Real-estate-investing advice: How one man went from food stamps to 587 units – Business Insider Nordic

• Sterling White, founder of Sonder Investment Group, turned extremely negative circumstances into a successful venture in real estate.
• In less than four years time, White accumulated 587 units through the “BRRRR” method — buy, rehab, rent, refinance, repeat.
• White details how influential one specific mentor was to his success.
• Click here for more BI Prime stories.

To say Sterling White grew up in a tough environment would be a vast understatement.

“I was born on the east side of Indianapolis, where people, when they drive through the neighborhoods where I had my upbringing, they tend to lock their doors,” said the founder of Sonder Investment Group. “Grew up with a single mother, had a fraternal twin brother — it was just us.”

He continued: “We grew up in Section 8 housing, food stamps, and I’m sure of any other type of government assistance my mother didn’t tell us about. There would be times where we would just hear gunshots and we would have to get on the floor.”

Although White’s circumstances were unpredictable and dangerous, he didn’t let them get in the way of his entrepreneurial spirit. He wanted to impress his peers with new clothes and the latest shoes, so he started to hustle.  

“My first product was Kool-Aid, second was Pokémon cards,” he said. “And then how I got started in real estate, in 2009, when things weren’t going so well, got into the construction. That’s when I fell in love with real estate.”

Shortly thereafter, White started working with a mentor. Little did he know, that relationship would change his life in less than four years.

“That’s how I really got a knack for the single-family home investing — brought the value to that relationship through working for that person for completely free,” he said. “Scaled up to 157 single-family (units). In 2017, transitioned to multi-family; was able to get up to 587 units, total.”

The mentor

White’s life changed when he met his mentor at a CrossFit gym. Since money was tight, he negotiated a deal with the owner to clean the gym in exchange for a membership.

“The problem that [the mentor] had was he had the capital, had the credit, but didn’t have the time to find the deals,” he said.

This is where White knew he could add value. He didn’t have credit and had negative funds in his bank account due to an overdraft, but he had the time. 

“I was able to look at my weaknesses, and then look at that person’s weaknesses and strengths, and then bridge the gap,” he said. 

White learned the in’s and out’s of real-estate investing from this individual — and he’d apply those skills moving forward in his own practice.

“I would say the two-and-a-half years I was working with my mentor is the 20 years of knowledge I was able to obtain,” he said. “I would’ve paid a million dollars for that if I had it.”

Deals

“Originally, how it was being done was using friends and family’s capital to purchase the properties,” he said. “Indianapolis — very affordable in terms of the houses … could buy a house at that time for $25,000, and then put another $25,000 into it and rent it for about $800 to $850. My partner and I, at that time, would buy 10 of those.”

White says that he employed an approach that is commonly referred to as “BRRRR” — buy, rehab, rent, refinance, and repeat. The only difference is he used outside investors instead of a traditional lender for financing.

“Just did that same thing over and over,” he said. 

To exit the deals, White would find a group of outside investors and cash out. The new investors would receive a stream of cash from the income the property produced.

“It was a straight equity split,” he said.

At the time, 80% of the equity would go to the investors and 20% would go to White and his partner for sourcing the deal. When the property was eventually sold, the proceeds are divvied up the same way.

Returns would vary, but White said they commonly came in around 9% to 11%, with some deals netting 12% to 14% on the cash-on-cash alone. 

“They would look to double their money in essence, including the cash flow as well as the sale of the property in a 5 to 6 year period,” he said in reference to the investors.

Advice

Throughout his journey, White absorbed swaths of valuable lessons for getting ahead in real-estate. Here are some of the most important:

Use other peoples money

“Another limiting belief is that you have to have a large amount of capital or you have to use your own money,” he said.

“Most people, they tend to get tapped out using their own cash,” White added. “So if you want to build a larger portfolio, it’s best to be able to use other peoples’ money. And that’s what I’ve learned from the high achievers and successes in this industry … is they tend to use other peoples’ money, as well, to really scale their operations.”

Multifamily over single family

“I prefer multifamily,” he said. “Having that many single families is very management intensive.”

In addition, White says multifamily houses are advantageous when it’s time to exit. He says that single family home values are based on comparables, while multifamily are based on net operating income. 

If a seller can push the income of a property up, buyers will likely be willing to pay more.

Cold-calling works for sourcing new deals

“Cold-calling does work,” he said. “I acquired a 46 unit, two 80 units, a 50 unit, and then also a 156 unit in the past two-and-a-half years all started with a cold call.”

“It’s a volume game,” he added. 

White says it takes between 185 to 200 calls to snag one deal.

Mindset is the biggest thing

“It’s 95% mindset,” he said. “I always thought — for some reason — that only investing in real estate was for the top wealthy, and that was one limiting belief that I shattered at the age of 23-years-old when I bought my first deal.”