investors because for whatever reason, we’re few and far between, you know, I think Nashville and the Southeast, they get all the love. But as
Dan Kreuger: [00:02:38] I say, there’s a lot of people up here that invest, but all of them invest out of state that there’s not they don’t I don’t
Nick Stageberg: [00:02:44] Want to I don’t want to dive into the weeds here, but we have benefits in other states. And I love the Minnesota story. So two things without getting political or whatever, but our state is better positioned than any other state in the country for the coming climate change. And our state has more reserves of freshwater, free freshwater. Alaska has more, but it’s all stuck in glaciers. Our state has more reserves of free freshwater than any other state. So I’m not saying what will or will not happen in the future, whether or not you subscribe to these trends. But Minnesota will likely be doing very well in the future relative to some other states. You know, if you’re in the southwest and stuff, you may notice you don’t have any water anymore and you might be buying it from Minnesota here in the not too distant future. I don’t know what that looks like, but I know that it means I want to have real estate in a state that has water and is in a livable climate,
Anthony Vicino: [00:03:37] Not a long enough time frame. Minnesota is going to become like the new Florida as the water. We’re going to be the last bastion and everybody’s going to come to us up here in the north. It’s going to be great, but it might be a little bit of time from now, I don’t know. But, Nick, tell us, what does attract you to investing specifically in your market? It’s in primarily Rochester, right?
Nick Stageberg: [00:03:57] Yeah. Yeah. So if you go to our website to blacks on real estate, we’ve got a whole bunch of information about our market. I think it’s one of the best-kept secrets in the country. There are more public-private partnership dollars per capita being spent in this community than any other community in the entire country. The Destination Medical Center initiative, it’s tens of billions of dollars being spent on a community of less than a quarter-million. It’s just it’s like Dubai here. The growth in this community, the population growth, the job growth, it is it’s a high regulatory climate if you’re comparing to investing in the Southwest or something like that or the southeast. So there are some barriers to entry here. But if you know how to literally play by the rules and work with those local regulations, I think it’s one of the best in those markets in the whole country. That’s certainly done very well for us, where this isn’t the only market that we’re in, but it is our favorite market at this time.
Anthony Vicino: [00:04:58] Nice and do you so I love Rochester, and I have nothing but great things to say about it, but let’s play devil’s advocate for a moment and ask the question because it is one of those communities that is leveraged very heavily in the medical community and in one of the critiques might be very similar to Detroit in the early 2000s. Is that something that you guys worry about? Is it if the Mayo Clinic and the medical community go away? What’s that mean for Rochester?
Nick Stageberg: [00:05:23] Yeah, it is the trillion-dollar question. It’s something that we do seriously discuss frequently. It’s a no-no. It’s a bad investing principle or whatever to invest in any community that has a single employment driver. I worked at the Mayo Clinic for years. My wife worked at the Mayo Clinic for years and we’re very familiar with that, that enterprise. And it’s difficult to describe the scale of the organizations with the largest employer in the state. It is an international organization. So the Mayo Clinic owns an international airport. It owns an international air fleet. It’s registered with the FAA as an airline because it has so many aircraft and that is just this teeny, tiny, tiny corner of the enterprise. But they just think, you know, we really need to be able to get our VIPs from Dubai to Rochester more quickly and efficiently. So let’s go ahead and own an international airport and an airline. That is how this organization thinks they have a one-hundred-year plan time frame that they’re operating on and being inside of the organization. We would go spend one hundred thousand dollars on some effort or whatever, and we would go to executive leadership with what we had done. And they would say, OK, is there any way that this could be improved? Is there any way this could hurt someone here? Were we OK? Well, how can we fix it? So it’s going to cost like a million dollars to make it a little bit better. OK, let’s go spend a million dollars like their dedication to quality and advancing the frontier of science. Like it just it has no limits, really. So being inside the nation, I think that the Mayo Clinic will probably be here still advancing the cause of medicine long after our state and national government have come to an end or something like that. That’s me that’s my personal theory on it.
Dan Kreuger: [00:07:16] I mean, really, what would have to happen for a world-renowned, literally world-renowned medical facility to cease to exist
Anthony Vicino: [00:07:25] Is just going to wonder, has that actually ever happened? And granted, we don’t want to use that is like the rule of thumb. Like just because it’s never happened doesn’t mean it’s never going to. I think the title of your company, Black Swan, is you know, it’s going to say a case in point. But yeah, it would truly take a black swan event. It would seem
Nick Stageberg: [00:07:44] Rochester’s routinely voted or ranked as one of the top three or five most recession-resistant communities in the country, one of the top three or five most desirable places to live. There was a streak where I think ten years in a row, it was the best place to live in the whole country, according to Money magazine. And never in a million years I have ever predicted a global pandemic. Right. That’s a that’s not something that was ever on my underwriting criteria radar or anything like that. And yet look what happened. Our community emerged stronger, frankly, from it than than than anything. And, you know, it was not like Rochester wasn’t impacted, but from an economic perspective, from a social perspective, probably less impacted than literally any other like the whole country. Our county, Olmstead County, has better mortality rates, as grim as that is. But fewer people died here, not super surprising given the cohort that’s here. More people are vaccinated, fewer people infected. Like I never could have even imagined that these were statistics I would never know or care about. And yet these are the statistics. And so it’s not that surprising to me that that happens. So pick your crisis, a financial crisis, a political crisis, a global pandemic crisis. It’s likely that this community will be better positioned than just about any other community in the world to cope with it.
Dan Kreuger: [00:09:15] Yeah, kind of aligns with Minnesota as well, just in general, if you look back at how our economy as a state has performed over the years, throughout past downturns, we’re always so much better off than a lot of the other markets around us. You know, those hot markets that are really great, but things are good are typically inversely doing just exponentially poorer when things are bad. So that volatility goes both ways. I think people forget that. So Minneapolis may not be or I should say Minnesota might not be, you know, the sexiest city-state to talk about. But honestly, it’s stable, which is why we really love it.
Nick Stageberg: [00:09:56] Absolutely. And you can go to, like the iron range. You can go to western or southwestern Minnesota. I mean, those are more like the Dakotas than they are like. So the triangle between Minneapolis, St. Paul, Mankato, and Lacross, where Rochester is the center of that hub, I believe it’s 90 percent of the population of the state is in that triangle. So Rochester is right at the center of that triangle. That’s where almost all GDP is generated. So I think if you think about Minnesota, you think about this big shape, but really it’s a very small shape where the people and the money are made up. And so Rochester is right in the center of that triangle. And I think it’s it’s certainly not a primary market by any means. It’s not millions of people, population, or anything like that, but it’s a very good market. I guess maybe I should be going up and talking about it on a
Anthony Vicino: [00:10:54] Podcast, although our debate is coming down there. They’re coming for you, Nick.
Nick Stageberg: [00:10:58] Obviously, if you want to come to this market, you’re probably going to give me a call first, because it is a very insular market. There’s a small group of people that control almost all of the residential rental real estate in this community. And we’re all very good friends with one another. And it’s a community that is has a lot of regulatory hurdles that need to be crossed. So, I mean, it’s it is prohibited to be an out of town landlord in this community. If you don’t reside in Olmstead County, you’re one of the six surrounding communities, counties, rather, you cannot own and operate the rental property in this area to prevent out of town slumlords from even if I didn’t know that property.
Dan Kreuger: [00:11:37] So how did you get into this? Because you mentioned before that both you and your wife worked at Mayo. So I’m assuming you weren’t buying real estate for mail. You were doing something unrelated. How did you switch from what you were doing before to what you’re doing now? And then if you could tell us a little bit more about what your portfolio looks like and what you guys are focusing on.
Nick Stageberg: [00:11:57] Yeah, so I talked to Anthony about this a little bit last time we chatted. And so we were kind of meandering path through this podcast. Sure. But I love it. So I actually have a whole background in technology and did a tech startup in Oklahoma City over the course of nine years. We went from thirty million in venture capital to one hundred million private equity sales. I actually grew up in Rochester, moved to Oklahoma City for school, and then stayed there for the startup. That’s where I met the woman who became my wife, who became a doctor who matched to the Mayo Clinic for her residency. So the one I did not plan on coming back here, but literally like the one thing in the whole universe that brought me back here by sheer coincidence, brought me back here. I had no idea what the heck I was going to do in Rochester, Minnesota. Is this like a grizzled tech startup veteran? And I interviewed for one job at the Mayo Clinic and they’re like cash. We really want to do this Intrapreneurship thing, just like how Amazon and Facebook and Google, have startups within their umbrella. They’re there to innovate. And so may I want to do tech, a tech-developed startup, and have a consultancy that would compete with outside consultancies for software in all the contracts. And seemed like a really good idea. Should be like on the front page of Forbes magazine. I don’t think they realized how cool that idea was that they’re trying to come up with. And they’re like, but how the heck are we going to find this like grizzled, experienced tech startup person in Rochester, Minnesota? And there I was.
Nick Stageberg: [00:13:23] So they hired me on the spot and did that for three years, went from a handful of people to thirteen teams of engineers that I was leading at the end, doing about a third of all new development for the entire enterprise. So that was just an awesome wild ride. I’m a spiritual guy. I think my path is guided. And it was awesome doing the pressure cooker tech startup in Oklahoma and then serving an organization like Mayo. It’s hard to describe just how virtuous that organization is. They make it clear like, you know, you’re here for a paycheck. No one’s getting rich here, but you’re going to really love the time you spend here. People work there for fifty years. It was hard for me to leave even though I’m not a corporate guy. It just it’s just such a nice place. But the whole time doing real estate on the side, my wife going through med school. Obviously, she’s the best of the best selected for the Mayo Clinic and stuff, working just her heart out, she’s a heck of a lot smarter than I am, and she’s helping with the real estate thing the whole time as well. We’re out there laying ceramic tile in our first single-family investment property that we bought in Oklahoma City and stuff while she is miscarrying our first child, just a million crazy, amazing real estate stories that I could share with you about that kind of phase of our portfolio. So something we were kind of working on in the side for many years. And then eventually, you know, it just got to a point where that was clearly what we should be doing full time with our time and we got to financial freedom or whatever, whatever you want to call it.
Nick Stageberg: [00:14:57] And so this is what we’ve been doing full time now for two years. And so my wife is my full partner in the business and she works full time with me. And this is what we do full time. So we take the kind of the all the. Principles and culture of medicine and technology, both of which are very kind of fashion-forward thought ecosystems, I would say that the way you manage people and projects and technology 20 years ago is how things are starting to come into fashion in popular culture today and then safety culture. And there are so many things for medicine that we then also apply to real estate. And that’s really the thing that I feel like sets us apart, is that we have these really diverse backgrounds that were then real estate and real estate. If I’m going to be, you know, a little bit blunt is is a very regressive industry. You know, technology, culture, management, like things in real estate, are frequently done the way they were done 50 years ago. And little has changed. And the typical real estate investor who has a significant portfolio might be 70 or 80 years old. So it’s not surprising why that’s the case. So it’s so that’s a very long story about our past. And I think some of the things that really make us special and different is having these different backgrounds and applying them to the real estate industry
Dan Kreuger: [00:16:24] As to say, because you guys have basically two very different lenses that you’re looking at things through. So you get to kind of counteract each other and make sure that things are getting done the right way while looking at it from two very different perspectives, which is really important that I talk about that a lot. What we’re talking about partnerships and finding people that have all studied skill sets that you can work well with together because you can’t really and they usually say this better than me, but you can’t really have two of the same person teamed up together because it just doesn’t really doesn’t work. You both want to do the same stuff. You both are trying to avoid the same stuff. So it’s not quite as productive as you might think just because you guys get along really well, but have some offsetting skill sets, which is absolute.
Nick Stageberg: [00:17:05] One of the things that people ask us about the most is how my wife and I can be together literally twenty-four hours a day and thrive. And it’s that right there we have we’re certainly not the same person by any means. And getting on the same page is not always easy. But we have very different perspectives and different skill sets. And her strong feminine energy wants to gather and connect. And she demonstrates the largest Facebook group of real estate investors on Facebook. And we’ve got our kind of ecosystem that we we do live Q&A with and stuff. And she does all that. And that’s not that’s just not a skill set that I. I mean, I’m thirty-eight years old. I can’t figure out Facebook. I’m just like three years too old for that. She actually is three years younger than me. I just realized that maybe that’s why she’s so good at Facebook. But then I love doing deals and throwing masculine energy. I love hunting after the next deal, the next opportunity. And when you kind of with those powers combined, we’re able to achieve great things that neither of us can do alone. So I agree totally. You have to have people with complementary and if she wasn’t there kind of keeping an eye out for risks, I probably would buy every deal, lease every tenant, like I would have run us off the cliff ten times over by now, so.
Dan Kreuger: [00:18:30] I love it. You’ve got to have one person that’s like not very risk-averse and then one that is so that you can actually make progress finding opportunities and then the other one steps into a kind of check them and make sure you’re good to go. But if you have too many people that are risk-averse, that you’ll never get anything done
Anthony Vicino: [00:18:46] And vice versa. If you’re both risk-neutral, then you’re going to get hurt probably pretty badly. There’s a couple of things there that I want to unpack that you mentioned about principles and you specifically mentioned safety culture, which is something I want to dive a little bit into because that’s an interesting phrase that I hadn’t really thought about, how that might apply to real estate. But before we get there, let’s talk about the bad investing advice, because we’ve already talked about we’ve debunked one of the myths already of investing in real estate, which is like you need to be investing in a market that has really diversified the economic culture. And, you know, that doesn’t always have to be the case. So what is your bad investing advice? Something that you hear all the time that you go? I don’t agree with that.
Nick Stageberg: [00:19:27] I love that question. That’s that’s fantastic. So my very strong opinion is merely an opinion, but it’s a strong one, is that real estate investment is a qualitative gain. It’s not a quantitative game. Now, you need to be able to do the quantitative part to be able to run a pro forma. You need to know your way and excel backward and forwards. One of those partner personas needs to be an Excel person, or it’s probably not going to that you’re really not going to have a good time. It’s easy to not make money in this game. But I see a ton of investors who, you know, when you’re coaching and stuff and people reach out and they’re like, OK, give us your calculator, can we buy your calculator? And I’m like, that is the least valuable thing that we have to share with you. You know, people they’re targeting a certain cap rate or a certain whoever wants a 10 percent cash on cash rate return. Well, I’ll tell you what, I can sell you a 10 percent cash on cash rate return asset. It’s going to be declasse and it’s going to have insane outsized Capex and non-recurring expenses that recur all the time. And it’s going to have an economic vacancy that’s inconsistent with its physical vacancy. And it’s just going to struggle and it’s not going to appreciate. And you know what? I bet that asset it’s been foreclosed on twice before and you will be foreclosure number three, my friend. It’s 10 percent cash on cash all day. And yet and yet it will ruin you. And when you look at.
Nick Stageberg: [00:20:56] Is this an asset that I’m going to be excited about owning 10 years from now, 15, 20 years from now, and a Warren Buffett principles, you ask Warren Buffett what’s the optimal hold period for an asset? And he says forever. And if you aren’t getting into it with that in mind, there’s a good chance you’re doing something wrong. So that’s kind of our approach. We don’t we’re always talking like commercial brokers and stuff. And yeah, what are your criteria and stuff? We want quality. We want dynasty assets is what we call them, assets that we hope to die with. And that doesn’t mean that they have to be Class A.. Plus, I’ll be honest, there’s a lot of class stuff out there with an indoor golf simulator and wave pool and stuff like I don’t know how shiny those assets are going to be 20 years from now either. Maybe not so shiny. Maybe there’s going to be a better amenity out there. And there’s nothing special about your asset that makes it stand the test of time. So that’s the bad investing business, right? There is a way to target certain cash on cash rate return or a certain cap rate, or is it to run your investment portfolio off of the spreadsheet? You should be able to walk the asset and know in your bones in 60 seconds or 60 minutes at most if this is something you want to own or not and then you work backward from there, what’s the purchase price that makes sense? What makes sense on a five or 10-year-old period or whatever?
Anthony Vicino: [00:22:19] This is something I talk about a lot, which is how you make your money matters, and if you’re buying an asset that is rundown class neighborhood someplace that you don’t feel safe walking around at night time, it could deliver fantastic returns. But you’re going to live in a state of constant stress and anxiety because you just never really you’re always waiting for the next boot to drop. And that’s not really the way that I want to invest long term. And so when you move towards quality and I would say not secure returns, but more conservative, cautious, realistic returns, and you’re not shooting for the moon. You’re just you’re happy with what you’re getting because, at the end of the day, you sleep well at night. And, you know, it’s going to be standing in one hundred years because it’s been standing for the last hundred years. And it’s going to always be in demand because it’s built to last. Like there’s a lot to be said about that.
Dan Kreuger: [00:23:12] So basically, just try to hit a bunch of singles and doubles and stop looking for your own home runs and those unicorn deals. Yeah, but
Anthony Vicino: [00:23:19] If you never strike out, you’re going to win
Nick Stageberg: [00:23:21] And you might get in the park, home run every now and then. That’s happened just before you take it. Warren Buffett says that the ideal profile for any investment is one in which it delivers a consistent, modest rate of return with the random chance for a wild upside, which is a really weird string of words like that. Sounds like an oddly specific kind of profile, right? Well, what the heck falls into that category? Well, there’s a lot of things that don’t fall into it, right? Like gold probably doesn’t. But Krypto well, crypto is too volatile to be the steady, regular rate of return. The real estate falls in that category perfectly. Right. It’s going to deliver consistently, but probably nothing too exciting. But every now and then you might have a redevelopment opportunity or a Whole Foods goes in next door. We had the utility company drill under our property for utility easement and we just get this giant check for no good reason, essentially. And there actually are quite a few investments that fall into that kind of profile. If you seek them out and people, they swing for the fences on these home run deals and they strike out again. Warren Buffett’s first rule of investing is to not lose capital on principle. And rule number two is to see rule number one.
Nick Stageberg: [00:24:41] So I love the basic safety culture, but this is like one of my favorite ideas as ubiquitous in medicine. I’ve not really heard of it outside of medicine or aviation would be another place for safety culture. So. So in the 80s, a bunch of airliners went down and no one could figure out why and because they didn’t have a good safety culture. So you’ve got two pilots, right. Who flies the plane. You’ve got a pilot and co-pilot who flies the plane. Pilot, that’s right, of course, you are the most experienced person they should be at the helm, right? Well, it turns out that when that happens, the plane crashes because the co-pilot does not have the authority to challenge the decisions of the pilot. So the pilot is going in for a landing and is about to run into a mountain. And the co-pilot sees it but isn’t quite sure how to bring it up. And hoping the pilot pulls up and is saying all sorts of oblique, vague things like, you know, I don’t see any runway lights. And, gosh, the clouds sure are thick today, but they’re not saying we’re going to crash because they don’t have the authority to do so. There’s not a safety culture. So they flip the script and required that the co-pilot start flying the plane and then the pilot has the authority to challenge the decisions of the co-pilot and all of a sudden plane stop crashing.
Nick Stageberg: [00:26:10] And medicine has a very strong safety culture as well. So everyone has the authority, the right, the responsibility to call out anything that might potentially violate patient safety, that might potentially harm the patient. And you can’t get in trouble for making a mistake. The only thing you can get in trouble for is not reporting on the state for holding your tongue. That is something that is the highest offense, safety, culture. And if you just set some ground rules aggressively and consistently and consistently message to your team that you live in a safe culture, that you eat feedback for breakfast, you’re going to get a lot of interesting feedback that you may not expect because, you know, in most teams, there’s one person flying the plane and there they’re landing courses not to be questioned. And if they crash into a mountain, well, I guess we all go down together standing stalwartly behind that leader or something like that. And it turns out that’s just a really terrible way to lead organizations and to lead teams and to get things done. So just my little
Anthony Vicino: [00:27:18] This safety culture there reminds me of a lot of really fantastic books, The Checklist Manifesto. And I think in both instances, what’s really interesting is when you look in the medical field, it’s the same situation, right, where nurses and say the surgical room don’t feel like they have the authority to challenge the surgeon when they’re making a mistake. And so they stay quiet. And it would lead to all these issues and all these downstream effects in the same way that if the pilot or the co-pilot or the stewardess or whoever can’t chime in and challenge and then everybody dies silently. And that’s not a very helpful scenario. But what’s really cool about that book is checklists are a great way of making sure that everybody is having a voice and going through the correct process, but only if everybody feels comfortable in the culture of expressing dissent and saying, hey, we’re doing this wrong, we’re not on the checklist. And so for you guys in your company, because you guys are vertically integrated with your own property management team, I assume that there are employees involved. How are you manifesting this on a day-to-day basis? Do you guys have a checklist that you’re using? Like, what is the systems that you’ve implemented to deliver the highest quality product to your residents possible?
Nick Stageberg: [00:28:31] Yeah. So is very serendipitous. So I was actually sitting down with someone earlier today making them a job offer for our organization, and they said that when they go into work in the morning in their current situation, they dread it. And because I asked him what would a perfect situation look like for you? And I said, well, here’s what it looks like today. I would love it if when I went to work in the morning, I was happy to be there. And so I showed them my KPI. So as the leader of this organization, my number one responsibility is the happiness of my team or my energy level is a good euphemism for it because people feel ashamed in American culture to say they’re unhappy. How crazy is that? But it’s OK if you are low energy on your scale, want to do with your energy level. We have check-ins every Monday and Wednesday at three a.m. We have a check and we go through everyone’s KPIs and we go through our value pipeline of units. We’re acquiring units that we’re renovating, units that we’re placing, the service units that we’re turning over. The recent move-in so we can do follow-ups with our tenants to make sure that they’re happy with the leasing process.
Nick Stageberg: [00:29:43] Moving process. Everyone has KPIs for that and everyone has perfect visibility on the entire value chain. And one of those KPIs is my KPI, which is our energy index, our happiness index. At the start of that meeting, everyone has a rate on a scale of one to ten what their energy level is, what their happiness level is. And then we average it and it goes right on the board with everything else. Before the nineteen-eighties, it was responsible, it was the CEO to look out for employees in. Our happiness and satisfaction were their primary mission, and then in the 80s, something changed where shareholder value came to Trump the needs of the employees and the customer became right. Not your staff. I can promise you that every other KPI on any dashboard, on any metric is subordinate to the happiness of your staff. If your people are excited to come into work, if they’re tap dancing into work, as Warren Buffett would say, they’re going to do amazing work and everything else will fall into place. If it looks like you have a low vacancy or low turnover costs or whatever your other metrics are, but your people are not happy to be where they’re at, you have a very big problem that is going to surface in a big way sooner or later.
Nick Stageberg: [00:31:04] So I would say that right there is the epitome of our safety culture, that we have all these other metrics out there that everyone can see and everyone can see if there’s a problem if we’re crashing the plane over here, over here, if there’s a bottleneck here and we can all see whether or not we are happy to be here. And I think there are very few organizations that have the brutal honesty and integrity to not just collect that data because I don’t think there’s a lot of organizations who have the courage to collect the data, let alone share that data. We collect the data and instantly share it with everybody on the spot. Now, it’s anonymous. It’s anonymous. You know, you can submit one if you’re at one today, that’s fine. There’s no shame in it. But we need to know that as a team where we’re at and we all need to know that at the same time. So I would describe that as the epitome of safety culture right there.
Dan Kreuger: [00:31:52] That’s where did you get the idea of that energy index and quantifying that Dragonite.
Nick Stageberg: [00:31:58] So it’s so very succinctly. So I worked for Dell in my technology life and Dell is amazing at this stuff. They are better at KPIs and metrics than any organization ever heard of. And they have every metric, every metric you could ever imagine. And they figured this stuff out before anyone else did. They were 10, 15 years ahead of the rest of corporate America on using KPIs and transparency and visibility to manage very large teams. And what they came to figure out was two pretty interesting things. One. Twenty-five percent of the stack ranking of your rating was not your metric, but the metric of your team. So it was impossible, mathematically impossible for anyone to ever excel if their team was sucking wind and so huge interest to make sure your team is as powerful as possible. If you can go to five minutes of coaching with the guy sitting next to you and give him a 10 percent bump ineffectiveness or whatever, that trumps that point zero one percent of effectiveness you can get from doing your job. So whenever you’re doing any kind of KPI, anything, you have to include the team. The team is everything. And then the second thing is to have all these metrics. But there’s really just one that matters, and that’s happiness, so. Everything that you did when I was there, I’m not sure what it is like today because they would change these things from time to time, those other things, they would have to change up because people would modify their behavior to the metric and everything.
Nick Stageberg: [00:33:40] But everything that you did, they would just have this little questions survey. On a scale of one to 10, how happy are you that no matter what your role was, so so you have a boss rate your happiness with your boss on a scale of one to 10, you take a phone call from an end-user to fix a computer? That and the user gets a survey. And it’s not like, would you like take a survey? Just like as you disconnect, it’s just like on a scale of one to 10, how happy where you are. Five, thanks. Bye. And in my department, which was a reality we worked with like the high-level clients and everything like that, any time anyone rated less than the seven, it was an immediate escalation to that person. Supervisor trying to wrap your mind around that. Every interaction you have, if you are not delivering at least a seven out of 10 in that interaction, it’s an escalation to your supervisor, as a fanatical, fanatical dedication to customer service. And so just. Yeah, scale one to ten. Are you happy or not? And if it’s over, if it’s a seven or better, that’s usually OK. If you really want to cook your noodle, you can’t do a seven, you just get seven from the scale. Have a six or an eight.
Anthony Vicino: [00:34:54] We’ve applied the same thing in my other businesses because everybody always defaults to seven. That’s right. It’s safe it’s a safe number, but it means nothing that it doesn’t help. Six tells me it’s closer to average. It tells me it’s closer to exceptional stuff.
Nick Stageberg: [00:35:08] You know, I didn’t tell my team this, but let me look at my last few. I didn’t tell them about everyone. Everyone says or maybe I did at one point. So I’m not reading the numbers, but I promise you that that holds true when we look at our KPIs, here’s our team happiness.
Anthony Vicino: [00:35:26] And I’m curious, too, is this something that you apply on the resident level as well? I would assume that you’re tracking resident satisfaction as well. Like what? What are you doing to
Nick Stageberg: [00:35:36] Go one to ten? How happy are you with your leasing experience? With your moving experience?
Anthony Vicino: [00:35:41] Is that just right after leasing is an ongoing process like once every six to
Nick Stageberg: [00:35:46] Ten days actually moving?
Anthony Vicino: [00:35:47] Ok, do you do anything like that on a follow-up basis then like six months later or after they
Nick Stageberg: [00:35:52] Get and I’m going to be really honest with you, I implement all these systems in my past startups. Our current company is only two years old. So these are very nascent systems. So it’s exciting. Don’t let me represent something that is not as mature as it is in reality, but I can tell it so. But I can tell you that the team yesterday was an eight-point six, seven days ago. It was an eight-point four and fourteen days ago it was a six-point nine. So it was happening then. Right direction. I don’t know. I don’t think there was anything, what fairly early part of the month we didn’t do a dance party that day
Dan Kreuger: [00:36:32] And that’ll do it.
Nick Stageberg: [00:36:34] Yeah. We tried to kick off our meetings with a three-minute dance party, so we picked out a song. You guys get up and I mean, it’s tough to get together day thirty in the morning and talk about this like this. It’s hard to get excited about that. So it’s tough
Dan Kreuger: [00:36:45] Not to be an aid after a dance party. I mean, come on,
Nick Stageberg: [00:36:48] It’s kind of
Dan Kreuger: [00:36:49] Ringing this. All right. Irreducible of numbers a little bit.
Nick Stageberg: [00:36:52] Absolutely. Absolutely. I admit to that.
Anthony Vicino: [00:36:54] Hey, man, if you’re not cheating, you’re not trying hard enough.
Nick Stageberg: [00:37:00] But I think I think most of our success comes from referrals like our tenants. So we try to set a bar so high that. People can’t help but talk about it and so tenants, we’ll talk to our tenants, we’ll talk to prospective tenants and say you won’t believe how amazing these guys are. You’ve got to just talk to them. They’re so amazing. I know you don’t even need a place to live but just talk to them. And we want our employees raving about how much they love working for us to other people. And that should be a recruiting metric. I mean, that’s our most recent here. That’s where it came from. I don’t even know where you came from. Just one of our employees refers to them. And it’s like I live in a world where we kick off our meetings with a dance party. That’s where we want to be part of, you know, and literally, just make people happy. Better than a seven out of 10 happy. Your customers, your investors, your staff, your vendors, like my director of operations just emailed me and said, hey, is it OK if I reach out to every single one of our vendors and offer to take them out to lunch and just buy them lunch? I said absolutely. I never would have thought of such an idea. I don’t know why she thought of it. But as a leader, I get my team into a peak state where they are excited to be here and just come up with ideas. I mean, how much does lunch cost? Like 15 bucks. Do you think we might get a little bit better treatment from that vendor? Season’s coming up here. We’re going to have a lot of upset tenants with non-functional air conditioning and no. And we’ll be back up a week from every HVAC contractor in town. Maybe we’ll be at the top of the list. And we just them once, like,
Dan Kreuger: [00:38:32] Definitely won’t hurt the story, that’s for sure.
Nick Stageberg: [00:38:35] Yeah, yeah. It’s of course, nothing. It’s just being happy and having energy and caring and everything else takes care of itself for the most part. I mean, it’s not quite that simple, but everything else is a downstream consequence of just
Anthony Vicino: [00:38:50] Tapping into something that I refer to as just your return on karma, which is like you’re doing right by your employees, you’re doing right by your residents or suppliers, and you’re just putting out goodness and happiness into the universe. And that has a way of manifesting and coming back around. And I’m not like an overly like hoo-ha type person where you just manifest the destiny that you speak out into the universe type person. But I really do believe that if you do good, that good comes back to you. So when you prioritize the happiness of your staff and the happiness of your residents, the downstream consequences are so massive that you’ll never be able to measure it on a spreadsheet. And that’s I think that’s a reason why a lot of people don’t do it, is they think like, what’s the Ahli? I need to be able to quantify this. You can never do that with these types of soft things.
Dan Kreuger: [00:39:46] It’s kind of like the Bezos mindset to the middle of reading Amazon Unbound. It’s pretty cool, actually, if you haven’t read. But that’s been his philosophy from day one is like, let’s just provide amazing customer service. We might lose money for a really long time just focusing on that. But instead of trying to make a profit, we’re going to make all our customers ridiculously happy. And I think it’s working pretty well for him. It seems to be doing all right. We just said they wanted to
Anthony Vicino: [00:40:12] Leave the customer-centric company in the world, right? Yeah, that that’s their stick.
Dan Kreuger: [00:40:16] I bought eight things on Amazon during this podcast.
Anthony Vicino: [00:40:18] So thank you, Jeff. Appreciate you, Jeff.
Nick Stageberg: [00:40:25] That was the Dell story I had. I think I’m a spiritual person. I think my path is guided. And I was at Dell for a very short time as the technologist. I happened to join the organization like moments before Michael Dell took the company back over and took it back to private. As he stepped back, the company went public and floundered and just kind of just went downhill and very passionate and effective leader like the middle of the night rambling emails to the entire organization. And I don’t know, I like Michael Dell. And he just made it clear that we have to satisfy people. And so I’d be on a call with this customer who is literally losing one hundred thousand dollars an hour because this ancient piece of equipment they bought from Dell a decade ago died. And there’s like no replacement for it in the world, not in this hemisphere. And we had marching orders to do whatever it took to make people happy and unlimited resources. He just said, spend whatever you have to spend to make people happy. And so we would add Sky Tech. They had planes and helicopters and we could go get that drive, that replacement device from the other side of the world, fly it over there.
Nick Stageberg: [00:41:42] And I’m on the phone with seventeen people and I’m like, all right. I can see it’s in the 747 right now. It’s flying to you at several hundred miles per hour. I estimate you’re only going to lose one million dollars. We have a sky tech in a helicopter right now. Flying is going to be waiting for the device to arrive. And then it’s like a twenty-four-hour call. We get off the call and there’s a technical account manager on the line and he just says, where are you happy with the service you received today? He said, yes, he said, is there anything you want to do about it? They said yes, says, all right, look, I look forward to our follow-up call. We haven’t got some sleep. And then they would go spend 10 million dollars on new equipment and new contracts and stuff the next day, like the R y was instant. I could see it. It cost us one hundred grand for that, like, you know, grandiose dispatch or whatever with like a ten million dollar sale the next day. So, you know, sometimes it is abstract, sometimes it’s not. I got to see it happen before my eyes. I’m grateful for that experience.
Anthony Vicino: [00:42:42] That’s really cool, man. So, Nick, this conversation went a little bit of a different direction than I had anticipated, especially for a multi-family investing podcast. But that’s OK because I think a lot of the lessons that we dove into and talked about here today are applicable, regardless of what you’re doing in life, if you’re a business owner or you’re trying to be a real estate investor or even just trying to be a passive investor, like a lot of our audience are passive investors. They might be listening to this and think, well, how does this apply to me? And the way I would turn this to say, really think about when you’re working with operators, how hard are they working to make you happy? Is that a thing that they even care about or are they just treating you like a no and nobody likes to be treated like a no? So this has been a really refreshing conversation, just a reminder that treats people good and they’ll do good work for you. So before we let you out of here, let’s get a book recommendation out of you. I have a feeling that you probably have a couple up your sleeve. That would be something that Dan and myself would be really interested in reading.
Nick Stageberg: [00:43:38] Absolutely. Dan is like
Anthony Vicino: [00:43:41] Chomping at the bit. Look at him over that.
Nick Stageberg: [00:43:42] He’s excited when you maybe haven’t heard before is the alchemist. I don’t know if you’ve heard of that book before.
Dan Kreuger: [00:43:48] Yeah, I’ve heard of it, but I haven’t read it.
Anthony Vicino: [00:43:49] It’s like Paul
Nick Stageberg: [00:43:50] Cologne. Well, I’m not sure how to pronounce that name. Yeah, I’m not sure that. Yes, just the nature of such good things
Anthony Vicino: [00:43:57] About it,
Nick Stageberg: [00:43:58] It’s life-changing, it’s life-changing. I don’t know why, but I decide to pick it up as an audiobook. When I was driving the moving truck from Oklahoma to Rochester and I almost had to pull over, I was just trying so hard. And it’s just the life-changing idea that you can always go back. Why do people why do they have so much fear? Why are they why do they fight change? It’s because they think that it’s one way, you know, but that’s not how life works. You can always go back and you frequently do. And when you go back, it’s often better than it was before because you’re changed for the journey. And it’s just an unbelievably powerful, powerful book.
Anthony Vicino: [00:44:42] Sounds awesome. I’m looking for it. I’m going to check that out. I’ve been hearing people have recommended that one to me multiple times, but putting it on the list once and for all, I will actually read it.
Nick Stageberg: [00:44:52] Yeah. Seek out your personal legend. We have a bathroom that my wife has decorated in the theme of the Alchemist and we just have some copies of it sitting there for people to take when they are guests at our home. But it’s also completely random. I don’t know why she just got an idea to do that I thought was a brilliant idea. And it’s a great book. It’s a great read.
Anthony Vicino: [00:45:13] Awesome. I’m looking forward to it. So, Nick, before we let you go one last time, where can people get a hold of you if they want to reach out?
Nick Stageberg: [00:45:19] Yeah, you can go to Black Swan, DOT real estate, shoot me an email any time. Nick at Black Swan Team Dotcom, we have the Facebook group, Single Family at Scale. If you just a single-family at school dot com or look up a single-family real estate investing in Skillern on Facebook, we do a ton of single-family stuff, although if you haven’t read the front page of CNN lately, there aren’t so many single-family homes out there these days. You’re doing a lot more multi-family stuff these days. We see a huge opportunity in multi-family, a lot of assets that didn’t have such a good twenty, and in that industry your underwriting on an and cap basis. So if twenty twenty-one could be a better year, there’s some opportunity there. So we’re doing a huge amount of single-family stuff. In twenty we saw this huge opportunity from June to Q1. Twenty, twenty one thought as many single-family properties as we could for ourselves, our clients, and right the second we’re doing a ton of multifamily stuff because we see an equally massive opportunity in that space. So single-family, telecom, and single family-scale Facebook group are also a great place and we just do a ton of free coaching and webinars and stuff like that for anyone who wants to wants to connect.
Anthony Vicino: [00:46:37] Very cool. Well, Nick, one last time, Matt, I really appreciate you. And for our listeners at home, as always, we appreciate the heck out of you. Thank you for taking a little bit of time out of your day to be with us. And we look forward to seeing you next week.
[00:46:50] Thank you.
