Steve and Jill Talk with Josh Sterling (CFFL 0083)
Steve and Jill Talk with Josh Sterling
Jack Butala: Steve and Jill Talk with Josh Sterling. Every Single month we give away a property for free. It’s super simple to qualify. Two simple steps. Leave us your feedback for this podcast on iTunes and number two, get the free ebook at landacademy.com, you don’t even have to read it. Thanks for listening.
Jack Butala: Josh Sterling grew up in Lake Tahoe, California and spent 5 years as an airline pilot. He’s currently an air traffic controller at Detroit metro airport. He moved to Michigan, and began real estate investing in 2009, where he currently owns, and manages 125 units, and flips 12 to 15 properties per year. He also runs a property management company called Epic Property Management. Josh Sterling, welcome, man.
Josh Sterling: Thank you, thanks for having me.
Jill DeWit: Hi, Josh.
Josh Sterling: Hi, Jill.
Jack Butala: Pretty interesting. You know, looks like we all have a lot in common. I’m from Detroit, and Jill’s a pilot, so we could make this podcast 3 or 4 hours long if we wanted to.
Jill DeWit: Don’t forget the California thing. I just picked up on that Tahoe thing. I’m like “Wow!”
Josh Sterling: Yeah.
Jack Butala: Usually people move west, man. You moved east.
Josh Sterling: You know what? They say you only move to Michigan for money or love, so we came here for … My wife is from a town called Trenton just south of Detroit, and we came here to get into the real estate business and to be close to where she lives, so I guess both of those.
Jack Butala: Boy, I have a zillion questions, so you moved to Michigan to get into the real estate business.
Josh Sterling: Yes.
Jack Butala: Because I moved to Arizona to get out of the Michigan real estate business.
Josh Sterling: Yeah. It was a combination of some things … The airline life, as I think Jill knows a little bit about, the airline life can jostle you around a little bit, and so part of that directed me here and then I met my wife actually out in Las Vegas of all places, on a vacation. She was from here. Next thing you know, here we are. Actually, the buying old market up here. I don’t know what you were in exactly, but the buy and old market is really actually excellent up here. I think it’s a great little niche that we’re in.
Jack Butala: No, I’m sure it is. You know I left Michigan in the … When it … It had nowhere to go except up back then, so yeah I’m sure.
Josh Sterling: Yeah. Yeah. Also, I always have to clarify, when I do these things because I think there’s people all over the country, and if they’re anything like most of my friends, I’m not actually in Detroit. In fact I don’t invest in Detroit at all. I wouldn’t touch Detroit. We’re about a half hour south of Detroit and it’s a world away. I mean we’re talking night and day difference.
Jack Butala: Yeah. Well I know that for sure. I know exactly where Trenton is. It’s right before Toledo, right?
Josh Sterling: Yeah. Well we’re … Actually we’re probably about halfway between Detroit and Toledo. Basically, the downriver market.
Jack Butala: Right. Give us an overview on the industry or the micro-industry that you’re in there. You must be doing something right if you’ve accumulated 125 units since 2009. That’s great.
Josh Sterling: Yeah. I mean I guess a lot of it was luck or fortunate timing on our part. We moved here back in ’09 and accidentally got into this. My wife had a property that she had bought at the peak of the market. The thing is still upside down to this day. We still have it as a rental. It was that far above market value. We had to rent it instead of sell it, when she was doing some moving around. We listed this thing for rent and came back, I don’t know, an hour later, and we had 15 or 18 people that had called about it while we were out. Just blew me away. I didn’t know there was that much demand for rentals. Obviously, we were priced a little bit low on it. It wasn’t hot but nonetheless there was a huge amount of demand. It just … The light bulb just went on, and we rented that house out. We ended up starting to try to figure out how we could accumulate more of these properties, and this was actually ’08, so the market really hadn’t even bottomed yet here I don’t think.
Jack Butala: Right.
Josh Sterling: We scrimped and saved and did all kinds of crazy things like 0% credit cards and stuff … Just whatever we could do to get some funds together. Neither of us were really making any money at our jobs at the time, but felt like properties were on sale. We ended up buying one more, so we had two. That worked, and I learned a few things from that. I realized that I could buy them … That was kind of a turnkey property, my second. I realized that I could buy them and fix them up myself, and even have some more value-add into there. Started learning how to do the work. My dad is pretty handy. Has always done this kind of work. Came out from California and spent a month with me. We did a third one and it just started snowballing from there. With the market timing. These things were just on everything was on sale. The rents were so strong. It was just really fortunate timing.
Jack Butala: That’s great. I think it’s great … I say this to my members. I haven’t said it lately, and we have a ton of members. One of the things I try to communicate to our members is if you’re apprehensive about pulling the trigger on a deal, take an ad out in the paper. Go on craigslist, of course. Post it on the internet, wherever those things happen. See if you can get a renter or see if you can get … Whatever the end is for the property. See if you can sell it or get any action.
Josh Sterling: Yeah, absolutely.
Jack Butala: You did it the right way. You owned the property first, but if you found out … There’s a lot of people who will go out and buy a house tomorrow if they knew they could rent it.
Josh Sterling: Right.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: It’s great.
Josh Sterling: I remember thinking back before we had any rental properties, and I had the same thoughts that everybody else has. The common questions I get are how do you ever find somebody to rent it? Or what if they tear up your house? Or what if they don’t pay rent? I had all those same fears, but as soon as you actually do one, you realize that none of it is that bad. There’s really nothing that can be detrimental with a rental property. Even the worse case scenario, if you imagine it, and I’ve had some crazy stuff happen, you still come out ahead most of the times. There’s just so many ways to make money if you buy the property right.
Jack Butala: Man, you’re sure in this with the right attitude. We feel those questions almost daily I guess Jill, right?
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: Everybody’s got some different type of concern. We try to alleviate some of those concerns. Our business model is, I’d like to think it’s the … It’s the best of both worlds. We only pay cash for our property. Our typical business model is we buy property for 5, I don’t know, $1000-$5000 a piece of vacant land, and we sell it on terms for $100 or $200 or $300 a month for a really long time.
Josh Sterling: Oh.
Jack Butala: Or we buy it for the same amount, $1000, $5000, and we make sure we can double or triple our money on it before we actually close on it.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: Jill and I … I’ve done 15,000 deals this way since the ’90s so it’s kind of a time-tested method. It’s always interesting to talk to … I mean you have a … It’s really interesting to talk to somebody like you who’s … Was forced to rent a property you really didn’t want to own. I think it’s great.
Jill DeWit: Mm-hmm (affirmative).
Josh Sterling: Yeah, and what I … Going into it, we had no idea that that … That it was going to turn out and become what it became in the last, really about 6 years I guess it’s been. It’s really just a blessing in disguise going out to rent that property out.
Jack Butala: Right.
Jill DeWit: Mm-hmm (affirmative).
Jack Butala: Our … What deals are you working on right now?
Josh Sterling: Lately we’ve started doing a lot more flipping. I wasn’t doing really any flipping until a year and a half or so ago, but as with everywhere, the market really started to turn here. There was more potential to do that. It also enabled me to bring on some more … Grow my staff a little bit. Grow my team. I added a project manager which helps with a lot of my rentals as well as the flips. I added an office manager. We added a full time maintenance person. We increased the number of subs we use. We really have kind of grown the business side of things. Lately what we’re working on is right now I have a total of 5 flips going. I’ve got another … We’ll close on one more this Friday, make it 6 going in various stages. Either just about to be listed or just about to be started all the way through. We’ve also been growing our buy and hold portfolio as much as we can. We’ll still pick up single-family houses when they make sense. A lot of times, with the price point that we’re at, one of these flips can become a buy and hold rental almost with just the change of an entity for us.
That’s something we’re always looking to grow. We’re always trying to add multi-family properties. Most recently we added a 53-unit building right in our core market, and that was in the end of June this year we did that. We’ve got quite a bit of work going into that one to try to get it turned around and improve the value there. On top of that, we’ve got a management company that we’re always looking to grow. We basically manage properties for other investors in our pretty tight-knit area that we’re in, and we strive to manage those properties as if we manage our own properties. That’s the whole volume that we’re working with here.
Jack Butala: What’s the typical channel for how you source acquisitions that work and on the flip side, what’s the typical sales channel for your flips?
Josh Sterling: Okay, so on the buy side up until about a year ago, it was strictly MLS and we really had no issues getting the inventory. As the market started rising, inventory started drying up. You had to get a little bit more creative. We still will buy some stuff off the MLS but it tends to be more in the case of we write an offer, we get rejected but we’re the backup, and then 3 months later they come back and want to see if we’re still interested. We end up getting quite a few properties like that still. Not many are we getting on our first offer, first time around. We just can’t pay the asking prices for them. We have really grown our network of wholesalers. The property we’ll close on this week is from a wholesaler. We closed on one last week from a wholesaler, and one about two weeks before that. We’re finally starting to get a few more deals that actually make sense coming across the desk. Between the MLS and the wholesalers, it’s pretty much our acquisition side channel, and then on the sell side it’s just strictly MLS listing. We have been fortunate enough to sell a few of these prior to listing just through our network.
It’s always been to the retail buyer. The end buyer’s always the … Usually the first time or the second time home buyer, retail buyer.
Jack Butala: Wow, it sounds like you have it figured out. Hey, is your wife involved? Does she work with you?
Josh Sterling: She is. My wife is excellent. Very very supportive of this. She probably couldn’t tell you where half of the houses that we own are. I could tell her tomorrow I’m buying a $2,000,000 apartment building and she’d say “Okay. What do you want for dinner?”
Jill DeWit: Sounds like me.
Josh Sterling: That’s … That’s like her requirement. She is … In an effort to get her more involved, we did … She went ahead and got her real estate license. She’s actually our agent on all these sales.
Jack Butala: Oh, that’s helpful.
Josh Sterling: She does a great job with that. She’s not … In all honesty, she’s not the driving force behind it, but she’s so supportive of it that we’ve found a way to make it work really well.
Jack Butala: Hey, if you could find a way to clone a supportive wife, you’d make twice at much money at that, in that instance.
Josh Sterling: I’ll tell you what. She might not know where half these houses are. I don’t know if you’ve read the Warren Buffet book The Snowball, it’s all about his life. Anyways, one key part of that. Just always stood out to me. Is his wife, her name was Suzy I believe it was. She was kind of the same way I think my wife is. She didn’t really care much about the investing, what he was doing, but she was so supportive to the point where he never made a meal for himself. He never did laundry. She was just such a good homemaker, and my wife is so much like that that I can’t tell you how much mental relief it is to not have to think about what you’re going to have for breakfast, lunch and dinner all day long. Everything’s ready to go for you. To not have to do laundry. To not have to … All the basic things that your everyday person does, I haven’t done that. I never … I don’t think I’ve loaded a dish in the dishwasher in 5 years. It’s … That’s just … We’re very delegate. We’re very segregated on what roles and responsibilities we have and it just seems to work.
Jill DeWit: Can I say one thing? Can I pop in here because I’m noticing a couple of things.
Josh Sterling: [crosstalk 00:12:58]
Jill DeWit: You’re close. No, this is good. Josh, you sound like my father. You can operate a multi-million dollar airplane but you can’t operate a washing machine. Is that what I’m hearing? We used to joke with my dad about that. He couldn’t figure out the washing machine. We’re like what the heck? What do you do all day long, and this? I love it.
Jack Butala: There’s some brilliance in that I think. A lot of brilliance.
Jill DeWit: Mm-hmm (affirmative).
Josh Sterling: Yeah.
Jack Butala: No Bill Gates’ father, he wrote a book called Showing Up For Life, and I’d highly recommend it. He said the same thing. A different version of the same thing. He said marry up. Always marry like, marry above you.
Josh Sterling: Right.
Jack Butala: He said when that happens, then you can actually be yourself and do what you’re going to … Go do what you need to do.
Josh Sterling: Yeah, and I do know some other guys, and some other people that do this that … Maybe their spouse either is not only not supportive of it but almost challenges it, and doesn’t agree with it. I can’t imagine how tough that would be. I second-guess myself enough that if I didn’t have the undying support here, I don’t think I would be nearly where we are right now, and have nearly the potential to grow that we do. She’s a … Even though she doesn’t do much of the day to day, she really is a huge part of it.
Jack Butala: I can’t imagine that either. I can’t imagine going to work and wondering who’s on your team and who’s not on your team. There’s enough of that difficulty in the day to day real estate operation, you don’t need it from somebody at home either.
Josh Sterling: Right.
Jack Butala: Well cool, what’s your … You met your wife in Las Vegas, I’m sure there’s a story there. What’s the … What’s your whole story from … Take us from deciding to leave Lake Tahoe to Michigan to run up to yesterday?
Josh Sterling: All right. I grew up in Lake Tahoe. Most of my life there from when I was about 4 years old or so, my parents decided to move there. Grew up, went to … There’s 1 middle school, 1 high school, one small town. Really growing up there, all I wanted to do was get out of this small town. I had no appreciation for it. I’ve since learned to appreciate it very much and I get back there as much as I can. See family and friends and whatnot. I just wanted to get out of there, and I was looking … I had always been told. You know, what do you do? You go to college. You get a job. You buy a house for yourself, and you work at that job until you retire, and everyone is that dumb and happy. That’s exactly what I went for. I went to one of the best, I’m sure that Jill or your dad would know about it. I went to a school called Embry-Riddle.
Jill DeWit: I know Embry-Riddle.
Josh Sterling: All the way in Daytona Beach. Pretty much as far as you can get from Tahoe. I went there and I really did everything I could to finish that degree as best as I could. I graduated almost top of my class. Really busted my butt in college. It’s … Got out of college. The real estate market was just about peaking, but of course I didn’t know that. I just thought “Man, I better buy something now, because it’s going to be more expensive next month.” We went out, and I went and bought a condo in Altemont Springs, right outside Orlando. I stepped back, and I thought for a minute at least, I thought look! I’ve gone to school, I’ve done great exactly like I’m supposed to do. I bought a place for myself to live. I was like 22 years old at the time. I … For a month or two, or a little while, I thought I really had it figured out. I’d done everything I … The perfect strived half. I’m going to … An airline pilot at a young age and things are looking great. Fast forward a few months and I start to realize, things weren’t so great. I’ve got this condo that I can already see declining in value.
I probably bought this at the highest ever price. That anyone has paid. I mean literally the peak of the market, there was a peak, I went up and probably paid above market for it. It was terrible timing. As I’m sure Jill or your dad can vouch for it, airline pilots really don’t make any money starting out. Once you get to the majors and get some experience under your belt, there’s some potential, but there’s no guarantee you’re getting there. I was a couple of years into the airlines. I was making $30-40,000 a year. I mean it was not great. I had $175,000 student loans, and I kind of did another stop and check yourself, and I thought I’ve done everything I’m supposed to do. Why … I’m upside down on this condo, by a lot. $100,000 or so. I’m not making any money. I got all these student loans. It was just discouraging, and really the straw that broke the camel’s back here was I had taken an airline job where I was a captain on a new airplane at a new company. That’s really how you move up and progress in the industry. I did it for about a year and a half, and out of nowhere the company just cut themselves in half.
I’m talking 3 weeks notice, and that equaled like a 50% pay cut for me, and it was just like knocked me back to square one. It was so, so discouraging that I just said “You know what? I got to do something different.” I’ve tried the right path. I was about 4 or 5 years into the career at that point. I’ve tried the right path. I’m going to … I’m going to have to do something for myself. My dad has always talked about … He’s always worked for himself and made his own way.
Jack Butala: A lot of people … Josh, a lot of people listening to this can really identify with what you’re saying.
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