Sep 26, 2022
We spend so much time working on our business, but do we even have time for ourselves?
Joining us again for another episode is Sterling White. He is a seasoned real estate investor and proud founder of Sonder Investment Group. With more than a decade of experience, he and his current partner have been directly involved with both buying and selling over 100 single-family homes and scaled his personal portfolio to up to 500 units.
Sterling believes that when we work on ourselves, we bring more value to our business and to the people around us. He talks about how he is taking a step back and finding ways to improve himself. He also shares important strategies and mindsets we need to navigate the current market conditions.
[00:01 - 07:49] Positioning Yourself in a Market Shift
- Welcoming Sterling back to the show
- The market is shifting and now is a good time to sell
- Real estate is overpriced but it’s still better to invest than to leave the capital sitting in the bank
- They are hitting a pause on their previous acquisition strategies due to the economic environment and will be flipping the switch once things start to turn
[07:50 - 20:59] Keeping Your Mind Sharp
- Sterling is improving himself by doing things beyond just business
- Accept these truths:
- People are going to be people
- There are things that you cannot control, especially what’s happening in the market
- It’s important to be self-aware in order to make sound investment decisions
- Practice patience and avoid FOMO
- Assess risk and protect your downside
- If given a chance, what’s one thing Sterling would do differently in his career?
[21:00 - 21:58] Closing Segment
- Reach out to Sterling!
- Links Below
- Final Words
Tweetable Quotes
“We've got quite a bit of uncertainty that's going on with the rise of the interest rates and I just believe that what people are paying for properties right now is just not sustainable.” - Sterling White
“People are going to be people and they're acting in their best interest, which many of the times, their best interests may not be in your best interest.” - Sterling White
“I've learned from people who are further along than me in their journeys, they've had those dry spells where they didn't acquire. But when they did acquire and things did shift in the market, they really scaled.” - Sterling White
-----------------------------------------------------------------------------
Connect with Sterling at SterlingWhiteOfficial.com and subscribe to his YouTube channel!
Resource Mentioned:
Connect with me:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!
Email me → sam@brickeninvestmentgroup.com
Want to read the full show notes of the episode? Check it out below:
[00:00:00] Sterling White: The first point is being self-aware and that's one of the things that through philosophy, I've also been studying human psychology. And it's just one of those things that, to answer the question that you have is human beings, I wouldn't call it irrational, but it's human nature, so meaning that if something's going up, let's say an investment in stocks or crypto, whatever it is, let's say stocks, that when everything's going up, that's when people have the fear of missing out effect and they start investing.
[00:00:41] Sam Wilson: Sterling White is a multifamily investor in the Midwest. He has owned up to 500 units. He's also been a BiggerPockets contributor since 2014 Sterling. You've been on this show before, and certainly appreciate you coming on back here again with us today. Welcome to the show.
[00:00:55] Sterling White: Yes. And thanks for the intro there and the energy, the tone, and everything. I think I just may clip that part and just have it at the beginning of my podcast or just whenever I enter a room, I'll just pull my phone out and play that.
[00:01:09] Sam Wilson: That's awesome, man. Sterling, it's great to have you back on, you know, there are for our listeners, maybe they didn't catch your previous episode, there are three questions I ask every guest who comes in the show: in 90 seconds or less, can you tell me where did you start? Where are you now? And how did you get there?
[00:01:23] Sterling White: Yeah. So started in Indianapolis, Indiana rougher parts of the city single mother, fraternal twin brother, ended up getting into real estate. This was 2009 when things were not so good in the economic environment. As a construction laborer, I read the book Rich Dad Poor Dad which rich and wealthy people did not get that way by being laborers, so then I started buying single family. I got up to 150 and then transitioned 2017 to multifamily, got up to about 500 units. So there we go. That's 31 years and 60 seconds I believe is what I did.
[00:01:56] Sam Wilson: Yeah, you did, man. You definitely kept it under the 90-second threshold there. Certainly appreciate that. That is awesome. So you scaled up to 500 units in your own personal portfolio. And then things have changed. We've had a market shift, like tell me what you guys are doing today and how you guys are positioning yourself.
[00:02:15] Sterling White: Yeah. So I've been selling over the years and just have one apartment left, which is 156 units, which is now under contract and waiting to close. There was a fire at the property and now going back and forth with insurance. So it really pushed it along, but actually received a million dollars more than what we had on our five-year projections. And we're two years into the project. So that just goes to show with where we're at in the market at this moment. And I believe that there's going to start to be even more of a shift so want to have that dry powder available and ready.
[00:02:48] Sam Wilson: That's really kind of wild. So, I mean, and we're seeing that across how many assets, I mean, everybody in the multifamily business seems like, oh, we're hitting our projections sooner than what we thought. We are getting more than what we projected. And it seems like for you, you think it's a good time to sell?
[00:03:03] Sterling White: Oh, yeah, for sure. With what people are paying and it's just one of those moments that, well, the perfect time I would've said would've been, what, six, eight months ago, but now is the other from that. But it's what people are paying in the overall sentiment and people are, I mean, just wanting to park their money in real estate. So when you get all of this influx of cash, yeah, it's a really good time to sell.
[00:03:26] Sam Wilson: What do you expect? So what do you expect to happen? A lot of times you look at market dynamics to say, okay, now is a great time to sell. That is because there is anticipation of something different in the future. What are you anticipating?
[00:03:39] Sterling White: So one, we've got quite a bit of uncertainty that's going on, the rise of the interest rates, and also, I just believe what people are paying for properties right now is just not sustainable. And I'll give you a prime example. The 80-unit that we sold, bought it for 3.35 million in 2018, and then a year and a half, two years later sold it for 5 million. I have no way, how that person made those numbers work 'cause we're actually operating the property, we're saying, how did they make that work. So I believe those deals will start to come around.
[00:04:12] Sam Wilson: So what you're saying is that you are in, and again, that this is kind of not asking to predict the future, but your conclusion is that people have a hypothesis. That there's people that have overpaid for properties. And then they're going to come back here in the near, you know, 6, 12, 18 months and say, oh my gosh, we've overpaid for these. And now we have to unload 'em at a discount and you're anticipating picking those up.
[00:04:37] Sterling White: Yeah. And I made that mistake overpaying for a property and ended up having to sell what was this, 12 months, a year and a half after that, 'cause didn't raise enough cash to take care of the improvements, because overpaid for the property. And if would've raised that money up front, it would've affected the investor returns. So it was already an okay deal, without raising the cash. So in essence is that same mistake, I believe, people are making. Not everyone, I'm sure some people are, buying deals at a good price, but just from what they bought it for. I just have no clue how they're making it work.
[00:05:11] Sam Wilson: I mean, and again, that's not your problem necessarily when someone else is overpaying for a property, you just, but you can obviously collect the proceeds from whatever it is they're willing to overpay so you see it is now a good time to sell. You think, yes. What do you do with that capital once you have it? I mean, that's something that a lot of people are, you know, questions that a lot of investors and us as a passive investor but also active investors have is how do we protect the purchasing power of our capital? I mean, the published inflation rate is, what, 9%? Let's say you get a windfall of millions of dollars. You unload all your assets. So you're sitting on millions and you go, oh, now what do I do with it? How do you protect that from the, you know, erosion of inflation?
[00:05:52] Sterling White: That is a great question 'cause I don't have the answer to that 'cause one real estate's overpriced. And then I've invested into other sectors and when I invested it ended up getting cut and some of those investments getting cut in half and actually went down. So it's exactly what you mean, it's uncertain times with what to do with their cash. I still decide to invest it because having it in the bank is you're losing money due to inflation, but I don't have the answers to that. It's very tough right now.
[00:06:20] Sam Wilson: Absolutely. Absolutely. Are you guys still in the acquisition game? I mean, are you still looking at assets, still underwriting? Are you doing anything on that front?
[00:06:30] Sterling White: Not at this moment. I just haven't, 'cause the approach that I've always taken is, on the multifamily side, is the direct to owner and outreach. So build a whole entire system with that. And it's a lot of work that goes into that. And so for that is the amount of work versus the ROI and what I saw from an economic environment, just couldn't justify the efforts that we put in for the ROI that we got.
[00:06:54] Sam Wilson: Yeah. And you guys had, for those of you, again, that are just tuning in and have not heard Sterling's first episode, when we conclude this, I'll go back and find the actual episode number. Normally I know that if I have a repeat guest and I didn't look that up ahead of time, so I apologize, but if you go back and find that episode, you'll hear some really creative sourcing strategies and outreach strategies for acquisitions. Sterling did some really cool things. I won't repeat those here, but certainly, worth a re-listen or a first-time listen if you want to go back and find that episode and find some really cool methods that Sterling was using to find direct to owner deals. So that's really interesting. So you're saying that the amount of time and effort that it takes to ramp up, especially your really unique strategy is just not there right now.
[00:07:35] Sterling White: Correct. Exactly. And still, once things do start to turn, already have that foundation set and the knowledge, it's just returning it back on.
[00:07:44] Sam Wilson: Right. It's flipping the switch and then you have, you know, capital in the bank and it's flipping the switch. What are you doing right now to really stay sharp? And then to know when the market is turned to a point to where you want to get back in?
[00:07:58] Sterling White: So it's stabilizing the current assets being that apartment, but also is I've taken on more, I wouldn't say more, but different hobbies. Meaning is I've taken the time to step back and actually sharpen more of my acts, meaning, my mindset which is taking on more philosophy, learning a different language. And so those are more things and rabbit holes I've actually gone into during this time.
[00:08:22] Sam Wilson: Now that's really cool. And, you know, there's always that confluence of money and time that people rarely run into in life. Like, you know, everybody seems to work for those golden years where it's like, oh, Hey, you know, look, we're retired. And we got time on our hands and money in the bank. And it's like, that's just, you know, it happens at few intersections, I feel like, in most people's lives. So it sounds like you may have found that intersection albeit potentially temporary. And this is what you're pouring into. So tell me on the philosophy side of things, why do you think it's important to really work on the way you think?
[00:08:55] Sterling White: And I wish more people actually talked about, these types of things, 'cause, yes, business is fantastic, always want to improve on that side, but I believe actually as a human being, you improve yourself. Not only you'll be better of value to people out there and just the common world, but also in your, business as well. One of the philosophies I've been studying or just, reading up on is, like, stoicism, there's daoism. And just one of the things I've taken on is that people are going to be people, accepting that, the good, the bad, and the ugly, and just to not take anything personal that some people may do and that they're acting in their best interest, which many of the times, their best interests may not be in your best interest. So accepting that. And then also is the things that you can control and can't control, which there's a lot of things out of our control, such as if Sam came on this podcast and just leaned in onto me and said, you know what, you were I don't know, make some things up, you're a bad investor, you're underwriting all this. I can't control that, but I can control my actual response to it.
[00:09:54] Sam Wilson: Right. Yeah, man, and that's funny. You mentioned that. Somebody said it, that life is 10% what happens to you and 90%, how you respond to it. There we go. Get my numbers right. And getting that mindset set to where when things happen that are outside of your control, you can just go, you know, I can't fix that. The only thing I can do right now is decide how much energy I want to devote to whatever that event was and then figure out how I want to respond to it. And outside of that, I got to just let it go.
[00:10:22] Sterling White: Yeah. And I'll give you an example. In my earlier days, when I started the companies I had that is I was working on myself, but there was always, there's different layers to it. And I'll give you a prime example. If someone sent over a not so nice email to me and they had multiple points is sometimes I would just each and every point I would respond back to that email. But now I'll give you an example. If an employer, someone sends that over to me, I'll just, instead of emailing and respond to 'em or getting triggered or frustrated or mad, one, I don't take it personal and I'll just hop on the phone call with them, just to talk it out, and completely take the angle. And many times is it actually what they had in the email was not intended of how I actually perceived it.
[00:11:05] Sam Wilson: Right. Right. That's absolutely great. Yeah. I find that as well, hitting those things or not hitting 'em on the head, but just addressing 'em head on. It's like, Hey, you know what? We're not going to email back and forth. We're not going to chat over whatever it is, Google Chat. We are going to just talk. And a lot of times that, whatever you had perceived is not actually what was going on there. That's really cool. How is this affecting you as an investor? And maybe if you're working on your personal philosophy, how does it affect the way that you foresee yourself investing in the future?
[00:11:34] Sterling White: Well, there was that one example that I just mentioned there from the business side, but also the accepting things that I can't control is I I'm not able to control what's out there in the economic environment, such as the Fed increasing the interest rates or let's say some Black Swan event happens in the war. We'll have World War III. Hopefully, this doesn't get banned for me saying that, but it is that those are events that I cannot control. So in the event that those do happen, I believe that will actually be an opportunity for investing because when there's blood in the streets, that's the best time to actually invest.
[00:12:08] Sam Wilson: Yeah.
[00:12:09] Sterling White: Counterintuitive advice though 'cause when it's actually happening, you're like, oh gosh.
[00:12:13] Sam Wilson: Yeah, I know. And you bring up an interesting point there and it's something I've I've long thought about, but I don't have an answer to, which is that investors typically invest at the completely wrong times. Going back to your point there in the beginning, which is that you're unloading all your assets because people are paying numbers for 'em that you can't have it make mathematical sense. You're like, this is just dumb. Sure. You can buy it. I'll let you buy it for that. No problem. But one of the things that I struggle with is getting out in front of, you know, 'cause we syndicate opportunities, I don't know if you syndicate your deals or if it's all in-house, but you know, educating our investors for the right time to invest to when everybody else is afraid, being able to instill confidence in the people around us. How do you see yourself doing that?
[00:12:58] Sterling White: Yeah, it's one, the first point is being self-aware and that's one of the things that through the philosophy, I've also been studying human psychology and it's just one of those things that, to answer the question that you have is human beings, I wouldn't call it irrational, but is human nature. So meaning that if something's going up, then let's say an investment in stocks or crypto, whatever it is. Let's say stocks, that when everything's going up, that's when people have the fear of missing out effect and they start investing. And then once things start to, a Black Swan event happens in the economy, when it's at the top, because at the bottom when people were scared, that's actually when the wealthy and the smart money came in. And then when things start to go up, retail or the common investor comes in at the top, the smart money actually starts selling off. And then let's say a Black Swan event and then from there, at the bottom, then that's when retail starts to sell. So it's just understanding that psychology and just when things are fearful, and let's say in the real estate market, 2008, 2009, 2010, that was actually the best time to buy.
[00:14:06] Sam Wilson: It most definitely was the best time to buy.
[00:14:08] Sterling White: But the scariest.
[00:14:09] Sam Wilson: Oh, for sure, for sure. 2009, I mean, could you imagine going out and taking down a 30 or 40 million apartment complex? In 2009? People would be like, so you're doing what again? Like, is anybody making money in that? None of their friends are making money in it. There's not these, you know, 2x, 3x equity multiples in two and a half years that everybody's seeing. So it's a really interesting kind of thing that you have to figure out is how to communicate to investors and instill confidence, you know, when everything does seem to be, or could potentially be going in the direction that most people aren't comfortable with.
[00:14:41] Sterling White: Exactly.
[00:14:42] Sam Wilson: Tell me this. If you were to give advice to somebody else looking to get in the business right now, or looking to scale their commercial portfolio, and somebody came to you and said, Hey, Sterling, I'm looking to jump in, man. What should I do right now? What would you tell ' em?
[00:14:56] Sterling White: So is this a person just getting started?
[00:14:59] Sam Wilson: Let's say they're like you and they had a single family portfolio, but they want to get out of that game and get into bigger assets.
[00:15:05] Sterling White: So I would say is, I mean, one, patience, but also is if you're on social media or whatever the case is. You're saying, okay, I need to get a deal now 'cause I see all these other people getting into it and I haven't, and I no longer want to be in single family, and I need to get this, deal now is the way to deal more credibility or whatever reason, you're just in that mindset that in more of a non-patient is I would just say patience. It's okay. I know we're in the microwave age and it seems as if everything happens overnight, but that's not the case. And one thing I've learned, 'cause if we're speaking in today's, terms on in 20 22, is that, one, yes, I haven't acquired anything for the past several years, but I've learned from people who are further along than me in their journeys. They've had those dry spells where they didn't acquire. But then when they did acquire, when things did shift in the market, they really scaled during those periods of time. So that's one thing as I always study others, but also constantly take a step back and practice patience as much as I can.
[00:16:06] Sam Wilson: Man, that's great. That's great advice. Yeah, because, I like the way you put that in the microwave age because it's so true. It's so true. We see it. We hit the button and 30 seconds later, we got a hot, well, I'm going to call it a meal. I'm not going to call it food, but I'm not going to call it a meal. Most of what comes out of a microwave, I'm not going to qualify, I wouldn't qualify as probably food, but either way, it's something to eat. So we're used to that instant. And especially as you see on LinkedIn or you see on Facebook or BiggerPockets, and you're like, oh, Hey, cool. So and so just acquired another massive, you know, transaction. You're like, golly, I'm just sitting on my thumbs. Oh, maybe.
[00:16:40] Sterling White: Yeah. And you don't know what all the work that they had that went into that. That could have been an owner that they've been following up for three, four years now that they just didn't have the time to put all that in the actual post or give that backstory, or they could have just overpaid for the deal. You don't know none of these things. So, and that's the thing that, what is it, the self-development and mindset, I went into is just keeping up with the Joneses is that is one of the worst things. And that's why I work to not be on social media as much as I can off of it.
[00:17:12] Sam Wilson: That's interesting. That's very, very interesting. Yeah, because the FOMOs and the feelings of like, I'm not doing enough or I'm not moving fast enough or things like that, none of that really generates any positivity, I think, in our life, or actually moves the needle for us. So I think that's a really, really cool point. Tell me this, so you guys, you're selling off your portfolio, you're working on yourself, you're working on your mindset, you are developing your own philosophy. You said you're learning a language as well?
[00:17:39] Sterling White: Yeah, Spanish. I can speak it, but [speaks Spanish]. I don't want to get too much, but it's difficult.
[00:17:45] Sam Wilson: It's difficult when people talk to you. Yeah.
[00:17:47] Sterling White: Si.
[00:17:48] Sam Wilson: I caught it. I caught it. Well, you're ahead of me, man. I can't speak it. So I can't. And then that's that's really, really cool. I love the ability and the willingness to keep your mind sharp. That's a really big, I think, piece of the puzzle. I guess the last question maybe for you is this. You know, so we talked about some risks that are out there in the marketplace and you see people overpaying for things. Are there other risks that other people are taking on right now that you feel like you've found a creative way to offset and/ or avoid altogether?
[00:18:17] Sterling White: I'd say is believing that cap rates are going to keep steadily compressing. So that's one risk when looking at and analyzing deals, let's say right now, it's the current properties trading at, let's say a five cap instead of underwriting in, let's say a three to five a year projection that it's going to be at a four, maybe even the three. I'm just using that, for example purposes, that likely just keeping at a five, five and a half, or maybe even a six. So that's what I would say is a mistake, to avoid.
[00:18:43] Sam Wilson: No, I think that's really, really great. Yeah. And who knows? Who knows where the cap rates go and who knows, the Fed may come out and, just keep interest rates where they are. They might cut 'em. They might just keep raising 'em. I don't know
[00:18:56] Sterling White: Who knows? But that is the thing. As an investor, you just have to assess your risk and protect your downside. And I see it, commonly people not protecting their downside. And a quick story is that there was an investor, they were buying a property, and they were buying the property based upon a corporation signing on to the lease, which would be premium rates for their tenants. And I asked them, well, what does the deal look like if the corporation does not sign on 'cause they didn't get anything on paper. And they said I wouldn't buy the deal. And that's what I mean, it's just not protecting their downside. 'Cause if they buy the deal in that case, the corporation doesn't sign on, now what are they going to do? It's not protecting their downside 'cause they couldn't ship that to market 'cause it doesn't make sense.
[00:19:37] Sam Wilson: Yeah. Oh, man. That's, yeah, that's scary stuff when you hear deals that they're only good deals based upon one major investor or one major source of...
[00:19:46] Sterling White: Everything has to go right basically.
[00:19:48] Sam Wilson: Exactly, it's like, I mean, it is owning a business with one major client. It's like the people that, oh, this is my million-dollar-a-year client. And then what do you do when that client goes somewhere else? You're toast.
[00:19:58] Sterling White: Exactly, yeah.
[00:19:59] Sam Wilson: Man, that's wild. Sterling, one last question for you here is this. If you would rewind the tape over your entire investing career, what is one thing that you would do differently and why?
[00:20:09] Sterling White: Man, and I know you probably get this quite often is if I were to change something that could be, I don't know if you watched the movie, The Butterfly Effect with Ashton Kucher. But basically, he kept going back in time to always change one little thing, but when he would change that thing, it would impact the future heavily because of that one. So that's the thing is that, but if I were to go back, just for the podcast purposes, I would say being more patient with myself when it comes to accepting the things that you can't control and not control. And when first, initially starting out, I had to have so much control that in this department, this department, this, and really get into the nuts and bolts and oversee. But if you want to quickly scale and then also free up your mind from that, 'cause there's a lot of mental energy that goes into that. So that's what I would just tell myself that you don't, just learn to let go.
[00:20:59] Sam Wilson: Man. I love it. Absolutely love it. Sterling, thank you for taking the time to come on yet again here on the podcast. Look forward to, you know, putting this out and letting the world hear where you guys are in your investing career. Certainly love it and love what you guys are doing. If our listeners want to get in touch with you or learn more about you, what is the best way to do that?
[00:21:16] Sterling White: Yes, you could find me at sterlingwhiteofficial.com. One more time, that is sterlingwhiteofficial.com. And then on YouTube, I contribute quite a bit of content on a weekly basis. Just type in Sterling white. Look for a bald, handsome guy. I'll come right on up.
[00:21:29] Sam Wilson: Sounds great. Sterling. Thank you again. Have a great rest of your day.
[00:21:32] Sterling White: You too.