Craig Stevens is the founder and president of Groundbreaking Real Estate and Shore Term Rentals. In this episode, he tells us how he left his insurance career to take on real estate, working his way up from the bottom by educating himself in order to become a successful capital raiser and owner of his own property management company.
Craig Stevens | Real Estate Background
- Founder and president of Groundbreaking Real Estate and Shore Term Rentals. Groundbreaking Real Estate works with trusted syndicators as a co-GP to help them raise capital, while Shore Term Rentals helps short-term rental owners on the Jersey Shore by listing their properties and providing management services.
- Co-GP 416 units
- LP of 579 units and 757K sq. ft. in retail space
- Based in: Raleigh, NC
- Say hi to him at:
- Greatest Lesson: No matter how frustrated or worn out you get, keep steering down your path and your dreams will come true. Set detailed and specific goals, reassess them regularly, and be relentless in meeting those goals.
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Ash Patel: Hello, Best Ever listeners. Welcome to the best real estate investing advice ever show. I'm Ash Patel and I'm with today's guest, Craig Stevens. Craig is joining us from Raleigh, North Carolina. He is the founder and president of Groundbreaking Real Estate, which works with trusted syndicators as a co-GP to help them raise capital. Craig is also president and founder of Short Team Rentals, which helps short-term rental owners in New Jersey. His portfolio consists of being a GP on over 400 units, and an LP on almost 600 units. Craig's portfolio also consists of a number of properties that he owns himself. Craig, thank you so much for joining us, and how are you today?
Craig Stevens: Very well, thank you. How are you doing, Ash?
Ash Patel: Very well. It's our pleasure to have you. Craig, before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Craig Stevens: Absolutely. I started out after my undergrad in accounting, I joined public accounting in the big four, and I worked there for about 11 years, just kind of grueling through as a public accountant auditor... And then I eventually decided to move into corporate America. I took a look role as the Head of Financial Reporting, working at a couple of different insurance companies in the New York City area. My last job was the CFO of a large insurance company for the US in the health business. I was traveling a ton of hours, and working a lot. I realized that there had to be something else besides my day job, that I needed to dream bigger, and think of something else that I could do with my future. So I decided around 2014 to start a side hustle. I looked into investing in real estate, learned more about it and bought my first multifamily property.
I worked on a plan... I remember sitting there, traveling to Australia on a plane one time, in 2014, just drafting out my plan for my exit out of corporate America... And I ended up just adding one to two multifamily properties a year. And finally, I was able to leave my day job, and here I am today, focused full-time on real estate investing; just this year I started full-time.
Ash Patel: I love it. So you're on this long international flight, doing numbers and projections on what you can make if you quit your job. Were you drinking on that flight?
Craig Stevens: Absolutely. [laughs]
Ash Patel: So the numbers had some extra zeros on them that made them look good.
Craig Stevens: Yeah, we had to go back and check the numbers after, to make sure it made sense.
Ash Patel: Craig, I want to dive into your mindset a little bit, because you invested in entire career perfecting your craft; you were the CFO of a large company, and you were right at the top... Wasn't there a path where you can start working less and make more money? There had to have been a pretty good light at the end of that tunnel, where you could not travel as much, not work as much, and still make a lot of money.
Craig Stevens: You're right. I had built some great teams throughout my career, and learned how to better allocate the workloads, making sure that we were traveling a reasonable amount... But you still get to this point where you know that just by working in corporate America, going through these meetings and preparing PowerPoint slide decks and giving presentations all the time, that there's some aspects of it that are not fulfilling. I did really enjoy my jobs; I don't have any regrets about any work that I had done in my past. I think I learned a lot from those opportunities. But really wanting to be an entrepreneur has always been in my spirit, and it's just something that I wanted to be able to steer my own destiny, to make my own decisions. It was a hard decision to leave, but finally, once I got to that point, I hope to never look back.
Ash Patel: Good for you. And I remember all the politics that we played in corporate America, where when you run your own company, you control the politics and lack thereof; so awesome, great story. You said in 2014 you started learning real estate. How did you learn?
Craig Stevens: Well, by listening to many podcasts. Every single time I had a lunch, or I'd get up really early in the morning before I had to go off to work, car rides to work, I'd listen to audiobooks, read books... Just consume as much information as I could. I probably ended up into an analysis paralysis situation for a while, because it did take me a while to acquire my first property... But I just started really pushing forward with whatever time I had to listen up. The Best Ever podcast was one of my first podcasts that I really started listening to.
Ash Patel: I could see how you have analysis paralysis, because being a CFO, and then working in the reinsurance business, your life is all about risk. So how many years from when you started educating yourself to when you took down your first deal?
Craig Stevens: Probably about a year and a half. And it was something that it did take me a while to understand the risks and the benefits of owning real estate, and that if you are really selecting the right properties, and the right opportunities, that you're limiting those risks, as long as you're managing it appropriately. So I do think that by my accounting background, finance background, I probably was a little bit naturally more risk-averse at times.
Ash Patel: And giving somebody else advice, that's also a CFO in some far distant land, in the insurance industry, what would your advice be to overcome that paralysis?
Craig Stevens: Study up. You still do have to learn, you have to understand what you're doing, get comfortable with what that process looks like to acquire real estate... But then go after it. Buy your first property. You always hear the first property is the most difficult one to acquire, because it does take you time, and it takes your energy, and it really is your first nerve-wracking moment in real estate investing. And then they start to come more easily. So I'd recommend starting small, something like a two, three-family building in your area that you can get to and see, and just go after it; it's likely to have better upside opportunity than to offset the downside risks.
Ash Patel: Craig, what was your first property?
Craig Stevens: My first property was 15 minutes from my home, in the New York City area. It was a three-family apartment complex, with a basement unit as well, so a four-family apartment complex, with a lot of good parking spaces as well. I still own that property today, so it was the first property I acquired, and then it's something that has still been cash-flowing nicely.
Ash Patel: Was it a heavy lift, or was it already tenanted and cash-flowing?
Craig Stevens: It already had tenants, but they weren't paying the optimal rents, so I started to understand this value-add opportunity where some of the units could be improved, and some of the tenants could either be increased with their rents, or moved on to bring in new tenants. So we were able to utilize at least the stable cash flow from the existing tenants, and then start to turn them over on a reasonable basis.
Ash Patel: And going back to mindset, Craig, you were one of the captains of your industry, and now you had to start all over in real estate. Was that hard?
Craig Stevens: It was. I felt like a small fish in a very large sea. People around me that I was meeting at real estate conferences were just so much more successful than I was... It felt like it was gonna take me a lifetime to get there.
Ash Patel: It's a humbling experience, huh?
Craig Stevens: It is. It certainly is.
Ash Patel: And what year was this that you purchased your first three-unit?
Craig Stevens: That was late 2014.
Ash Patel: Okay. And after you purchased that, I'm assuming you got the bug and thought, "Hey, this is pretty cool. Let's do this again."
Craig Stevens: Yeah. After I got comfortable with that first one, actually, on the way to signing the agreement, I saw another sign out front as I'm driving away, just down the block, another multifamily property, a three-family building. And it had a sign, For Sale by Owner. I was like, "Fantastic. This is the next one." I called him up after I signed for that first property, and within three months I think we were closing on that second deal.
Ash Patel: And the numbers on these deals - properties in New York are not inexpensive. What was the ballpark purchase price of these?
Craig Stevens: Yeah, the first one we purchased for $525,000. Rents were at the time around $5,000, but we were able to get them up to about $6,000, including parking; some of those other alternative cashflow opportunities. There's a storage shed in the back that we could utilize and rent out... There were more parking spaces available than were probably being used, so we started squeezing in more parking there. It was a great area for parking. And we were able to get it up to a higher rent. So it's been able to return a decent amount of cash flow; still not great, because it's New York City. I'd say it returns around 8% percent cash flow a year, so that's not too bad. And the value has gone up substantially.
Ash Patel: Yeah, you trade cash flow for equity.
Craig Stevens: Yes.
Ash Patel: Yeah, I get that. The second property - what was the purchase price on that?
Craig Stevens: That one was much lower. It was For Sale By Owner; that was a slightly smaller property and a smaller lot, $375,000. And I'm in the process of selling it as we speak. I'm planning to close, hopefully by the end of December, for $710,000.
Ash Patel: Over how many years?
Craig Stevens: We bought that in 2015, so it's about close to seven years now.
Ash Patel: And then what did you put down on that? 20%?
Craig Stevens: 25%.
Ash Patel: Okay, so roughly 100k, just under, and you walk away with a very healthy profit there.
Craig Stevens: Yes.
Ash Patel: At what point did you understand leveraging other people's capital?
Craig Stevens: As I was realizing that I was getting a little too concentrated in this area, in New York; we had five properties eventually in New York, all similar within a couple of blocks of each other. But all three/four-family buildings. I was a little bit worried about the concentration risk, so we started to look elsewhere, and I bought properties in Fort Wayne, Indiana. And we found a nine-unit building there.
I didn't have the financing setup; I wanted to provide an all-cash offer to be able to close on it, so I started acquiring money from friends and family to purchase this building just for a short time, until I could place the financing. I did have a bank set up to do the financing, I just knew it was going to take a couple of months to get it secured.
Ash Patel: Were you in a time crunch to get this deal done?
Craig Stevens: Yeah, I wanted to be able to provide that all-cash offer, and to be able to close the deal within, I believe 45 days, and the bank financing was going to take a little longer ticket secured for that property, because it was a commercial property.
Ash Patel: Okay. So you got some friends and family together, I'm assuming?
Craig Stevens: Yeah, I went out and collected $25,000 from a group of people that I knew, and including my parents, and offered to give them an 8% return; everybody signed a one-page document that we put together just on a short-term loan. I was able to pay everybody back within the time period expected, and was able to get the financing on the property.
Ash Patel: Craig, while you were educating yourself on real estate, were you educating yourself on syndications as well? Or was it just starting out?
Craig Stevens: Yeah, that was the next route. So my first taste of using other people's money was that nine-unit building in Indiana; but then, continuing to listen to podcasts, listening about the successes of syndications, attending real estate conferences, learning more about those, I knew that was the greater avenue to higher success in real estate investing.
Ash Patel: Okay, so you knew that this syndication thing existed, and "At some point, I should probably look at raising capital." You're pretty risk averse... Why did you pick Fort Wayne, Indiana?
Craig Stevens: Working for my last job, we had an office in Fort Wayne, Indiana. And I traveled down there to meet up with my team, and one of the individuals on my team was a real estate investor down there locally. And he gave me a tour during lunch breaks, and when we had some time and I decided to look into acquiring some properties there, he got me in touch with his broker, and we were able to identify three properties down there, two duplexes and a nine-unit building that we were able to acquire.
Ash Patel: Alright. So to me, that's still a pretty safe investment... You have potential boots on the ground, you know the area... What was the first thing you did in real estate that made you really uncomfortable?
Craig Stevens: Doing my first limited partner investment. The first property that I acquired through a limited partnership investment was a mobile home park; it was a blind fund syndication that was going to acquire mobile homes all across the country. They could tell you what those looked like, they're a well-known kind of mobile home operator; they were giving you ideas of what those properties would look like, but you didn't know quite where they would be placed. So I invested as an LP investment in those transactions, in that fund, and that was probably my first taste of investing in other locations that were a bit out of my reach, that I was not as familiar with, relying on someone else to manage my money.
Ash Patel: And giving up total control of your money and your investment.
Craig Stevens: Yes.
Ash Patel: And did that deal do well?
Craig Stevens: There was some challenges... There were some challenges around the operator being able to exit a lot of those mobile home parks in the timeframe that they had expected. There was some miscommunication going on at the time, so it did not return as much as they had expected. I think the IRR that they were targeting was 17% and we ended up getting closer to 10%. So my first risk-averse opportunity outside my comfort zone did not return as much as I had hoped. But still a good return, obviously.
Ash Patel: Okay, but then you went on to do a lot more LP investments. I would have thought, knowing you for about 10 minutes, you would have said "Screw that, I'm just going to do my own deals." What made you put money back into other people's deals?
Craig Stevens: The turning point for me was realizing that it was just getting overwhelming to build up my own portfolio, and it was going to take me a long time to build at that scale. I needed to leverage off others experience. I was still working a ton of hours at my W-2 job, so starting my own syndication was going to be complicated. I didn't have that expertise that I needed to do that, or the time... So investing in other transactions - I really felt that was a good way to approach this. Even though I had that unfortunate opportunity with the mobile home parks, I was able to invest in other LP transactions; I didn't want to give up, and wanted to leverage off other people's experience in this market.
Ash Patel: I'm gonna guess that you never invested in a mobile home syndication again?
Craig Stevens: It was my last one. [laughs] I may do it again, now that I'm more comfortable in my syndication experience and capital raising. I know how to analyze the deals a little bit better, but it probably wouldn't be a blind fund.
Ash Patel: And a total side question. On your computer, in your real estate folder, how many Excel spreadsheets do you think you have?
Craig Stevens: Probably about 100, I would ,say at least... And some of them are duplicates of transactions that I've reviewed multiple times... I am a spreadsheet nerd, I would say, for sure...
Ash Patel: I love it.
Craig Stevens: ...and that's part of what I'm bringing to the table when raising capital. I do a lot of due diligence and financial analysis on the transactions that I bring my investors to.
Ash Patel: And where did that evolution come from? You end up raising capital, or helping others raise capital - how did that come about?
Craig Stevens: I had been in touch with a couple of syndicators and thought about raising capital, maybe creating my own fund, somewhat of a blind fund as well... I thought that that could be a good opportunity for me to get in and get more of an LP share of returns for my investors and for myself... I had a syndicator reach out to me and ask me if I was interested in raising money for his transaction... He already had been in touch with me for many years. I had never invested in his transactions, but had been interested in them. I told him I was interested in maybe bringing capital to his transactions... A gentleman by the name of Reed Goossens. He contacted me, asked me if I'd be interested in raising capital, and this is just after I put in my notice at my W-2 job. So it came as almost a serendipitous opportunity for me to do that raise. We agreed to a million dollars. I thought through my network of individuals that I've met over the years that I could raise a decent amount of capital; we agreed to a million dollars, but that was kind of a bit of a stretch for me to start up, but I was able to achieve it.
Ash Patel: Okay, a couple things here... Why did you quit your W-2? What was that pivotal moment where you're like, "Alright, I'm done"?
Craig Stevens: I was starting to spend more time thinking in my head about real estate investing, the things I could achieve in real estate, about my businesses, including the one you mentioned, Short Term Rentals - it's a property management company in New Jersey - I was thinking more about that than I was my day job, and more passionate about that. And then the day job started to seem less exciting to me at times. And I wasn't necessarily putting my whole heart into it as I was in the past. I just had to do it for myself and for my company. I felt like it was serving me best and my family best to take this opportunity to jump ship.
Ash Patel: Hard decision, I commend you for that.
Craig Stevens: It was.
Ash Patel: Back to real estate... Now you've got to come up with a million dollars... Your identity amongst all of your friends and family is this CFO in the insurance industry.... How do you go about raising capital and taking on this new identity as a real estate capital raiser?
Craig Stevens: It was a leap. And when I hung up the phone the first time with Reed and said I'd raise a million dollars for him, I was quite nervous that I'd be able to achieve that. I was thinking to myself, "What am I doing here?" But through my networks that I'd established over the years, I was always very open with people, anybody that wanted to listen about my interest in real estate. So I had been able to share with my friends and family - many times they did note that I had this side hustle going on, including all those that I worked with in my companies. It was not a secret that I was doing a side hustle. So when I finally called them and asked them or sent them an email and asked them if they wanted to invest in these transactions, they had seen that I was leaving my day job to do this full-time, so they knew there must have been something there, and I think because of the trust that I built over the many years of knowing these individuals, I was able to turn them into investors. It happened probably more quickly than I had anticipated, and a bit more seamlessly.
Ash Patel: Interesting... A lot of people that are in W-2s have to keep their real estate life a secret... And why didn't you? How was it okay that you've got this double life as a real estate investor?
Craig Stevens: I tried to make sure that it was not interfering with my day job as much as possible, and I really think I did a good job at that. So I would just get up really early, I would work on the weekends, I would work late at night on the real estate business, and get my day job done well. And I didn't want to be sneaky and hide this from my boss and from my team. But while I was trying to make it as transparent as possible, I was also trying to make sure that did not interfere with that role.
Break: [00:20:04.07] to [00:21:09.27]
Ash Patel: Craig, when you look at investing in other people's deals, I would imagine your level of due diligence is much higher than somebody like me. What kind of questions do you typically ask? What kind of information do you request from an operator where you're looking to invest?
Craig Stevens: One of the things I do pride myself with when bringing my investors to a transaction is performing that due diligence. So I do look at the financial analysis, as you can imagine, put it into my spreadsheets and do a separate analysis. I'm very interested, especially right now, in how they're planning to do the debt financing. I'd prefer not to see a refinancing in their strategy right now. So if they're planning to refinance in three years or five years - that's a nice to have, but I don't really like to see that as part of the overall strategy and the performance. I do background checks and criminal checks on all my partners and sponsors that I work with, I go to view the properties, and then I'll ask questions about financial proformas that maybe other people might not quite spot. I try to dig in and really understand the story of how they're going to achieve what they're looking for.
Ash Patel: What are examples of red flags that you've encountered, that made you walk away from a deal?
Craig Stevens: Too high of a loan-to-value ratio. So I saw a transaction that was targeting at 80% loan-to-value right now in this environment, which to me is too high. I'd prefer to see 70% or less. Floating rate interest, still, maybe without an interest rate cap; that's concerning, obviously, with these high interest rate environments. Aggressive revenue increases... So if you do have this value-add strategy, making sure that you're not planning to increase rents all the way up to the top of the comparables in the area. Pick somewhere in the mid range. You're not going to have the best property, with all the best tenants paying all the highest rents. And then also somehow looking for areas where expenses are decreasing drastically. How are they going to achieve that? Have they had experience in decreasing those expenses in the past? And looking for a track record that can cover those things as well.
Ash Patel: And then once you have all of that, do you ask the operators if they've stressed-tested it? And then two, how do you end up stress testing the deal?
Craig Stevens: What I would typically expect from the operators is that they're doing some type of stress-testing around exit cap rates; for instance, vacancy rates - what are the breakeven vacancy rates that could exist? Another red flag is if the plan is in the proforma to exit cap rates at the cap rate, or even lower. I typically like to see 50 to 100 basis points over the purchase rate. And then seeing stress-testing around there. So I'll run additional stress tests around the cap exit rate, because that is a very big driver for the returns on some of these medium-term value-add transactions. I'll run variances on rents and vacancy rates as well.
Ash Patel: And Craig, why does 80% LTV scare you? Why do you prefer them having more cash into the deal?
Craig Stevens: It is relying more on the debt financing - if you don't achieve the returns that you're looking for, it puts at risk the transaction overall. So if the value of the property goes down some, you start to eat into the additional equity that the equity holders have, and then risk missing some payments potentially on the debt. So if you have a more conservative, lower loan-to-value on these transactions, you're still achieving that benefit of leverage, but you're not putting yourself at too much risk if there is a downturn in the market and a reduction in value.
Ash Patel: Understood. A couple times you mentioned a blind fund. Can you explain to the Best Ever listeners what that, is versus a traditional fund?
Craig Stevens: So in a blind fund, you are taking an experienced syndicator, they're creating a fund and they're talking to you about the types of transactions that will eventually end up in that fund... So it's not investing in one specific individual transaction, but it's investing in multiple transactions within one fund. They might not have assets within that fund yet, but they'll tell you what they're looking for, and what they're trying to bring into that fund.
The blind aspect is that you don't know what will eventually end up in that fund to make it a full fund. So you put your money in, and then it might take a year to acquire the assets to fill that fund's investments. And you have to really rely on an experienced operator to make sure that that fund will perform, and have the right asset mix that's going to make sense for your investments.
Ash Patel: So you commit your capital ahead of time. Do you actually wire it into the fund?
Craig Stevens: Yeah, you would send the capital in once you're ready, and then they would start to deploy that into investments in the future; it could be, like I said, over a year.
Ash Patel: And while that money sitting idle, potentially for a year, are you earning any returns on that?
Craig Stevens: Some blind funds will already have one asset in it, or a couple of assets in it, so you could be getting some returns back. They'd be more limited. And there are some funds that might offer you some type of low interest return during that hold period... But typically, it starts out slow, and then it will eventually ramp up once they get all the assets into the fund.
Ash Patel: And is there any liquidity for you, when you invest in a blind fund with somebody else?
Craig Stevens: It's going to be challenging to exit out of these funds. They're relying on your money, they're going out to acquire assets... The only opportunity is if you have some type of life event, that the syndicator may be willing to work with you to exit you; maybe they'll purchase your investment, or maybe there's other investors that would be willing to buy your interest. But because they're all private placement deals, private transactions, whether it's one syndication that you're investing in, or a blind fund, you have to be willing to keep that money in those investments for a period of time, say three to seven years typically.
Ash Patel: Alright. Craig, let's get back to your story, because we went from you raising money for a deal, and then helping somebody else raise a million dollars. How did you evolve from there to where you are today, helping numerous GPs raise capital?
Craig Stevens: Yeah, we're on our fourth deal now that we're raising capital for, and across the last three I've been able to raise a million dollars on average for each of those deals. It's been rewarding to see repeat investors coming back. So now that I've built these contacts and these relationships and they know what I'm doing, I've had the conversations with them, I've had individuals that are investing in every single one of my deals. And that's helped to make it a little bit easier.
I'm getting better at putting together smart processes in place to organize my investors and communicate with them. I would say the first deal was certainly very clunky, working in Excel spreadsheets and trying to figure out who I had called, and making sure I was keeping the best notes possible... Now I've developed a bit better systems and processes. It's becoming more comfortable for me. It's still challenging, obviously, to raise money, but I'm enjoying it more now.
Ash Patel: Is there a CRM system that you recommend using?
Craig Stevens: Yeah, we're currently using Pipedrive. I started with a different CRM system, but it didn't have -- what I'm really looking for is an integrated system where you can send emails out of the CRM tool, and do advertising from the CRM tool. The one I originally used didn't have that integration, but Pipedrive does. And I really like the mechanics of moving things between different deals, and then also where they are in the pipeline.
Ash Patel: And going back to your CFO life - you had a lot of team members around you, you had a lot of people that reported to you, and you can offload a lot. Have you built that team up today, or are you doing it all?
Craig Stevens: I'm doing a lot of it myself. One thing I didn't mention is that my wife recently left her job as well, so we are zero W-2 income family. We have two children, and we're both working together on this. So my wife has been extremely helpful. She's working more on the social media and marketing side of the business... But that's it for now. But I'm planning to certainly add help, because it is starting to stretch me pretty significantly.
Ash Patel: Do you miss the days where in a boardroom you can hand off a task or a project to somebody, and not hear about it until it comes back finished?
Craig Stevens: I absolutely miss that. That's why I know the value of bringing on a team. I just read a book. How, Not Who.
Ash Patel: Who, Not How.
Craig Stevens: Who, Not How, right. Yep. Sorry.
Ash Patel: Yeah. Great book.
Craig Stevens: Yeah. Who, Not How... And just realizing that it's going to be extremely important for me to be able to grow my business, add additional people to my team in order to be more successful.
Ash Patel: Yeah, I love that you're sharing these nuances of being at the very top and then starting all over, and some of the mindset shifts that go on. How do you recruit new investors, or how do you let people that you don't already have an existing relationship know what you're doing?
Craig Stevens: So I've created a pretty good CRM listing now of my investors. I started looking through my Facebook contacts, my LinkedIn contacts, my phone, all the contacts that I had on my phone, and putting them into the CRM tool. Organizing those contacts in different aspects, making sure that -- I kind of created this three by three system, where I like to organize them by the strength of my connection, the likelihood they are to invest, and then the amount that they would be potentially investing. Put it as kind of a low, medium, high tiering, and then start to sort them out. And then I start contacting individuals that rank higher in those areas, and build up those connections. So I start to work through that, making phone calls, I send out emails to all these investors, and then try to do monthly emails as well. So keeping that communication strong throughout the entire process, not just when you're capital raising, but even when you don't have a deal, making sure that you're still connecting with individuals as you go along.
Ash Patel: And do you find new people to interact with on LinkedIn, social media?
Craig Stevens: We've been starting to get success there... So I've been very active on LinkedIn, posting different things that I'm working on, whatever things that I'm interested in, giving them valuable information on where the economy is, what are people talking about from a real estate investment perspective... And I've started to have people reach out to me from those social media posts, asking me to learn more about real estate investing.
We've just recently hired a marketing firm to help us with the Groundbreaking real estate aspects, so they're going to help me with more social media. I've been able to get into some blogs, and I've written a couple of articles as well, so that started to gain some traction on organic investors. And that's gonna be extremely important going forward. My friends and family are only going to take me so far.
Ash Patel: Are you enjoying this way more than corporate America?
Craig Stevens: 100%. I am glad I left when I did. I don't think it was too late or too early. But this has been a lot more fun of a ride. I've been able to determine my own destiny.
Ash Patel: Craig, I love what you're doing, but then you throw in short-term rentals. What are you doing with that?
Craig Stevens: Well, being risk-averse, I have to have multiple businesses that I had to work on as well. And that stretches me too. So I have this other business that is a property management business, and we do a listing of properties, short-term properties on the Jersey Shore. I owned a beach rental property on the Jersey Shore, and I realized that there was really a lack of good property managers in the area, so I saw an opportunity with that. I was frustrated with the high fees that other agents were charging to rent out my property only, and not manage it... So I decided to start up a company, I saw this opportunity, I jumped on it, I created a good web portal where guests can go in, look for properties... They are able to sign leases, transact the cash, and then I'm also providing property management services. That business I do have boots on the ground there in New Jersey, because as you said that in the beginning, I'm in North Carolina. That's been a tough one to get started. It's just been a lot of work behind the scenes over the last nine months, I'd
Ash Patel: Why did you not start that in North Carolina?
Craig Stevens: That'd be smart. [laughs]
Ash Patel: [unintelligible 00:33:30.21]
Craig Stevens: I was more experienced with New Jersey. The barriers to success in New Jersey were higher, which did make it difficult. They have, I'd say, more strenuous laws around real estate property management in New Jersey, and listing services. North Carolina seems to be a little bit more simplified. So there's probably more competition in North Carolina. But that's my next stop, so I'm hoping to expand it all up and down the East Coast.
Ash Patel: And that is called Shore Team Rentals?
Craig Stevens: Shore Term Rentals.
Ash Patel: Shore Term Rentals, got it. I grew up at the Jersey Shores, so I can imagine a lot of those landlords are very nice... [laughs]
Craig Stevens: Local New Jersey folks are definitely challenging at times... They expect a lot, but it's been fun to interact with them.
Ash Patel: We're just very direct people, and often, that doesn't come across in an ideal way. What's the hardest lesson you've learned so far in real estate?
Craig Stevens: The hardest lesson is to not give up. There were times where I slowed down, and my first time that I was looking for an investment, the reason it did take me almost a year and a half to close on my first investment was because I kept making offers and getting turned down on offers... And I couldn't really understand, I couldn't place why I wasn't getting these deals. I probably made four offers before I finally got this transaction. Part of it was my team. So the broker that I'd used at the time was not really experienced in this space of multifamily. So after I had gotten rid of that real estate agent, I was actually able to get my next deal that I made an offer on, with the right real estate agent. So I found the right real estate agent, and the right lawyer. My first lawyer was making it a complicated transaction. But at times, I felt like giving up; I was thinking, "I'm just not good at this. My first four deals, I'm not getting -- maybe I'm not set up for real estate investing." So don't give up, don't slow down, just keep pushing forward.
Ash Patel: Do you approach other operators to look at being a part of their GP raise? Or do they come to you?
Craig Stevens: It's been a mix. So people come to meet me at real estate conferences, at online meetups, and they ask me if I'm willing to raise money for them. And then in other cases, I find a transaction that's being advertised, and I go out to find the syndicator, and I'll meet with the operator and ask them if they'd like me to raise money. So it's been a mixed bag; I've been able to get referrals as well, which has been really helpful.
Ash Patel: If I meet you at a real estate conference, and I'm one of those people that just wants to be an operator, I don't want to deal with the capital raising, and I bring you in for the capital raise, how do I reward you for what you're doing?
Craig Stevens: These operators typically pay out 2% to 3% acquisition fees, and then they allocate a portion of the GP interest at the end; there could be a disposition fee that the capital raiser would share in as well. On the GP interest, it's usually 30% of the GP interest that would get allocated to the capital raisers; somewhere in the 30% range.
Ash Patel: So really, a lot of your returns come at the end.
Craig Stevens: Yeah, but 3% in the beginning is kind of a nice, immediate benefit... And then you do have this great opportunity at the end, depending on your GP portion, that you're able to take in.
Ash Patel: Craig, what is your best real estate investing advice ever?
Craig Stevens: To really push forward with your analysis of the transactions, but don't wait too long to close on them. Making the offers; getting turned down on offers. If you're not getting turned down on offers, then you're probably either giving too much money out to acquire them, or you're not active enough. So you really need to get out there and make sure that you are making offers, getting yourself in the investment space, and then just continue learning. There's always different avenues to make great money in real estate. And you might not know about those opportunities yet, so keep learning.
Ash Patel: Great advice. Craig, are you ready for the Best Ever lightning round?
Craig Stevens: I'm ready? Let's do this.
Ash Patel: Alright, what's the Best Ever book you've recently read?
Ash Patel: So my Best Ever book was Millionaire Real Estate Investor by Gary Keller. Just the way that he laid out that book and provided a nice landscape strategy to becoming a millionaire real estate investor - I ate that up, and it helped me with designing my strategy as well.
Ash Patel: Craig, what's the Best Ever way you like to give back?
Craig Stevens: I'm spending my money on giving to charities. I like to be selective about what charities I do give to, and giving larger amounts to a smaller number of charities, rather than kind of $50 here, $25 here. Trying to make better use of that funding. And then also educating others on real estate. So I like to participate on podcasts, I like to provide any individuals with an opportunity to learn more about my experiences in real estate, and meet with them and help them with their success... I'm teaching at a local library in a couple of weeks to [unintelligible 00:38:23.14] class just to help out and teach them about real estate investing.
Ash Patel: And Craig, how can the Best Ever listeners reach out to you?
Craig Stevens: They can reach me at info [at] groundbreakingre.com, or they can find out more about us at groundbreakingre.com.
Ash Patel: Craig, I've gotta thank you for your time today; you brought us into your world, where you left behind a very successful career to take on real estate from the very bottom, and just kind of learning as you went along, educating yourself, and now being a very successful capital raiser, and having a property management company... Thank you for sharing your time with us today.
Craig Stevens: Thank you, Ash.
Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five star review share this episode with someone you think can benefit from it. Also, follow, subscribe and have a Best Ever day!
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