As co-founder and head of investor relations for Spartan Investment Group, Ryan knows the importance of keeping investors updated. He’s raised over $5 million from their current investors, and he’s in charge of developing more relationships to bring in more capital. If you want to hear how to find capital and keep it coming in, be sure to listen to this episode! If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Ryan Gibson Real Estate Background:
– Co-founder of SIG, Spartan Investment Group
– Has experience ranging from investing in apartments, to single family homes, managing renovations and
– Responsible for SIG’s investor relations, driving the acquisition & financing of projects
– Also is a major airline pilot and flies the Boeing 757/767
– Based in Seattle, Washington
– Say hi to him at: http://spartan-investors.com/
– Best Ever Book: Tax Free Wealth
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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Ryan Gibson. Hello, Ryan!
Ryan Gibson: Hi, Joe. How are you doing?
Joe Fairless: I am doing well, and holy cow, before we started recording, Ryan gave me this little nugget – he is joining us from Italy, just North of Rome. He is based in Washington DC – is that where you’re based? Or are you based on the West Coast, in the Seattle area?
Ryan Gibson: We’re actually doing business in multiple states, but we do business in both Washingtons – Washington DC and Seattle-Washington area.
Joe Fairless: Where do you live?
Ryan Gibson: I live in Seattle.
Joe Fairless: You live in Seattle, okay. So normally, you’re based in Seattle, your company does business on both coasts… Today you’re joining us from North of Rome, in Italy, and we’re grateful for that, that you wanted to spend some time with us during your vacation. I don’t know if I would have done that, but we’re grateful for it nonetheless, because – here’s a little bit about Ryan and his company. He’s the co-founder of Spartan Investment Group, and he has experience ranging from investing in apartments to single-family homes, managing renovations, development projects… In fact, Spartan Investment Group has completed six projects and they are also focused right now on four projects between the range of 2-8 million dollars.
In 24 months, four of those six projects that they completed totaled 2.5 million dollars with an average ROI of 36%. I know that because we also interviewed the other co-founder of Spartan Investment Group. His name is Scott Lewis, and his episode number is episode 965. You can go check that out.
Today we’re not gonna be repeating the conversation that we had with his co-founder, we’re gonna be focused on investor relations and how Ryan and his team are attracting investors and keeping them updated, because that is Ryan’s responsibility, investor relations with this company. With that being said, Ryan, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Ryan Gibson: Yes, you said something there that I really wanted to stress, and that was team. I think that our organization now has a very strong team, where I’m now able to transition away from doing a little bit of everything, which we all do in our small businesses, but in some more investor relations and attracting capital to our company, to make sure that we can go out and do these awesome projects.
When you kind of go around the room, we have five full-time teammates for Spartan Investment Group. One person is totally in charge of our acquisitions, and that’s Ben Lapidus, and we have Lindsay Lewis, who is responsible for all of our research. She’s actually just developed a system, an app that we have internally that grabs 40 data sources and brings together the best deals to the top commercial properties – we’re focused on self-storage, value-add opportunity – and kind of gets us to only look at the deals that we really wanna look at, that are available on the market.
Scott Lewis, the co-founder and CEO of Spartan Investment Group is not focused totally on operations, so he is responsible for the day-to-day permitting activities, and also our strategy, as you heard about in the previous call. Then Jackie is involved in our marketing, and also supports the operations as well. As a result, I’ve been able to go out with our team and raise just a little bit over five million dollars for our current and previous projects, and that is my day-to-day role. I’m also a full-time pilot. My flight is 7576 for an airline based out in Seattle… So that’s kind of my day-to-day.
Joe Fairless: Five million dollars – how many investors does that make up?
Ryan Gibson: I would say that’s probably 15-17 investors.
Joe Fairless: Okay, you’ve got 15-17 investors… Let’s say 17, that’s 294k — let’s just round it up to 300k. So 300k/investor on average… What are the three main sources for how you originally met these investors who are investing on average about 300k?
Ryan Gibson: Sure. One of our core values as a company is to develop personal relationships with everybody we do business with, and I feel like we have done a great job in developing relationships with folks that we can instill a lot of trust in; that’s previous relationships, it’s friendships, and it’s also kind of doing things such as going to the Best Ever Real Estate Conference…
Joe Fairless: It’s a mouthful, yes… [laughter] My conference, yes.
Ryan Gibson: Your conference, which by the way, Joe, I just wanna say that it was a great conference. I think it was different than a lot of other conferences, in the sense that I felt like the networking was really good and I felt like the relationships and the side conversations and some of those folks that we’ve met we still keep in touch with today and have done business with, so I’m really looking forward to going back next year.
Joe Fairless: February 9th-10th, Denver. BestEverConference.com, I appreciate you mentioned that.
Ryan Gibson: Yeah, no problem. So one of our suggestions is get out and do things that aren’t real estate related. I think a lot of people focus on just going to real estate meetups, going to these conferences and things like that, and that’s really important, but I think a lot of where we develop relationships with people is doing things that we enjoy. I enjoy flying, I used to be a rowing coach in Washington DC, I enjoy joining running clubs in my neighborhood, I like to sail, I like to ski, we like to travel… And a lot of folks that you meet, you talk about what you do and they’re very interested in being part of your organization and doing things like investing in your projects. I think that really helps.
The other thing that I would say isn’t necessarily a source, but just kind of a talking point that helps people is understanding where money comes from. Obviously, there’s self-directing accounts such as self-directed IRAs and Solo401(k)’s, cash accounts, leveraged brokerage accounts, you have life insurance policies you can use to invest, you can do a home equity line of credit, or leveraging an existing property, and I think kind of having an understanding of a lot of those facets helps people that would normally think that they don’t have money to invest say “Oh, that’s right, I have that old 401k from my previous employer that I have done nothing with, and I have no idea how it’s performing, but when I’m presented with the knowledge that that 401k could be rolled over into something else”, it really helps them say “Oh, wow, that’s great. I can actually own part of a self-storage business and not do any of the work, and put my money with you, someone that I sincerely trust to do the right thing and do a good project.” So we kind of help facilitate a lot of those things with custodians that we have existing relationships with, so that’s something that we’ve done that’s been really helpful for our investors – understanding the best way to utilize their money so they can get the best return on their capital as well.
Joe Fairless: As far as understanding where the money comes from, you mentioned some interesting things like life insurance policies and home equity line of credit… I’ve never actually talked to an investor (or a potential investor) about doing a HELOC or life insurance policies; certainly, self-directed IRAs come up, but that’s it. I’ve been on the receiving end of “Okay, I’d like to invest via this account”, but I haven’t proactively talked to them about those things. I think you can get into tricky territory with a home equity line of credit, where you borrow against the house, so how do you approach your conversations with investors when you’re talking to them about the other types of ways where money comes from?
Ryan Gibson: Well, I think it’s obviously very conversational, and obviously I preface everything with “I’m not a CPA, I’m not an attorney, I’m not your financial advisor, but there’s solutions that allow you to invest that I’ve personally used and been successful with.” I’ve used a HELOC to invest, I’ve used a self-directed IRA, I’ve used a leveraged taxable stock account… I haven’t actually used a life insurance policy yet, but it’s just kind of an idea that’s been floating out there. And kind of explaining that maybe the best places where I’ve found HELOCs or custodians that I’ve really enjoyed working with, just kind of talking through the nuances of how those accounts can work and who they might talk to that, again, someone that I know and trust, that has set them up before, or a lender that gives you a good rate and terms, who can really help them make that informed decision.
Joe Fairless: I’m trying to understand where in the process of the conversation are you talking about home equity lines of credit, or life insurance policies… Because from my experience, what I’ve seen is I talk to a potential investor, and once they’re interested, then they say “Okay, I’d like to invest via my self-directed IRA”, or “I’ve got money I wanna diversify because it’s all in the stock market.” So they already know… So I haven’t thought of the approach of saying, “Well, in addition, here’s this…” or I guess there hasn’t been a natural segue for me to talk about these other ways to invest, so how does that come up?
Ryan Gibson: That’s a tricky question. So it’s not like I say, “Hey, have you thought about this and this and this?” and “This is how it all works…” I think it’s more of just kind of you knowing the dynamics – as basic as it sounds – of how a HELOC might work, so that way when they have a question like “Hey Ryan, I found a lender that will give me prime plus a percentage, or a prime rate, and if I draw this much, they’ll give me a discount. Does that sound like a good rate and terms to you?” And from having that experience and understanding what the market is offering, I can intelligently respond and say “Oh yeah, that sounds good” or “Hey, have you tried this bank? Because they might be able to help you out better”, and just sort of being able to keep up with the dialogue… I think that’s kind of the segue that I’m sort of speaking to–
Joe Fairless: I’m with you, okay.
Ryan Gibson: Yeah, kind of having the backstop of knowledge.
Joe Fairless: 300k on average per investor… Before we do that average — or, heck, I guess I already did that average, but let’s put that average aside for a second, because I have one investor who’s invested over 18 million with us, therefore that skews the average of everyone else if I include him in there, so my question is do you have an investor like that, that’s invested above and beyond the rest?
Ryan Gibson: Yeah, we have had a handful of investors that have invested above the rest. I would probably say the mode or the most invested would probably be in the 150k range.
Joe Fairless: Okay. From the couple that have invested the most, where did you meet him or her?
Ryan Gibson: Like I said earlier, basically conferences have been one, a place that we’ve met investors. I’ve met investors…
Joe Fairless: Not investors, I’m talking specifically those two people who have invested above and beyond what the others – do you remember where you met those two people?
Ryan Gibson: Yes, one investor I met when I was involved in extra-curricular activities in Washington DC, and another investor I met at my place of employment.
Joe Fairless: Cool, alright. Now, what you’ve mentioned earlier – you’re a pilot, then you’re a rowing coach, and running clubs, sailing, skiing, traveling… Those are all rich people activities, and clearly — maybe not running, but flying, rowing, sailing, skiing, and you can make an argument about travel… But those other ones, clearly those are rich people activities. If a Best Ever listener is looking to bring investor money into their deals and they’re currently not part of those rich people activities, do you recommend that they start joining those types of activities in order to rub elbows with rich people, or do you recommend a different approach?
Ryan Gibson: Well, I will say that it wasn’t a calculated decision to do those things. Those are things that I really enjoy doing, and naturally, the folks that have surrounded myself in those hobbies and extra-curriculars are — like you said, they might tend to attract a more wealthy person, but I didn’t say “I think I’m gonna pick up skiing because it’s an avenue for me to raise capital.” But as far as recommending people to do things, I recommend people do things that they’re really passionate about. I was a rowing coach for 5+ years, and it was something that I really enjoyed doing. It was an opportunity for me to really be in a position where I could help people and help high school athletes achieve their goals, and adult athletes as well.
When you’re thinking about “What kinds of things I could get involved in”, think about the things that you’re passionate about and do those things. Sometimes you can’t think of — in this world of real estate mentor, we think of “I’ve gotta be so efficient with my time… I’ve gotta get up, I’ve gotta do this, I’ve gotta do that”, but sometimes just letting loose and having some fun and doing things that you really enjoy – you’ll find yourself surrounding yourself with other people who like to enjoy themselves, and maybe they have some discretionary income to invest in your project. I’m sorry to be so philosophical about it, but…
Joe Fairless: No, I love that approach. I completely agree. I just had to call it out, because that’s something that some Best Ever listeners might have been thinking.
Ryan Gibson: Sure.
Joe Fairless: I 100% agree with you… If someone does not have an interest in skiing – like myself – but then attempts to become a member of a ski club because they want to hang out–
Ryan Gibson: That could be disastrous.
Joe Fairless: It could be deadly. [laughter] It could be deadly, number one, but number two – yeah, it could be disastrous because it just wouldn’t be fun, and… I always talk about — when I first became an entrepreneur, someone I worked with, she worked at Junior Achievement in New York City and she said “You should get involved because it aligns with what you’re talking about – finances, learning and helping others.” So I did, and I’m now on the board of Junior Achievement in Cincinnati, and through that, I have developed some good investor relationships, but I had no intention at all of ever developing investor relationships and business friendships. It was purely I was interested in doing something, and then it just evolved from there, and same with being on the alumni advisory board for Texas Tech – that’s evolved into investor relationships, but I had no intention of it happening. So I completely agree – do what you’re passionate about first, and then they’ll fall into place.
Ryan Gibson: I wanna make two points to that as well. Number one, I’ve never asked somebody to invest with us directly. I’m never doing something just to get investors, or whatever. So when you’re thinking “How can I get involved?”, it’s something that you’ve gotta love to do, and rule number one that I have for raising capital is I never ask for money. Now, it doesn’t mean I don’t put myself in very uncomfortable situations to progress my career as a real estate syndicator, and eventually say “Hey, I know that you said you were interested… Are you really interested?”, but the other thing is adding value to somebody’s outlook on a market or real estate I think is really important, too. When somebody is having a dialogue with you in those groups and they know you as kind of the real estate guy, you can add a lot of value to their personal situation.
Maybe you don’t flip single-family homes, or maybe you’re not a real estate agent, but you know enough about that sector that when they ask you a question, you can add value to the discussion by saying, “Oh, I know this is what you should look for in the title work”, or “This is a good lender” etc., so they kind of have a feeling of “Oh wow, this guy is really helpful to me. I would entrust him/her with the capital to invest.”
I think that kind of developing your way of garnering folks to invest — we do a quarterly newsletter, and we like to add a lot of value to folks that read our newsletter that may or may not be interested in investing, but that’s kind of an in… If they say, “Hey Ryan, I’ve been talking to you, I’ve known you for a while… I’m interested in what you’re doing, let me know more about it”, I say “Well, would you mind if we put you on our list of our newsletter?”
When that happens, it’s a good thing because when our newsletter eventually comes out, that person can kind of understand that “Oh, okay, this is what these guys do” and they get really comfortable with our projects. A lot of times folks that I network with may say, “You know, I’ve got a lot of student loan debt, but that’s gonna go away in a while”, or “I’m not in a position right now, but I might be in the future…” No problem, there’s never any pressure or arm-twisting to do any of these things, and I think that kind of goes along with the same philosophy of if you’re gonna do something for fun, really make sure you enjoy it, because if you don’t and you’re kind of skeezy, asking for money all the time, it really works in the opposite, negative way as well.
I also think that a lot of the folks that do these types of activities – you’ve gotta be kind of at that trustworthy level where you’re taking a significant amount of capital and investing it for somebody, that’s an enormous responsibility that you have for that person’s capital, and I think Scott mentioned at the conference last year, $10,000 is about the average saving of $100,000 salary. So if you’re taking $50,000 to invest in a project for somebody, that’s five years of savings potentially. That’s a very serious thing to do.
Joe Fairless: You mentioned that you have a quarterly newsletter – is that mailed out, or is it e-mailed?
Ryan Gibson: E-mail for now.
Joe Fairless: What’s in it?
Ryan Gibson: We write a market update. So if we’re focused on a specific market, we have Lindsay Lewis who does our research; we’ll write a quick blurb on — we’re building a self-storage right now in the Seattle Metro Area, and she focused in on population trends and housing statistics for the Seattle market, just to kind of give folks a flavor of what’s going on in that market right now, which is a lot of good things.
We’ll also feature a teammate. For example, we’ve just brought on Ben Lapidus, who is our director of acquisitions, so we had a little bio of his background and his resources that he brings to the team. We’ll also write an article about a specific topic. Right now I’m focused on self-directed accounts, so my last newsletter included an article on how to do self-directed retirement investing, and what it is and what it isn’t, and how it might work for a particular situation, and I plan to have a continuation of that knowledge base for our investor group, so they can kind of have some opinion on that.
We also kind of let everybody know what our current projects are. We send out a few renderings and kind of give an update on the ins and outs of Spartan. Our goal is to let our readers feel like “You do your job every day, you’re running around, you’re doing all these projects, you’re doing all these things in your world, but do your fans and your investors, do they know what you’re up to?”, so we kind of do like an around the room, so they can kind of have a purview of what all of our projects are and how we’re doing as a company.
Joe Fairless: And I want to just get clarification on the statement you mentioned earlier… You said “I never ask for money.” How do you bring in investors in a specific deal where you’re raising money? What’s that conversation end with, so that they know there’s an opportunity to invest?
Ryan Gibson: Well, I guess I used that term fairly lightly. So I always let them volunteer that they’re interested in investing in our next project. I never seek out somebody, or arm-twist or make them feel obligated, or have it be awkward. People ask what I do, and I have my 30-60 second elevator pitch.
Joe Fairless: What is it?
Ryan Gibson: I knew you were gonna ask, and I was like, “Should I say this…?” [laughter] No, I just say that we run a real estate development company, and we’re in multiple states, and we raise capital, we find projects – so we find the project… I call it the three F’s – we find the project, we fund the project, and we finish the project. We target and identify under-market value properties that either we can improve through forced appreciation or highest invest use (in other words value-add), and then we raise the capital required to either purchase the property outright or using leverage, and then we completely operate the project. So we hire the contractors, we do all the legal work, we do everything that’s required to make that project go from A to Z.
Naturally, that kind of perks interest… “How do you get your money?” We say that we have a network of investors that raise capital, and we provide an annualized return anywhere from 15% to 50%, depending on the project. That usually kind of creates a conversation. “Oh, well how long do your projects take? What do you do? How does this work?”, and we kind of get into how we do it, SEC 506(b) and 506(c) offerings, and how all the projects kind of piece together, and how we can try to beat the market, and we’re conservative in our facts and figures, and things like that. That was more than 30 seconds, but it was kind of a–
Joe Fairless: It’s helpful, thank you for walking us through that.
Ryan Gibson: Yeah, no problem.
Joe Fairless: Alright, what’s your best real estate investing advice ever? Based on investor relations, let’s keep it focused on that.
Ryan Gibson: So three things – keep your investors updated. We do a quarterly investment update where we look backwards and say everything that we’ve done for their investment in the last quarter, and everything that we plan to do in the future.
The other thing that we do is we actually do video updates. If we’re rehabbing a property, we will show in the video what’s happened to the property during the progress.
The other thing that we do is we make sure our corporate formalities are done properly, and we always invite our investors to teleconferences where they can ask and answer questions.
Joe Fairless: Is that number two, or is it still number one, keep investors updated? Is this part of number one still?
Ryan Gibson: It’s kind of a holistic approach, kind of a three-within-one, I guess. I think one of the biggest things that you can do is keep them updated, but the other thing is provide clarity in what they get. I read a ton of offering memorandums, and I get through the 20 pages of the offering memorandum and I get to the end and I can’t understand what I’m getting, how long it’s gonna take, and how I’m connected to the project. I think the feedback we receive from investors is “I really like your offering memorandums because within the first two paragraphs I understand how much I can potentially make on this investment, I understand my timeline, and I understand how I’m connected to the project.” I think that’s a really key thing.
And the last thing is systematize what you do, so you can automate and workflow a lot of the process that’s involved with raising capital and doing all this paperwork that the SEC requires.
Joe Fairless: Are you ready for the Best Ever Lightning Round?
Ryan Gibson: I am.
Joe Fairless: Let’s do it! You’re like, “Yeah, I’m in Italy. I’m ready to go drink some more red wine… Of course I’m ready!” Alright, first though, a word from our Best Ever partners.
Break: [00:25:50].10] to [00:26:45].00]
Joe Fairless: Okay, best ever book you’ve read?
Ryan Gibson: Tax-Free Wealth.
Joe Fairless: Best ever system you use to help create a process for investor relations?
Ryan Gibson: We’ve created an entire app suite built from scratch in Podio.
Joe Fairless: Best ever deal you’ve been a part of?
Ryan Gibson: It was our first project, actually.
Joe Fairless: And why is it the best ever?
Ryan Gibson: It was the best ever because there was a lot of learning that was involved in it, and a lot of profit.
Joe Fairless: A mistake you’ve made on a transaction?
Ryan Gibson: It was a mistake, but the mistake was caught, so that was good. I always encourage people, as a pilot, a very thorough due diligence process checklist. We did all of the paperwork for an SEC raise, we raised all of the money, and it was a fast-moving deal. We had to close in a week of getting the offer presented to us; we raised all the capital, did all the paperwork, did all the hoopla, we got to the closing table and we could not obtain title insurance. Luckily, no money had moved hands because of our due diligence process, so the investors got all their money back, no problem… But it was a mistake in the sense that before the SEC stuff we wanna make sure that we just kind of move that checklist item above “Raise money and do SEC paperwork.”
Joe Fairless: What was the issue?
Ryan Gibson: Are you ready for just a very quick story?
Joe Fairless: Yeah.
Ryan Gibson: Real quick, the owner of the house, when he was living, he had dementia, and he ended up moving home with his family; the house that we were purchasing that we were gonna convert into condos in DC – a guy broke in, changed the locks, forged the title, sold the title as a wholesaler to another investor, fraudulently. The title exchanged hands, money exchanged hands, and the family had no idea. When the gentleman finally passed away, they went to the house, the locks were messed up, they went to sell the property and they realized that it had been sold illegally out from underneath them.
By the time this came to us, the attorney representing the estate didn’t really know that it was that big of an issue. No problem, we got to the closing table and our very awesome title insurance company said “Hey, we can’t ensure you.” We were like, “What do you mean you can’t ensure us?” And we went to a couple other title insurance companies, they said the same thing, and finally I said, “What is going on?”, and they send me this report that all these things happened…
So it’s very, very important to make sure that you have a very squared away due diligence process, which we did, and a lot of people do, but we just wanted to make sure that before money exchanges hands, that you are in possession of a very clean and clear title.
Joe Fairless: Best ever way you like to give back?
Ryan Gibson: I have always been very open to mentoring, and as a coach at heart, I’ve helped a lot of people in real estate with advice, and also I’m a mentor at my other job, helping other pilots progress through their careers. I just really like giving back, because I’ve had a lor of really good teachers and a lot of good mentors in my life.
Joe Fairless: How can the Best Ever listeners get in touch with you?
Ryan Gibson: We have a website, it’s spartan-investors.com, or I don’t know if giving out my phone number is appropriate…
Joe Fairless: Whatever you wanna do.
Ryan Gibson: Yeah, my e-mail is Ryan@spartan-investors.com. My phone is 202-696-5112.
Joe Fairless: Ryan, thanks for being on the show, talking to us about your approach to investor relations, how in a very short period of time five million dollars worth of investors capital that you are working with, and your approach for doing so – the long-term approach of developing those relationships, and doing things that you’re passionate about, and then those relationships just naturally gravitate to other things. It’s encouraging, I imagine, for a lot of the Best Ever listeners who are doing things they’re passionate about but haven’t seen some of the fruits of their labor; well, perhaps continue to do that, and as we’ve seen with your career, it has worked out.
The three points that you mentioned – keeping investors updated; you all do quarterly reports, video updates and teleconferences. Two, providing clarity in what investors get – the projected profits, the timeline for the project and how they’re connected to the deal, and then creating a system.
Thanks for being on the show. I hope you have a best ever day, enjoy Italy, my friend, and we’ll talk to you soon.
Ryan Gibson: Alright, great. Thanks, Joe. Have a good day!