We’ve all heard the term “rat race” before. It’s used to describe a job or pursuit that is meaningless or unfruitful, like a rat trying in vain to earn some cheese. The crazy thing about it is that we use this word to describe the type of job that so many people go to every single day—jobs in corporate America. The “rat race” is the never-ending pursuit of more money, a higher position, or esteem, and is associated with stress and long working hours.
A lot of people want to exit the rat race and pursue their dreams of freedom, flexibility and financial independence. The two guests, Jenny Gou and Steven Louie, on this episode of the Executive REI Show were able to do just that!
Jenny and Steven are co-founders of Vertical Street Ventures and are recent converts to the real estate investing world. Both of them left their corporate jobs in 2020 and used the pandemic as a time to jump into real estate, equipping themselves with education, enthusiasm, and transferable skills. They quickly found investing success and now have $90 million in assets under management!
They sat down to talk to us about exiting the rat race, but using those transferable skills to find success in real estate. We also talked about tips for new entrepreneurs and investors.
Exiting the rat race
Steven and Jenny have similar stories, having both worked in the corporate world for many years. Both worked in sales and sales management for large companies. They shared the stress they had in those jobs, always feeling like there was more, more, more to do. They worked long hours and were frustrated by the high taxation on their sales-commission salaries.
There were certainly push factors like long hours and stress that led both Steven and Jenny to quit their corporate jobs, but there were also pull factors towards real estate. Steven describes how he started getting “sucked in” by educating himself, going to conferences, and finding a mentor. For Jenny, personal and family difficulties really clarified what was important, helping her find her “why” and realize the things that are truly important in life.
Here are some of the things that were attractive about real estate investing and made the jump easy:
- Continual learning and growth—there are always new and exciting opportunities in real estate.
- Time flexibility to spend with family and loved ones.
- No ceiling on what you can do or how much you can earn.
- Tax benefits for real estate; this is especially attractive to sales professionals who often surrender a flat-tax rate of 40% on commission.
Using transferable skills
Despite no longer wanting to be part of the corporate world, both Steven and Jenny are quick to share how useful their corporate training was for a career in real estate. Working in sales in a corporate setting gave them the transferable skills needed to quickly achieve success in real estate investing.
Transferable skills are also often referred to as “soft skills,” such as communication, management, system-thinking, or teamwork. These skills can be taken between any type of work and are useful. They differ from “hard skills” that are really only applicable to one field, such as computer coding.
The transferable skills that Jenny and Steven identified as helping them succeed in real instate investing include:
- Technical knowledge: In real estate, you need to know how numbers work and the bottom line. Strong technical and financial knowledge is an important skill in both sales and real estate.
- Building relationships: Real estate is a fairly “old-school” industry where building relationships, picking up the phone, or shaking someone’s hand really matter. So, as sales professionals, Jenny and Steven were able to hone those people-skills and apply it to real estate, building strong relationships with partners, contractors, or property managers.
- Problem-solving: Things can always go wrong—well they do always go wrong. Having a problem-solving mindset, focused on solutions, goes a long way in both corporate America and in real estate.
- Systems-oriented: Corporate jobs put an emphasis on systems, processes, and procedures. Jenny and Steven shared how they were able to easily implement effective and efficient systems to manage tasks and responsibilities to stay on track and stay accountable to each other. For example, they have weekly check-in meetings with their team to go over tasks and deliverables.
Focus on mentorship and education
Both Jenny and Steven talked about the importance having a mentor was to their real estate journey. Mentors are people who have gone before you and walked the path that you want to walk. So, instead of trying to do it all by yourself, why not follow someone else’s advice who truly has the knowledge and experience?
In addition to mentorship, education and continual learning are also so important to success in real estate. Jenny spent the early days of the COVID-19 pandemic immersing herself in the world of real estate to learn as much as possible. Then, when opportunities presented themselves, she was able to capitalize on them with that new-found knowledge.
Here are a couple tips for new real-estate investors:
- Find a mentor. There are programs that will set you up with them, or you can attend conferences to network and get to know people.
- Learn as a limited partner (LP) before becoming a general partner (GP). An LP financially invests in opportunities, but does not have to take on additional responsibilities, so it is a great time to learn about the industry without additional risk.
- Understand the fundamentals. Real estate is not quite rocket science, but you do need to have a firm grasp on the basics and make sure you understand the terminology and different theories and concepts. Devote yourself to really understanding the basics before you get involved in any deals.
What to look for in the market
As mentioned, Jenny and Steven were able to go from zero real estate assets to nearly $90 million under management in the company Vertical Street Ventures in just over a year. It’s pretty incredible, and their journey can teach us a lot. Jenny and Steven were committed to seeking out the best deals and really learning what to look for in the market.
Jenny and Steven work primarily in the multifamily real estate space and have some great advice on what to look for:
- Location matters, down to the zip code. Most people understand that location matters in the broad sense, but it also matters on a street-by-street basis. It’s important to analyze each individual area for the market potential and not assume all locations are the same just because they are close together.
- Look for units where you can add value. One example is where you can add in washers and dryers, or other appliances. This is a value add to the residents, as it improves quality of life, but also allows you to increase rents and earn more income.
- Rely on people who know the neighborhood. Relationships are important and relationships with people who have ground-level knowledge are even more important. Jenny and Steven work closely with property managers who live and work in the neighborhoods they buy from to understand the area completely.
- Get a mixed floor plan building. Having mixed units like one, two, and three bedrooms is good for attracting residents.
- Look at properties with long-term owners. Buildings with owners for 20+ years, say, mean that there are opportunities to capture increased revenue because of deferred maintenance.
- Look at the submarkets. There are a number of factors that determine a good area to buy in, and one of the most important is household income. Steven shared the resource city-data.com which provides demographic breakdown of all zip codes in the US. By using this tool, you can get to know what the neighborhood is like and if the average household income can pay the rents you want to charge.
Despite your best efforts and following the above tips, things can still not always go according to plan. So, it’s important at the end of the day to do your due diligence, and make sure what you are purchasing is what was advertised.
The executive tip of today’s episode is also a good way to end this article: you’ve got to find your why. Just like Jenny and Steven had their reasons to leave corporate America, each real estate investor has to know why they want to get into this industry. Your why could be time freedom to spend with family or financial freedom to vacation multiple times a year—whatever it is, get clear on your why and then make a plan to get there.
If you want to learn more about Jenny Gou and Steven Louie’s company, check out their website at www.verticalstreetventures.com. You can also connect with them on social media, including Facebook, LinkedIn, and Instagram.