You can’t do everything alone if you want to manage a big business. In that case, you have to choose your partner well. Join your host Sam Wilson to dive deep into the importance of building trust in your business relationships. In this episode, our guest, Steven Louie, is joined by his co-founder and managing partner at Vertical Street Ventures, Jenny Gou, to share their pathway to success. For Steven, one of the important aspects to success in real estate investments is building relationships and trust. For Jenny, choosing the right people and partners is key. Stay tuned and know how both of them ended up together and how they’ve built their relationship and trust, among others.

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The Power Of Building Trust In A Business Partnership With Steven Louie And Jenny Gou

Steven Louie and Jenny Gou are both Cofounders and managing partners at Vertical Street Ventures. They have acquired $90 million of commercial multifamily real estate in less than one year from startup. It’s a fascinating story I am looking forward to jumping in. Jenny and Steven, welcome to the show.

Thanks for having us, Sam.

Thanks, Sam.

To you both, the pleasure is mine. As the interviewer, it’s a little bit harder for me when there are two of you. Forgive me if I make some mistakes as we work through this show. I’m used to doing one-on-one but there are three questions I ask everybody who comes on the show. Can you quickly tell us where did you start? Where are you now? How did you get there?

I’m happy to start. I started working in Corporate America for many years at a company called Procter and Gamble. I started with single-family homes, as many of your audience, I’m sure. I saw the light at the end of the tunnel with multifamily due to scaling. I quickly jumped over, left my corporate job in February of 2020 and launched Vertical Street Ventures with Steve in early 2021. That’s what we do, we focus on multifamily acquisitions.

 

For myself, Sam, I started like Jenny in a single-family home. Corporate America guy all my life, started as a financial underwriter then worked my way up the ladder to the corner office, I call it. About halfway through my career, my CPA introduced me to real estate. There are a lot of tax advantages to investing in real estate. I took advantage of that and started in single-family homes. I have a very similar portfolio to Jenny’s then we connected through various meet-ups. Now, I have acquired quite a few multifamily apartment investments. It’s quite the team sport out there and it’s great to meet folks like yourself as well as my partner, Jenny, through networking.

I’d love to dig into that story a little bit because that’s a common struggle that a lot of people have because this is a team sport. Single-family, you can do on your own if you want to wear a lot of hats and you want to work hard but in multifamily, there are too many moving pieces. It’s one of those things that you’ve got to build out the team either horizontally or vertically. How did that relationship transpire? At what point did you know that, “We can build something together?”

When I left my corporate job, my goal was to find somebody who I could shadow, essentially find a mentor, be their intern for lack of a better word and learn as quickly as I could to start scaling. That’s when I found Steve at one of these multifamily meetups. He was speaking at an event and met my husband. I met him a few weeks later and we essentially spent the better part of 2020 working together. Me, helping him manage his properties in Arizona, underwriting deals every day. Him still working full-time. It was a win-win situation because we took advantage of each other’s strengths and weaknesses to improve. That’s how we came to be and decided by the end of 2020, this is a good relationship. We had interviewed each other for 6, 9 months and decided it was a good fit. That’s when we did our first project together but we didn’t start the company until early 2021 so we did a couple of months after that.

Steve, are you still working in the corporate world? Are you out?

I left at the end of 2020 to focus 100% of my time in multifamily with that little focus. It’s hard to balance. A lot of times, when you’re in corporate, you’re getting pulled in different directions and that’s what your responsibility is. I’m always a fan of, “You have to do your job well, where you’re at and great things will happen.” I took the plunge at the end of 2020 and was able to press forward and be with Jenny and myself, build a team and an operation that allowed us to acquire apartments across the board and have a presence in Arizona. The focus was all in one location. We focused on Arizona and that’s where predominantly most of our growth is, Phoenix and Tucson.

There’s a lot of tax advantages to investing in real estate. You can start learning them and take action now.

Speaking of Arizona, I don’t know if you guys saw the RealPage report that came out. It was something about rent growth in Arizona. It was Phoenix in particular. It was something like 22% year-over-year rent growth. That’s an astounding number for a particular city. On that thought, it’s tough. The bulk of 2021 is for experienced operators to find and take down deals that make sense. What did you guys do differently or better that allowed you to take down $90 million in deals in your first year?

It is the relationship. Steve leads a lot of our acquisition works so let him elaborate on this more but be able to build a good relationship with brokers. Not just brokers, everybody that is part of this team that you’ve built in order to get deals. In fact, we landed off-market deals from our lenders, our loan partners, not just brokers. It can appear anywhere. You got to make sure you’re continually building those relationships and harvesting them.

When you’re loan partners, tell us maybe the snippet version of that story. How did your loan partner wind up with a lead for you on a deal?

Everything is based on relationships. My belief is that everybody can learn to underwrite but those that can take it to the next level build relationships with brokers, lenders, all of the resources that are out there. By way of background, I don’t think we touched on this. Both Jenny and I have a very strong corporate sales background. What that teaches you is how to build relationships. A lot of people out there are trying to network and grab the cards and move on to the next person. Grab a card, build my investor base, “I’ll grab the card from the broker. I’ll call you later.” There are so many different connection points that brokers and lenders like to see.

Fortunately, one of the strengths that I play strongly is building a solid relationship with an individual. Once you build that relationship and relationship is built on trust. Once they trust you, you’re going to follow through. You can close opportunities. You don’t re-trade often and you’ll ultimately make their lives easier in terms of that whole process. They’ll want to do business with you. A couple of the incidents is one, the broker that we’ve done six deals with. They give us off-market deals. They give them truly off-market where maybe a handful of individuals only get those then we get the chance to bid on them if they make sense. Relative to your question around the lender, a great relationship.

 

I asked them, “Is there anybody that you recently worked with that has any loans out there or any that are going to be potentially coming off and expiring?” He’s like, “There’s a person that you should need an introduction. I’ll introduce you to him.” Not thinking it was going to lead to anything. We connected, had some drinks and one thing led to another. A couple of months later, that individual that was introduced to me said, “I got a couple of different properties here. They needed to 1031 exchange them out and we got them in our refer deal.” They didn’t go to anybody else but us. That was purely because of relationships that are out there. Hopefully, that gives your audience a little bit about what we do and what we try to spend our time on. For me, it’s not about just building up a stack of cards. It’s focusing on those key five that can help me get our business to the next level.

You asked the lender, which is any loans come and do, anything coming up for renewal. Is there anything that is out there where someone may be looking to offload that you know about? That’s a brilliant source and probably not one I’ve heard too much about on that front. Talk to us about your goals. One of the things I know that you guys set out for was a certain goal, as far as dollar amounts of deals you’re going to take down. Can you tell us what that goal was because I’ve not mentioned that yet? Tell us at what point you’re like, “We may have written that goal a little too small.”

We launched this company back in January of 2021 with a goal of acquiring $25 million in assets. We threw a number to the wall because, coming out of COVID, we didn’t know what was going to happen. We set out with $25 million. By the end of the first quarter, we had acquired a property that put us almost halfway to that goal. We said, “We might be selling ourselves a little bit short.” Come the middle of the year, we were already blown past our goal with more on the way. We ended the year with $90 million, which is so much higher than what we anticipated. We want to double that next year or more. We also want to do other things to improve the communities that we purchase.

It’s a human business. We work closely with everybody, including our residents. One of the things we’re looking to do is launch a nonprofit sometime in 2022 to see what else we could do to help the communities whether it’s the kids or the parents, the adults, what have you. We’re still fine-tuning that but that’s something we’re passionate about. We also have the passion to help others gain financial independence, similar to how we’ve done it. We’ve launched an academy focusing on the Arizona marketplace for people who want to learn how to be syndicators and operators in a market that we’re very strong in. We’ve launched that. We’re trying to make that bigger and better in 2022. Those are three of the big things that we’re trying to work on.

Going back to the team sport, there are a lot of moving pieces here. How have you been able to scale so quickly and yet, master those pieces of the equation and still think, “We’re going to go nonprofit. We’re going to go start an academy.” Those are a lot of different moving parts. Because this is an at least hands-on intensive business, what have been some things that you have done in 2021 to allow you to buy an asset, get it streamlined, and set it and not forget it but settle on, at least make it run like a machine then move on to the next?

You have to form a foundation. You have to build a foundation that is super strong.

We have good strong sales backgrounds in our previous lives from people management all the way to strategy, project management, running regions and businesses. Building a team is something we’re very good at. We bootstrapped the first couple of months to launch a startup. We quickly hired an underwriter and a tech person to help us build our systems and foundations. We’ve now hired a virtual assistant to help with the day-to-day tasks that we don’t want to do so we can focus on strategy.

We’ve also expanded to the marketing and investor relations person we’ve added to the team and our spouses. That marketing person happens to be my husband. He left Corporate America as well. Steve’s wife, Rebecca, has joined the team to help funnel some of that work to her. We’ve hired on our first asset manager to manage all these properties we’ve acquired. I read the book Who Not How by Dan Sullivan. An awesome book to help drive us into hiring and outsourcing the work that we don’t like to do and may not necessarily be the greatest success so that we can focus on things we enjoy and are good at.

Having that plan from the beginning is something a lot of us, I know myself, certainly in my real estate career has lacked, where it’s like, “We’re going to do this and this.” How did you guys set aside a certain amount of funding up front where you said, “We’re going to set aside $300,000 or $500,000, whatever it is, in order to know that we have the runway to take off, hire the right team members and build a team effectively,” or was it, “We need this person. Cost me damn, let’s go.”

We were fortunate to come off of pretty high-paying jobs from a Corporate America standpoint. Also, as our first acquisitions came in, we had three within the first couple of months. What happens with that? You do have some capital. With capital, what that allows you to do is consistently plan. One of the things that Jenny and I specifically do, we have weekly meetings to go through all the tasks that need to be divvied out amongst the entire team and a monthly and quarterly meeting to figure out what we need to do. That goes for everything. To add to what Jenny was saying, we got an HRIS system, a Human Resource Information System that’s in there. We have payroll all set up.

All of those little things have a complete accounting system. A lot of those things are typically after I get the business running, I’m going to do that. I would highly recommend to any of your audience that you start that from the beginning. If you start those processes and you have some of that in place and the websites and all those good things like we talked about at the beginning, that will allow you the opportunity to focus on what your strengths are whether it be acquisition or asset management, that we’re both capable of doing. The great thing is that both Jenny and I are technical and have that extroverted personality that when it needs to come out, we can play in each other’s shoes if we have to. If Jenny has to take a week off, I can pick up on the things that she needs to do and vice versa very easily.

 

I know we talked about this a little bit but I’m curious. Did you do any StrengthsFinder, DISC test or things like that ahead of time to see like, “What is it that you, Steve, do? What is it that I, Jenny, do?” What does that look like?

I’m a total nerd with all that stuff. We’ve done StrengthsFinder, Enneagram, the DISC assessment. All of them tell you something a little bit different but not all the same but it’s fun. When you build the team, you want to find folks that are going to compliment you and your skillset or fill in a gap that you’re lacking. That is the best and fastest way to scale and accelerate your business.

That’s a great point there. This is fantastic. I’ve loved what we’ve learned. You have transitioned out of Corporate America. Congrats. That’s a big leap. You’ve been able to take the skills you’ve learned in Corporate America and bring them over into this business, which is cool. You got a goal of $25 million. You went to $90 million. You’re scaling your team. You know your market. You are doing awesome stuff. I look forward to tracking your progress here in the next few years. Although it’s been short, I got one final question before we jump into the final four. Is there anything you would do differently that maybe would have changed, accelerated or allowed you to do things a little bit better?

It goes back to the building systems. We started out building certain systems but we probably shortchanged ourselves or thought we could piecemeal things that now we’re to having to go back and redo, which is time and effort. For folks starting over, if I had to do it over, I would do all of the things I said in the first six months because we’ve grown so fast now we’re trying to catch up a little bit to make sure that we don’t have a bottleneck somewhere. That’s something I would do. Figure out the systems you need, plan for your growth and set up the systems upfront so you can achieve it.

Firm foundation. You got to build a foundation that is super strong. If you want to get into a specific, even accounting. Accounting is so crucial. Hire a bookkeeper, accountant or a CPA immediately. I know it seems like it might be somewhat expensive or redundant but once all those receipts and everything start piling up, the longer you wait, the longer it is you’re going to be spending time trying to get that done. Coming from corporate, people took care of that stuff for us. “Here’s the receipts that we had on the trips that we went to.” We gave it over to them and the expense report was produced. Now, we’re in the midst of it. Get a great accounting and bookkeeping system in place.

Choose your partner wisely. You want to have some complementary skill sets.

That’s especially tough. One thing people don’t think about, especially starting out is that for each asset especially if you’re doing single asset, LLCs and not doing a fund, it’s a brand-new company. This is a brand-new bank account. These are brand new filings. You’re brand new. It’s a whole new set of tax returns for each and every asset you buy. To your point, Steve, if you don’t have that nailed from the get-go, it’s going to get bad upon worst upon terrible if you’re not right in front of it. The final four questions for you are these, what is one tool or resource you find you cannot live without?

My phone. I would be lost without my phone because of all the technology that I use on a daily basis for communicating, research and managing my properties. I don’t know what I would do without it.

Any answer from you, Steve?

It would be a CRM. We have so many different contexts. A CRM that can track who you spoke with and when.

Question number two is if you could help our audience avoid one mistake in real estate, what would it be? How would you avoid it?

 

It’s not necessarily a mistake that I’ve experienced but I’ve seen other folks come across as not building your right team. Jumping in quickly with partners before you’re truly vetting them out will cause a lot of headache and heartburn quickly later on if that’s not done right.

Choose your partner wisely. You do have to vet that out. A lot of times, we all want to jump in. “I got this deal in Atlanta. Let’s go do it, Sam.” We haven’t even said hello yet and haven’t even talked yet. A lot of it is because of the fear of missing out in the environment that we’re in and it is such a team sport. A lot of times we’re jumping into a situation with somebody that may be identical to us and that might not be a good thing. You want to have some complementary skillsets.

To expound upon that a little bit, that’s one of the things we always say that the first thing you vet in a deal is the team. I’m sure you get a lot of deals that come across your desk. I’m a passive investor in a lot of other people’s deals. That’s the first thing I look at as well. Most of the time, I already know you anyway. I don’t need to worry about that but I still see a lot of deals and I go, “The composition of this team is crazy.” I can look at it from the outside and say, “There’s way too many of you and you guys all don’t know each other very well. This is not going to end well.” My capital certainly is not getting deployed there. I bet that smell test doesn’t pass a lot of other people’s as well. I like what you’re saying there about building a team. Question number three, you already talked about this, Jenny but what is one thing you’re doing now to make the world a better place?

Since our properties we’ve taken over, we try to do community events as often as we can to build that community then also drive on the investor side, retention as well. We’re trying to do things that drive a win-win situation. Separately, we’re going to launch a nonprofit in 2022 so that we can blow that up, gangbusters as well. More to come on that but that’s one of our big goals for 2022.

If our audience wants to get in touch with you or learn more about you, what is the best way to do that?

You could visit our website VerticalStreetVentures.com and we’re all on all the social media platforms, Facebook, Instagram and Twitter.

Thank you so much for your time. I do appreciate it.

Thanks for having us.

Important Links:

• Vertical Street Ventures
• Who Not How
• Facebook – Vertical Street Ventures
• Instagram – Vertical Street Ventures
• Twitter – Vertical Street Ventures
• Vertical Street Ventures – LinkedIn

About Steven Louie

Steven is a Managing Partner at Vertical Street Ventures, where he is responsible for acquisitions, sourcing capital, and building key strategic partnerships. As the founder of Vertical Street Ventures, he focuses his time on revenue-generating activities.

 

 

 

 

Jenny Gou

Jenny is a Managing Partner at Vertical Street Ventures, which was established to help individuals achieve their financial goals through passive investing in real estate. As one of the Founders, she currently oversees Asset Management and Investor Relations. Her Real Estate Portfolio includes Single Family Homes and over 950+ Multifamily Units across the country.