Listen Here
Today we have an exceptional guest joining us, Nick Stageberg. 
Nick is the co-founder of Black Swan Real Estate, a visionary name in real estate investment, alongside his wife. Together, they have built an impressive portfolio valued at $375 million, focusing on holistic well-being and luxury living. Nick’s journey is not only about substantial financial accomplishment but also about reaping benefits through community impact and service.
But that’s not all. Nick’s pathway to success is filled with invaluable lessons of resilience and strategic pivoting. His diverse career includes tech industry exploits, where he led a startup to a $100 million private equity sale, and a transformative seminar with Tony Robbins that redefined his approach to wealth and identity.
In this compelling episode, Nick delves deep into the philosophies and strategies behind his remarkable success. He shares his profound insights into leveraging one’s unique strengths and highlights his transition from tech to real estate, focusing specifically on the long-term “BRRRR” business model. Nick opens up about the motivating factors behind his investments, including the drive to create positive social change and provide stable, quality living environments for his tenants.
One of the key takeaways from this conversation is Nick’s emphasis on using financial resources to make a lasting impact. He outlines how 5% of their profits go to charity and another 5% to profit sharing, fostering a more motivated and ethical business environment.
In This Episode
- Nick’s transition from the tech industry to real estate investment, including the impactful seminar with Tony Robbins that redirected his professional and personal growth.
- The “BRRRR” strategy (Buy, Renovate, Rent, Refinance, Repeat), which Nick employs to build a long-term, stable property portfolio.
- Leveraging personal strengths and unique advantages, and repetition of proven successful actions to create success.
- Using financial capital to drive community and social impact to create a positive difference and a motivated team culture
To anyone that wants to accelerate their wealth journey. Like, sit down right now and write down, like, what are the three most financially successful things you’ve done in your entire life?
Welcome to the Wealth Strategy Secrets of the Ultra Wealthy podcast where we help entrepreneurs like you exponentially build wealth through passive income to live a life of freedom and prosperity. Are you tired of paying too much in taxes, gambling your future on the stock market, and want to learn about hidden strategies for making your money work for you? And now, your host, Dave Wolkoff, serial entrepreneur and author of the bestselling book, the Holistic Wealth Strategy.
Hey, everyone. Welcome back to Wealth Secrets of the Ultra Wealthy. I’m your host, Dave Wolcott, and today we have a truly inspiring guest, Nick Stageberg, a tech industry veteran turned real estate investor and visionary behind Black Swan Real Estate. Nick’s journey is a powerful example of transforming adversity into opportunity. After years in the tech world working on high stakes ventures, Nick faced a pivotal moment that changed his life trajectory.
This experience led him to real estate, where he built a $375 million portfolio by focusing on value, service and long term community impact. In today’s episode, Nick shares the life lessons that fueled his shift to real estate, his passion for helping others, and the philosophy behind Black Swan’s unique investment model. Nick’s story is a reminder of the power of resilience, gratitude, and abundance in building wealth and fulfilling your purpose.
If you’re looking to learn how to turn your challenges into strengths and use them as a foundation for lasting wealth, this episode is for you. And before we dive in, if you’ve been enjoying these conversations, please subscribe to Wealth Strategy Secrets of the Ultra Wealthy and share it with someone you know who’s working towards financial freedom.
Let’s dive in. Nick, welcome to the show.
Thanks. It’s a privilege to be here with you.
Yeah, absolutely. Nick was pretty excited about having this conversation, and I actually started my career in the tech industry as well once I got out of the Marine Corps and you have quite a story about being in the tech industry that I think is really transformational and I think will, you know, provide a lot of insight for people and maybe, you know, perhaps that was one of the pivotal moments for you into, you know, transitioning to real estate and really getting, you know, more control over your destiny, you know, not only your financial capital, but just really more control over your time and everything. So really looking forward to to you sharing that story with the audience and anything else from your origin that I think would be helpful. So why don’t we start there?
Yeah. So I had a great privilege to get into the ground floor of a software development startup and enterprise software development startup. And we went from 13 million in venture capital to 100 million in private equity sale over the course of nine years and I think our greatest achievement was just that. We had an inception date of 06, so just about the worst time to do kind of financial services software startup since the Great Depression. But just got to see what that looked like to go on that journey and then I had the privilege to lead a software development startup launch for the Mayo Clinic. We went from just a handful of people to 13 teams of engineers over the course of three years.
So repetition is the mother of mastery. If you do something repeatedly, you get better at it just took three years to build another nine figure business there and then along the way was building a real estate portfolio, just like a lot of people do, buying one house one year, a couple houses the next year. It’s interesting you mentioned control because the very first investment property that we purchased, it was a proof of concept, which in the technology world is a really critical concept.
Before you do something really big, you want to start with the smallest possible experiment you could do and iterate from there. I was expecting this big windfall from the tech company selling that first tech company. I bought this $35,000 house, did a sweat equity remodel. My wife was in med school and leading teams of engineers by day, and then at night we’re laying ceramic tile and rolling paint and stuff like that.
But over the course of six weeks, we went from a $35,000 house that we spent about $17,000 on, so $52,000 all into a property that was worth, I think it was a little under $100,000 when we got done, and I looked back and said, “wow, this is a lot easier than leading teams of engineers in the technology world.” There’s some really brilliant, motivated people and I feel like you have to like, work hard, be extraordinarily talented, and get lucky to kind of hit it big in technology.
The winnings can be huge in technology, but like, your odds of arriving are kind of, you know, it’s not great odds. Whereas in real estate, you know, no one is doing it for free. Your competition is not as strong as it is in the technology field and there’s more millionaires made in real estate than any other industry.
It might seem like it’s technology because you hear about, you know, Mark Zuckerberg stories, but that millionaire next door almost certainly made their fortune in real estate and when that tech company sold, they terminated me and seized my stock options right before they sold the company, which is actually a pretty common thing to happen in the tech world. I was obviously very shocked at the time and for like six months I had like ptsd, like reliving that day, you know, I was fired and you know, how dare they cut a slice out of the pie.
And like, what, what did they do to me? And I lost the best prime working years of my technology career life, because you get old pretty fast in the technology industry, and then after about six months of that, I just said, “you know, that stupid house, that proof of concept that I did to figure out what to do when I got that big winnings from the tech company sale, man, that was like the most financially successful thing I’ve ever done in my life and if I could just go do that a bunch more times, I’ll have all the money I could ever need and my family will be taken care of forever.”
And so for a few years of hard hustling, I was doing the next tech startup for the Mayo Clinic and kind of growing that thing. But then at night I was out buying another investment property or checking on contractors. They’re doing renovations, did a business model to buy something, improve it, do a cash out refinance and take that money and go do it again and again and started working with investors along the way, and kind of the rest is history.
And somehow today we now have Black Swan Real Estate, which is a real estate private equity firm which has over $375 million in assets under management, and it’s really, it’s the exact same business plan. It’s never really changed from that first proof of concept house that we did where we kind of doubled our money on some renovations to cash out, refinance on it, to get that money back and go buy more properties and that’s kind of what brought us to where we are today.
Yeah, wow, I definitely want to unpack Black Swan and get into your expertise there, but just want to rewind the tape a little bit for people because I think there’s so much learning here and we dedicate so much to our careers, to our employers, and being, you know, working in corporate America myself for several years, it’s just amazing how much control they have over you and to pull the rug out from underneath you right at that absolute pivotal moment where you had worked.
I’m certain blood, sweat and tears for many years of your life and thinking that you were going to have that liquidity event and really, you know, change the course of your life at that point, and instead you actually get fired. So, you know, I just can’t imagine, you know, what was going through your head and I know you’ve been to some Tony Robbins events and some other work, and I’ve heard you kind of really talk about, you know.nThat as kind of a pivotal moment for you.
Can you just kind of unpack that a little bit? Really? What was going through your head and just how did you make that transformation?
Yeah, so for three years, I had this huge chip on my shoulder, and it’s a really sad state of affairs. I’m sure there’s lots of people listening to this podcast who are very financially successful people, and they’ve got a big chip on their shoulder, something where they feel like they’ve been wronged and if they could just achieve a certain thing, that piece of them would be whole. So we had achieved kind of financial freedom. We had a small portfolio of rental properties.
I was able to step back from my day job at the Mayo Clinic, and I just happened to get signed up for this Tony Robbins seminar. That was the day after the last day of my W2 job and I had never heard of Tony Robbins. Seemed like he was some kind of cult leader, snake oil salesman, I don’t know that.
And you go to one of his seminars and you get pumped up and he says, “I want you to think about the worst day of your life, the worst moment of your life, what’s the worst thing anyone’s done to you that’s happened to you” and just popped into my mind that day that everything was taken from me and they fired me.
All this success that I had had in the three years between that moment and this Tony Robbins seminar, somewhere in my heart of hearts, was really to spite these people that I felt like had wronged me, and Tony says, “I’ve got a hallucination to share with you. Because I find that in coaching high performance people that they often mistake the worst day of their life for the best day of their life, or the best day of life for the worst day of their life. You’re never going to mistake average day for the worst day of your life. But it’s exceedingly common to mistake the best day of your life for the worst day of your life.”
So I have a hallucination to share. What if that the worst day of your life, what if it was actually the best day of your life, you’re still alive. You still have breath within your lungs, you’re here with us today, you must be doing okay and that thing that happened to you, what if that pain, what if that problem, what if that thing that you think was done to you, what if it was a gift?
A gift from God or the universe, whatever you believe in, what if it made you who you are today? And what story would you tell yourself if that was actually the best day of your life? How would you feel? Like? Does that feel better? Does that story feel better to you? Because no one can tell you what anything means in your life. No other person, not God, no one.
You are the only person who gets to decide what anything means. So if you think that that’s the best day of your life, if that’s a story that you sincerely believe, you can’t lie to yourself. You are the only one who gets to decide. In that moment, I just decided, you know, and I believe this with absolute sincerity today. For years, for almost 15 years, if you walked up to me and said, “nick, who are you?” I would say, “oh, well, I’m a tech guy.” Like, how tragic is that? How sad is that? That I would wear my career as my identity and I held it so tightly. Oh yeah, I’m this rock star tech startup guy I get to work on, you know, I held it so tightly that it slipped through my fingers that it had to be taken from me.
And that is truly the greatest gift that God has ever given to me. I have a bachelor’s in computer science, a bachelor’s in ministry. I’m kind of a of faith, man of science, and I do sincerely believe that had to be taken from me in order for me to have the opportunity to recreate myself, to rewrite myself, to decide what my true identity is and the truth is, if I had stayed at that startup, you know, when a private equity roll up happens, they give you a little bit of cash, you know, to kind of, you know, you can go get a car or house or something like that.
Then they’re like, “oh, well, we want you to roll into the next one and the next one, and you’re back on that treadmill for another five, 10 years.” And it’s a pressure cooker. I worked like a 30 hour shift the day my first daughter was born. That’s the work environment in the IT universe.
And so I sincerely, I thank God that was taken from me and so as a result of that, I could become the man I am today and I still got to do the technology thing, but I did it with, like, a joyful heart. It was so beautiful, so healing to me, you know, to serve the Mayo Clinic. You know, there wasn’t stock options, but, like, people’s lives were saved as a result of the software that we made and then I got this, like, space in my life because it wasn’t as much of a pressure cooker to build this whole real estate thing that could take care of my family from here until the end of time, and like, what an incredible gift that is. Most people, they don’t get that gift, the opportunity to recreate themselves.
And so that was a huge turning point in my life and then in terms of, like, the birth of what we do right now, I realized the selfishness of what I had done to that point. Because all the time people would reach out to me and say, “hey, Nick, you’re doing this real estate thing, but you’re doing this software thing. Like, what are you doing? I see you’ve got, you’re like, renovating properties. Like, can I get involved in that? Can you help me with that?” And I would, I actually had to make up a metaphor to turn people away because it was such a common conversation for me to get sucked into. I said, “well, you know, we’ve got a lot of kids.”
I’ve got five kids right now, and I like taking care of my own kids, but I don’t want to open a daycare. Like, think about the painful selfishness of that. Like, no, this wealth thing, this is just for me, not for you. I don’t have time or space or love or abundance in my life to serve you and so one day at that same Tony Robbins event, you know, because Tony asked you some quality questions and he says the universe is screaming at you for value.
I promise, every single person listening to this podcast right now, the universe is screaming at you for value and you’re putting your fingers in your ears and saying really low quality things like, well, “I don’t know how to do that,” or “I can’t make money doing that,” or “that’s not why I got into business,” or “that’s not my business today.” And just ask yourself some higher quality questions like, “who could I hire that would love to do this? And what would be the business model that would allow me to create this massive value that people are screaming for?”
And so literally at that event, I called up the last few people, I said, no, I’m like, “hey, I’m at this crazy seminar with this, like, cult leader, stake, oil salesman person. I don’t quite know if I believe, but he told me to just call the last three people I said no to and just say yes and so you said you wanted to, like, get started on this real estate investing journey. I’m going to help you with that.” And they’re like, “okay, awesome, you know, tell me where to start.” I’m like, “well, I haven’t figured that part out yet.” And they’re like, “okay, well, just tell me where to wire the money.” I’m like, no, like, I don’t even know what we’re doing yet.” And I’m like, “well, that was a weird phone call.” And I called the next person, exact same call.
And I find that when you just meet people’s needs and you put their needs ahead of your own, and you just sincerely want to love and serve people, I mean, the universe paves a path to your door, and you will be just, like, showered in avalanches of abundance that you can’t possibly imagine until you put yourself into that place and you just say, “what is it that I can do to create massive value for the people in my life?”
When you meet people’s needs and you put their needs ahead of your own and you sincerely want to love and serve people, the universe paves a path to your door and you will be showered in avalanches of abundance that you can’t possibly imagine.
What are people screaming out to me for where the universe is demanding value? That’s exactly what we did. We started really serving investors in a huge way, and we 100x our business in short order as a result of that and we’ve created huge wealth for so many investors. We’ve created clean, safe housing for thousands of people. Just because I said this wealth thing, it’s not just for me and my family. It’s for everyone that I get the opportunity to serve.
Yeah, wow, so powerful Nick. I just really love, you know, where you’re headed with that and I think, you know, it’s hard for people, right, because we’re faced with such adversity in the world, right, these days, whether that’s, you know, health or certain relationships, career things, you know, money things, all of these things that kind of, you know, come at us. But if you can truly flip the table and change the script, right, which, yeah, Tony’s really good at talking about that. You change your story of who you are.
What you tell yourself, right? Do you tell yourself that, “hey, this is actually the best day of my life,” or “let’s take our biggest obstacles and use them as raw material, right, for our biggest goals and our biggest accomplishments that we can then achieve.” And I think if you look at, you know, many, you know, super successful entrepreneurs, or look at so many sports stars, or you name it, right, they took that adversity in their life and they use that to fuel their success, and that’s where they got to, right?
Whereas some people, right, if you don’t really have that type of adversity, you’re just kind of playing it safe all along, right? And you’re not trying to rock the boat and everything. So it’s just such a powerful way to look at, you know, obstacles. Ryan Holiday’s book, he calls it the Obstacle is the Way, right? With stoicism and really trying to understand that that’s the power for you. So a really great message there.
Appreciate you sharing that journey and you really dovetail that as well into just this, you know, this way of abundance, I think that’s so powerful and really the challenge with it that I see, Nick, is that we’re not taught this anywhere, right? The only place you can get messages like this is with high performance coaching, with people been in the trenches or, you know, resources like this on, on podcasts, right, that you can hear some of these stories. But typically in the corporate world, in different grinds, it’s all about, show me the numbers, show me the results. You’ve got to have everything, you know, yesterday, you know, step on your brother to get ahead, you know, all of these different things.
But you so, you know, clearly articulated that the path to an abundance really lies in serving other people, right? And when you can serve other people and help them get what they want, you know, it comes back to you completely in spades.
The path to abundance really lies in serving other people. When you can serve other people and help them get what they want, it comes back to you completely in spades.
Yes, I was just saying that once you have enough. So going from this, like, place of scarcity to finally having enough, the only thing that will get you up in the morning is serving other people, right? Like, once you have that financial number or whatever it is that you’re. You feel like you’re striving for, you don’t tend to be satisfied with it for very long and when you wake up every day and say, “man, what can I do to serve people today?” Like, right in this moment, like in the back of my mind, I’m trying to imagine people listening to this podcast and imagine, like, what do they need that they can take away from our, you know, our time together today, our extraordinarily precious time.
And like, that feeling, whatever that feeling is, it’s a limitless source of energy that you can tap into that’s just available to you the moment you decide Like I’m going to live every day for the rest of my life just trying to figure out how I can serve others at a higher level and when you do that, you are going to lead a long, joyful, beautiful life, just without fail. That’s what I found.
Yeah, for sure and you know, I think I would really, and just really urge the audience, you know, if you’re in a scenario where you’re not happy with your career, you’re not happy with the relationship, you’re not happy with your health, right. All of these things are like basically toothaches, right, that are going to just continue to get worse and what I see often, right, is that sometimes if we don’t do anything to actually be proactive about it, what happens is you have that life altering event, you know, that can be really significant and take you off your track.
So that’s really the call to action, right, is to, you know, if you see any of those gaps, you know, really try to address them now, right? So you can change the course of where you’re going. Because they’re just, I think there’s way too many people in the world today that are, they’re in careers that they feel like they’re handcuffed to their jobs, you know, they’re not fulfilling their purpose, you know, and they may have you sacrifice their health or something like that for, you know, for their jobs, right. Or sacrifice certain relationships, you know, they have deferred relationships that are going on. So truly addressing that right up front on a proactive level can significantly just change the trajectory, you know, of where you’re headed.
And you said as well, I think that’s really spot on, right? When we’re, you know, money is, we can all make more money, right? Money is really less of the challenge that you really think it is. It’s, what are you going to do with that financial capital and that wisdom to do that? Are you going to change other people’s lives? You know, are you going to, you know, serve other people more to create more purpose and impact in your life? And we love to talk about that here on the show.
You know, all about really holistic wealth and really the psychology of wealth, because what does it really mean at the end of the day? Yes, we want to learn new strategies and tactics and find great investments and everything. But part of the reason that we want to do that, right, is to be able to create more impact and do that 100%.
We have a, I think like a fun model. If you’re like a syndicator, fund manager, whatever. On this, listening to this right now, I challenge you. Give away 5, 10% of the profit from your next deal. So in our organization, 5% of all of our profit goes to charity, 5% goes to a profit share for our team and it is far more motivating to me that give back, right? So a little bit more money is not going to change my life in any material way. But like, we had, we had the opportunity to build a school this last year that my children now attend, you know, helped this scrappy startup charter school find an abandoned 40,000 square foot office building, do an adaptive reuse. I was like kind of half job, site foreman, half mortgage broker.
And we just got permanent financing in place here about six months ago. You know, all in, we were at like 5.3 million, appraised at 8.7 million. That organization now is $3 million of like, wealth. They’re set for the next half century, have a beautiful building that they can continue to grow into and that all came from that 5%. Give back is like, what can we do with this money to have like the most amazing impact ever, and so obviously if we’re able to do that with like, you know, this portion, you know, this 10% that we set aside, like, we get a bunch for ourselves too. But like, I don’t know, that doesn’t excite me, it doesn’t intrigue me.
You know, what can we do to impact other people’s lives with what we do? That’s what really gets me up in the morning. So I would challenge anyone here, just like set aside a portion and give it away in a way that leverages your skills, your expertise, your connections, your talents, and you’ll be blown away at the impact you can have. Like, it’s one of the most joyful things I’ve ever done.
I dropped my kids off at school every morning at the school that I helped build. You know, my name’s not on it. No one knows, you know, whatever. That’s not the point. Like, you can’t have a bad day when that’s like the start of your day, right? Like, you see these kids streaming in the building.
It’s like, “man, this is like the coolest thing I’ve ever done. So I would challenge anyone here.” Like, you know, the next big project, you do the next fundraise, you do the next, whatever it is that you’re doing in your vocation, just say, “I’m gonna give back this much and then really challenge yourself.” Like what can you do to have the greatest impact with that?
Absolutely love that Nick. That is fantastic and thanks for the inspiration there, appreciate it. So why don’t we talk about Black Swan? I know you’re actually doing some really unique things about how you’re really focused on real estate and really holistic well being luxury living. So can you talk about your business model a little bit more?
Yeah, so we do, you know, residential real estate, single family, multifamily. It’s a business model where we buy something, renovate it, rent, refinance, repeat so we can recycle that capital as quickly as possible. Most people that are in our industry, they have a two to five year hold period and when I look at that model, I don’t feel like that model is great for society. There are buildings that I have looked at buying that have been through five different ownership groups in the last 10 years.
Think about the roller coaster ride that, you know, puts the tenants on the management company the block and then, you know, at each one of those transactions, like brokers have gotten fees and stuff, like, and presumably they’ve made money each step of the way. Like how much wealth would be created for the, you know, the owners of that building if they just held onto it and took really good care of it and that’s, I mean that’s really our entire investment thesis is just find high quality real estate in a good location and just hold it for a long time.
Kind of a very simple Warren Buffett style investment thesis. Our fund structure is also very different, I see a lot of real estate syndications and stuff that have all kinds of fees that aren’t really super transparently disclosed. In fact, the general partner might make more money in fees than they make from actually getting a return on the deal. Especially if the deal doesn’t go well, there’s a lot of deals out there that aren’t going so well.
Right now our fund has no fees whatsoever, there’s no acquisition fee, asset management fee, capital event fee, disposition fee, loan recourse fee, marketing promotion fee, and 100% of all of our profit go to our investors until they get a full return of capital and then it’s a 50, 50 split after that.
And if you kind of pencil that into a calculator, your returns, you know, as like a limited partner are going to be, you know, a little bit better with our structure than with like a traditional kind of fee fee loaded structure. If things go well, if things go poorly, which fortunately we’ve never had a capital call or lost money on a real estate deal, but if they did, our limited partners come out way ahead because we’re not collecting all these compensation pieces on the front end of the deal.
So I jokingly call it the lemonade stand model. If you were to open a lemonade stand with your kid, you might use our exact business plan of “okay, I’m going to help you buy some lemonade, some lemons and some sugar and then I need to get my money back and then we’ll split the profit after that.” It doesn’t really need to be any more complicated than that.
We’ve grown that business to $375 million in assets under management in a relatively short amount of time and we’ve been able to just have a massive impact on the communities that we get the privilege to serve. So, you know, about a third, probably over a third of all of our properties are income restricted in one way or another are, you know, section 42 LIHTC or have TIF affordability, you know, covenants or something like that.
I grew up in section 8 housing and I am so grateful for, you know, being able to be where I am today and I think I have so many people to thank for that and I want to pay that forward any way I can. So we’ll often purchase these communities that are kind of egregiously mismanaged and they have a very low opinion of the tenants that they serve, and I find that people tend to behave the way you expect them to behave.
So when you have low expectations for people, they don’t perform the way they would if you had high expectations for people and you know, just countless, you know, beautiful stories from that. You know, like we bought one building, you’ve seen this building before, it’s in every community.
It’s a beautiful historic building, 100 year old building in a historic neighborhood where there’s, you know, million dollar single family homes next door. But the ownership group has kind of operated it as like a knockdown thinking, well one day we’re going to knock this building down and put in something much nicer so that it’s almost like they willfully, you know, kind of run these buildings into the ground.
And when we bought the building, you know, there was a unit, basement unit, it’s always a basement unit and there’s a woman in this unit that, you know, all manner of horrible things were happening in this unit. Drugs, prostitution, you name it. Couldn’t get into the unit before we bought it and we bought the building and then, you know, notified her, we’re going to do a safety inspection on the unit and we walk in and there’s, you know, just an orgy of tragedy in this unit.
We actually had to step out, get some PPE, get some, you know, five gallon buckets to fill up with drug paraphernalia and, you know, and other things, and we said we’re so sorry that the previous ownership group let this happen, let you do this to yourself and to who knows how many other people. There’s zero judgment in our heart for any of the decisions that you’ve made. Half of my wife’s family has died of drug overdoses.
She grew up in Westmoreland County. More drug overdoses per capita there than any other county in the country. So we’re happy to give you a ride, help you dial a phone, help you get treatment. Here’s a facility that we support. You know, we know it’s a hard conversation to make. We’re happy to have that conversation with you as many times as we need to and so we’re going to be back tomorrow and the next day until you’re served and again, there’s no judgment in our hearts for you.
We believe you’re a beautiful soul, but we don’t allow these things to happen in our properties. That’s not allowed and we had to visit her three times before she finally sought treatment, and she’s doing much better today, and the crazy thing is, the right thing to do can also be the profitable thing to do. So, you know, fast forward a few years. That building that we bought for, I think it was $62,000.
A unit is worth double that today. When you solve hard problems that other people don’t have the strength to solve, you’re rewarded for that in the marketplace and there’s just so many stories I could share of literal lives we have saved people where we have, you know, seen them. You know, they might, they might die within a matter of hours if we had not had the opportunity to intervene when we, you know, acquire a property and I just, it makes me so grateful that we get the opportunity to serve people where they live.
You know, we get to make the world a better place to live in the most tangible sense of the word. There’s very few people you’d call in the middle of the night, right? Like there’s like your parents or something like that, maybe your spouse and your landlord, like we get to serve people in a really special way.
And as a result of doing that and leaning into that mission, we’ve been able to generate, you know, huge financial returns for our investors, and because we align our incentives with our unusual structure, you know, for ourself as well, and all the different missions, we get to support with that give back. So I know that’s a little bit about our organization, and I don’t know what we do and more importantly, why we do it.
Yeah, Nick, so have you been able to. I mean, we’ve seen examples of class C properties that have been nothing but challenging, right? With tenants that don’t want to pay their rent, you know, all of those kind of things. So how have you managed to maintain profitability with that type of tenant base?
Absolutely, so you know, I think of, you know, B class housing as kind of clean, safe, not luxurious, but clean, safe. C classes, not very nice workforce housing. But there’s no physical insecurity, there’s no drugs or crime or anything like that and then D class housing I personally think of as characterized by physical unsafety. So there is drugs and crime and that sort of thing and so our favorite thing to do, if we can, is to buy kind of a D building and if we can pull it up to like a B minus.
That’s sort of our goal and you really can’t purchase a building of any letter grade in like a D location. I mean, location is absolutely crucial. So if you can buy what I would call the worst house on the block, you know, the, like the epicenter of that, you know, crime element or whatever, and then be vigorous in policing that, literally, you know. We partner with the police department. I think that having positive community engagement is critical.
I think we sponsored nine events this year. We’re trying to help them buy a food truck right now so they can have better community outreach and stuff like that. So we can make our community safe. That’s the basis of it and as soon as you go from unsafe to safe, you immediately go from a D to a C, and then it’s typically just a question of kind of the physical condition of the property, the upgrades or improvements that you’ve made to the property, inside and out, the customer service that you provide to it.
I think a lot about, you know, what’s the difference between, like, Burger King and Chick Fil A. Like, the product is a little bit nicer, but really it’s like the customer service, you know, like, I kind of wouldn’t be caught dead in a Burger King.
And yet I patronize Chick Fil A more often than I care to admit and I always marvel at the level of customer service that I receive there. Very similar product. I don’t know what the price discrepancy is. I’m sure Chick Fil A is more expensive, but I don’t even know or care and if you can achieve that in the, like the C class housing space. So, you know, we do, you know, a good renovation package. You know, luxury vinyl plank flooring, socket switches, faucets, fixtures.
We spend more money on renovations than most operators do. We don’t just refinish countertops, we, you know, replace and upgrade them, but ultimately raise our, our expectations for our tenants, raise our expectations for our staff and have that, you know, Chick Fil A level of customer service. I find that’s one of the core differences.
So you have, you cannot buy in a bad location, that’s the critical thing. You need to buy the worst house on the block. So you need to buy the epicenter of whatever that problem is that’s afflicting that immediate area layers. Countless deals I could tell you about right now that we don’t bother even underwriting, like they’re a low purchase price, but we know that that’s a bad area.
There’s crime in that area and so no matter what we do to try to fix our, you know, our slot on the block, like that crime is still going to be kind of washing up on our shore on a daily basis, ad then you need to provide, I think, an outstanding level of customer service which people are not accustomed to receiving in C class housing.
They’re frankly kind of accustomed to being treated poorly and then, and then just provide a slightly nicer product than, you know, the property down the street and in my experience, that gets you over that hump that gets you to the place where you now have tenants that are proud of the place that they call home and take care of it and certainly pay their rent and don’t break the law and let us know if there’s a problem that needs attention and renew their leases.
Even on our section 42 stuff, like, Dave, you won’t believe this, but we’ll do 15 or 20% rent escalations on our income restricted section 42 stuff, which most people would say is completely impossible. Those people don’t have any money and they don’t value a nice place to live. We upgrade those communities, we spent $1.8 million on upgrades to a $10 million Section 42 community that we bought last year.
So a pretty ludicrous amount of money to spend on upgrades to an income restricted rent restricted community. That community we had average rent growth of 14% and we had an 82% renewal rate last year. So these are income restricted tenants and they are just so delighted to have someone that cares about them, that loves them, that treats them with dignity and respect and they will never leave. So we’re kind of escalating to the rent cap and with, with an outrageously high renewal rate and those people are probably going to live there for the next 10, 15 years.
Yeah, awesome and what markets do you focus on specifically?
So we’re based in Rochester, Minnesota. We’ve got, call it 275 million in assets under management here in the southeastern Minnesota market and then another 100 million in Tacoma, Washington. I really love both those markets. Those are strong secondary tertiary markets that kind of ride in the wake of a strong primary market market. So you know, if you go to Seattle, like there’s a deal I was just looking at where it’s 287 a unit for 150 square foot units, like Seattle’s the lowest cap rates in the country.
I don’t know how anyone’s making money there and then you go south to Tacoma, which is, you know, kind of in that MSA, but a different market that’s close by and we’re able to purchase, you know, a typical kind of C or D class unit for maybe $140,000 a unit, in some cases much less than that. When we find a really good deal and when we’re done renovating those, they might be worth like $250 to $300,000 a unit.
And we can double or in some cases we’ve even tripled rents with really deep value add. Because you go from a knowledge worker at Microsoft or Amazon that’s paying $4,000 a month for rent in Seattle to paying $2,000 a month for our frankly luxurious product compared to what they’re getting in downtown Seattle. There’s a huge arbitrage in, in cap rate and per unit purchase price between those markets and then we really like Rochester, Minnesota for the same reason.
It’s kind of a strong secondary tertiary market that rides in the wake of a strong primary market next to Minneapolis, but purchasing at a far more advantageous kind of cap rate or per purchase price and then Rochester really has this crazy X factor of the Mayo Clinic. So there’s the largest Public private partnership in the country per capita happening in Rochester right now. The destination medical center initiative.
You can go Google that or whatever. Mayo Clinic, just hospital the future. So that’s a $5 billion expansion to their hospital. So that’s two Amazon HQ2s on Midwest dollars. So probably like four Amazon HQ2s or something like that happening in a community of 130,000. So think about the incredible economic impact that has. We had 5% population growth last year, so just staggering growth. If you can find a market that’s not quite on the radar for other people, that’s a niche and just laser focus on that niche.
I mean, that’ where all the success is in any industry, in any business. The riches are in the niches. I promise you there is somewhere close to you or something that you have some knowledge of. There’s a market that has an X factor like that, and we’ve been able to find that in both Tacoma and Rochester and it’s been extraordinarily favorable markets for us in the time we’ve been investing there.
Awesome. Nick, it’s been such a pleasure having you on the show. So many great insights and great to get your perspective on growth as well as what you guys are doing, doing at Black Swan. Definitely a unique model out there, for sure. If you could give just one piece of advice to the audience about how they could accelerate their own wealth trajectory, what would it be?
Yeah, so, you know, I just said, like, the riches are in the niches and in my observation, all of the most successful people that I have ever met, they. They found a niche, they found a trick, and they just, you know, doubled down on that trick over and over and over again. And it’s so tempting to listen to podcasts like these and think, okay, I’m going to go invest in Tacoma and Rochester, Minnesota, or I’m going to go invest in LIHTC Section 42 housing or whatever you need to find what I call your asymmetric advantage or your unfair advantage.
Like, let’s say that you had a whole career in lending. Well, you’re probably better at getting debt than most people. If you were to become a borrower instead of a lender, but stay within that same, you know, community of people of connections and, like, figure out how can I invest in such a way that really maximizes this unfair advantage they have on the debt side. Or maybe you’re a contractor and you can go from building things for other people on a fee basis to building things for yourself, and maybe you’re not as good at getting debt.
But you’re really good at dialing in your construction costs, obviously. And there’s probably something unique about your social network. Maybe you have a rich uncle. I sure wish I did, but I know lots of people who do. You know, I’m married to a physician. My wife Elaine, she’s my full partner in the business, and she’s a bit of a celebrity in that space. When I go to conferences with her, they’re like, “oh, my God, Nick, you’re Elaine’s husband.”
“Can you introduce me to her?” And I’m happy to play the part. Right. I enjoy being the celebrity’s husband. So the joke is she, like, raises our capital and then I spend our capital on investments. If I had ego in this and was like, “oh, I want to be the celebrity at the conferences, I want to raise the money,” that would be, like, a really stupid thing for me to do because I don’t have any advantage there. I have an advantage in my technology background, my business leadership background, and growing businesses successfully. So that’s where I need to focus my unfair advantage.
So to anyone that wants to accelerate their wealth journey, sit down right now and write down what are the three most financially successful things you’ve done in your entire life? Just write them down right now and just do more of those. Don’t get creative, don’t get cute, don’t get clever or complex. Just do the thing that you’ve done before. Just like I had done this whole successful tech startup thing, but I didn’t have any money to show for it.
It was not a financially successful thing to do. I had this very modest $35,000 house that I bought. It’s not sexy, like this big tech startup thing, but it was financially successful and when I finally got the ability to check my ego at the door, I could very clearly say, “yeah, I could go do that 100 or 1000 more times easily.”
More easily than I could go build another tech startup company. So I’m going to do that. I’m going to do the thing where I’ve had huge financial success, and I’m just going to repeat it over and over and over again, and everybody has that in their life. It might share something in common with what you’ve heard from me or other people on this show, but it’s likely something totally different. Just find that unfair advantage, that asymmetric advantage you have, press that advantage and just go repeat the most successful thing you’ve ever done over and over again without getting bored.
Yeah, no, Sage advice for sure. We have not heard that piece of advice before and leveraging your unique abilities and your strengths, right. To be able to create value, whatever that might be. Great way to focus on it. So appreciate you sharing that and all the wisdom on today’s show. If people would like to connect with you or learn more about Black Swan, what is the best place for them to reach out?
Yeah, anyone can go to blackswanteam.com. There’s a link right to my calendar there. I’m happy to, you know, spend 15 minutes with you just, just whatever I can do to provide you with value or if you might be interested in investing with us, there’s all kinds of stuff for that, too. Whatever we can do to serve you. My wife has a coaching program that people absolutely, you know, rave about. Whatever we can do to bring you value. You can go to blackswanteam.com and we’d love to connect.
Awesome. Thanks so much, Nick.
Thanks, Dave. Thanks for listening to this episode of Wealth Strategy Secrets. If you’d like to get a free copy of the book, go to holisticwealthstrategy.com. If you’d like to learn more about upcoming opportunities at Pantheon, please visit pantheoninvest.com.