It’s said that Confucius advised, “Choose a job you love, and you will never have to work a day in your life.”
While I’m sure that some days feel more like “work” than others, it’s hard to deny that this investor has found his passion. Exploring niches from multifamily to self-storage to mentoring and advising others, Giovanni Isaksen has been surrounded by real estate his entire life. Today, he works to provide due diligence, market research, financial analysis and asset management to clients for their apartment, self-storage and mobile home park investments — and also is involved raising funds for a number of development deals. To top it off, he spends his free time mentoring and advising women entrepreneurs in CRE and tech.
In this interview, I couldn’t help but sense Giovanni’s pure enthusiasm for the industry. It was simply so apparent that he lived and breathed real estate — and his curiosity for different areas within the industry has shaped his career and led to some very unique and interesting experiences (and lessons learned).
Whether you’re a newbie mobile home investor or seasoned apartment building mogul, I guarantee you’ll learn something from his diverse experiences — or at least enjoy his intriguing story.
Want to ask Giovanni something not included in this interview? Be sure to leave a comment!
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A Conversation With Value Investor Giovanni Isaksen
Giovanni was born into a family whose real estate history goes back to his great-grandfather, an architect in San Francisco who built and owned office and residential buildings after the 1906 earthquake. A “rebellious child who grew up mowing lawns, patching drywall and cleaning out apartments,” he says he wanted to do something different — so he went into construction. (At least he didn’t have to deal with tenants, toilets and trash, he mentions.) He began running projects for a company that did condo and residential work during a construction boom.
Realizing that he could make much more money by being “just a little less disorganized” than his bosses, he started a company that built one-of-a-kind homes and performed additions and remodels on high end homes in the Seattle area. Construction was booming at the time (late ’90s and early ’00s), and a lot of his customers were early Microsoft employees, who introduced him to some of the latest technology and what he dubs “the systems religion,” which allowed him to leverage technology to automate his business. Cutting edge at the time, he was suddenly able to manage three project leads, running three jobs while planning the next three.
Overheads were down, and profits were up.
Construction is Like Horse Racing
Still, the draw to climb higher up the ladder gnawed at him…
“Eventually it dawned on me that construction was like the horse racing business. The horse has a really good life, being well fed, pampered, groomed, etc., and it gets to go race around with its friends every few days. But the horse soon figures out that it’s doing all the work and thinks being the jockey would be a much better deal. The jockey does have it pretty good too, riding the fastest horses a few hours a day while making a decent to really good living. But of course it doesn’t take long for the jockey to figure out that it’s the owner who makes the vast majority of the money, and all they do is stand around in the clubhouse drinking mint juleps,” says Giovanni.
“On a good day as a contractor I was the jockey, on other days I was the stablehand cleaning out stalls, so that’s when I really started thinking about all the real estate lessons from my family. I knew I wanted to be the owner and started looking for opportunities to buy houses and fix them up.”
The Rehab Business
And so, he partnered with a friend from the finance industry, used some startup capital and implemented the systems and people he had in place to do the work. Originally planning to hold the houses as rentals, at the beginning of what would turn out to be a market bubble, they soon began receiving offers that were too good to turn down.
“Doing these flips, we figured out that the guy who was making the most money on them was our agent,” he recalls. “So my partner partnered with the agent and hired us to do the work. I partnered with an architect we’d been working with who also had his real estate license. This worked well as in both cases the real estate commissions were included in the profit split.”
The Seattle market started to peak in 2006, and when one of their flips took four months to sell, they knew the time to make easy money had come and gone. He decided to sell his company.
But things did not go as planned:
“Two-thousand and six was a great year to sell a construction company, but not a great year to put that money into a condo conversion deal. My only consolation came from a developer acquaintance who said not to feel bad because there are only two kinds of developers, those who had gone broke at least once already and those who would. Well I guess I’m part of that club now too. Only I wasn’t just broke I was in debt with no company and no job.”
He eventually got a gig with a “old school guru-type” analyzing deals submitted by students. He built an application that helped with the analysis — but knew his heart was in the apartment business. With no capital (and little 100% financing in 2008), he started bird-dogging apartment buildings, working out of Florida and finding deals in Texas and Arizona.
In turn, this lead to something more:
“I found a couple of small funds who were looking for the same type of deals who appreciated my deluxe packages I sent, which included a detailed analysis of the numbers and as much of the due diligence one could do remotely. From there my clients grew slowly but surely and now include a few who work at large institutions and don’t have time to manage their portfolios.”
A Well-Rounded Real Estate Education
A lot of what Giovanni has learned about real estate has been through his own experiences — from working his way up to bouncing back from bankruptcy — but he also names a number of important, diverse mentorships. From his Uncle Tony who taught him how to spot upcoming areas to a “systems mentor” who advised him on using search engines to find people and deals, Giovanni reminds investors to keep their eyes open for important educational opportunities.
“These days, it’s easy to be virtually mentored by great investors for practically free,” he says. “Read every one of Warren Buffett’s letters to his shareholders, I think he’s the best on business and investing. Warren’s partner Charlie Munger is also very good. Howard Marks at Oaktree is a private equity value guy who also does a lot of real estate. Jeremy Grantham and James Montier at GMO are really good too.”
What about books? “That’s really tough because I’m kind of like Charlie Munger, a Kindle with two legs sticking out,” he replies.
If You Want a Few Classic Favorites
Rich Dad Poor Dad by Robert Kiyosaki
The E-Myth Revisited by Michael Gerber
What Every Investor Needs To Know About Cash Flow by Frank Gallinelli
If You Want to Know What It’s Really Like to Be a Real Estate Investor
Creating and Growing Real Estate Wealth by William Poorvu
Confessions of a Real Estate Entrepreneur by James Randel
If You Want an Intro Into the Real Details
The ABC’s of Property Management by Ken McElroy
If You Want a Wharton MBA Real Estate Education For the Price of a Book
Real Estate Finance & Investments: Risks and Opportunities by Peter Linneman
Real Estate Niches
Giovanni has dabbled in a number of facets within real estate and therefore has some unique insight on how they compare to one another. Here’s what he had to say about the niches he’s found himself in and which he’s enjoyed the most.
Construction & Spec Remodeling (aka “Flipping”)
“For people with a construction background, spec remodeling is a way to move into real estate investment. If you’re not in construction or have no experience in it, you will be at the mercy of your contractors to start out with spec remodeling. Developing, spec building and/or spec remodeling are businesses that happen to be related to real estate. Owning income producing real estate should be the goal, though, because that’s actual passive investing where your money works for you instead of the other way around.”
“I’m a strong believer in the value of professional property management, but because I grew up doing it, I really appreciate the fact that other people are willing to do it — and they only charge money.”
Apartments & Self-Storage
“Of the different sectors of income properties, the one I like best is apartments. Self-storage is great because it’s apartments without the people, but will we always have too much junk to store in our own homes? (Apparently the answer has been yes since the late seventies when my mom thought we should be getting into them when no one else did so I’ve been wrong about that for a long time.) The thing about apartments is that everyone needs a place to live, and even if we all end up running eBay stores from our couch in pajamas, we’ll still need a place to put the couch.”
Single Family Rentals
“Single family rentals is a great place to start, but eventually most successful investors find it more efficient to have fewer apartment buildings than more houses. The institutional guys got into SFR because they could buy REO product at 40-60 cents on the dollar, and I think the REIT exit is the way for them to get out before the burden of maintaining scattered sites gets too heavy. For mom and pop investors, though, the institutional players will force them to raise their game just as happened to apartment investors when REITs came into that market.”
Hotels & Medical Office Buildings
“Hotels are on the upswing right now, but every morning you start with about 100% vacancy and have to get heads in the beds every night. Medical office buildings are getting a lot of attention now, too, but the TI can be very expensive, plus the financial model the medical system this country runs on is broken.”
What You Should Know About Apartment Investing
Right now, Giovanni himself focuses on finding distressed owners of apartments in markets he likes. He also seeks self-storage opportunities in markets that don’t attract the big players.
If he could start all over again, though?
“I’d become an apartment broker and get a resident manager gig with a free apartment to live in while I built up my brokerage business. By the time your business is rolling, you’d know the sector and your local market inside and out and could start getting a piece of deals as well as doing your own.”
For those looking to get into the apartment business like him, he says it’s important to avoid two frequently acquired syndromes:
- The Guru-of-the-Month Syndrome: Where investors are pitched a new strategy at every meeting. Instead, pick a strategy and stick to it until you master it from an owning and operating standpoint.
- The Grass-is-Always-Greener Syndrome: Where investors believe things are always better in another market. Instead, get you know your market and find your deals where you have home field advantage.
Regardless of how you get there, once you’re in the apartment investing business, it’s important to have a few strategies up your sleeve for improving value and increasing cash flow. Giovanni focuses on energy efficiency, good property management and tenant screening.
Specifically, in his buildings, he likes to install:
- Double pane windows
- Low flow toilets
- CFL bulbs in common areas
- Programmable thermostats
- Timer switches for bath fans
When it comes to property management, he believes that finding a great, trustworthy company is key to reducing resident turnover and boosting NOI over the long term. “One of the easiest turnarounds to do is to find a property that’s ‘under managed’ and bring in a good outfit to run it,” he says.
And it’s amazing how many issues you can avoid altogether with managing your property if you screen your tenants properly, he adds. “Every submarket will have different thresholds to screen to and sometimes it requires patience to wait for qualified tenants to apply but it’s worth it for both you and your property manager, who should already know where to set the thresholds.”
From here, Giovanni hopes to continue growing his apartment investments so he can find more time to help others achieve financial success. In the meantime, he doesn’t mind the hectic lifestyle that real estate investing sometimes requires.
“What I love about this business is that you can build wealth by doing good for others, providing one of life’s most essential needs,” he comments. “And shelter is much easier to provide than food; just ask any farmer.”
- How did YOU choose your niche?
- If you had to do it all over again, what would you do?
- What questions do you have about apartment investing?
- What are your favorite ways to add value through real estate investing?
Join in on the discussion, and let’s talk!