Episode Overview

Podcast: Real Estate Investing School Podcast
Episode: 187 – Lessons from 1,000+ Deals with Jacob Vanderslice
Host: Joe Jensen
Guest: Jacob Vanderslice, Co-founder & Principal at VanWest Partners
Release Date: August 26, 2024

Main Theme:
A deep-dive discussion into the lessons, strategies, and mindset acquired over nearly 20 years and 1,000+ real estate deals, with a focus on why Jacob ultimately specialized in self-storage, his approach to building long-term wealth, decision making in acquisitions and exits, and the nuances of scaling a real estate investing business.

Key Discussion Points & Insights

1. Jacob’s Real Estate Journey (00:55 – 04:09)

• Started real estate investing around 2005 while working as a firefighter, with significant downtime used for residential deals.
• Experience spans single-family, adaptive reuse, retail, townhomes, multifamily, land, and eventually, self-storage (first storage deal in 2015).
• Transition into self-storage was unplanned: “Wasn't really a strategic pivot... just kind of try a new initiative out, see how it goes.” [01:10]
• Settled on self-storage due to its durable, recurring revenue and cash-flow-driven nature as opposed to the highly transactional, “eat what you kill” structure of fix-and-flips.

“One big mistake we made… we didn't have the discipline to hold on to these houses… we sold probably, I don't know, 95% of the deals we did... What we didn't like about our business in retrospect is it was overly transactional and we wanted to shift to something that had more durable recurring revenue streams.” [02:14 – 03:30]

2. Transactional Vs. Wealth-Building Strategies (04:09 – 06:06)

• Many real estate businesses become just another job—transactional, high churn.

• True wealth-building comes from holding and operating assets long term.

• Memorable quote from an octogenarian investor:

  “You know the problem with selling?... You don't own it anymore.” [05:02]

• Jacob emphasizes properly managing, financing, and operating long-hold assets for wealth creation.

3. Deciding When to Sell or Hold (07:00 – 15:01)

• Metrics for selling are both quantitative and subjective:
  • Underperforming assets may be pruned early.
  • If projected multiples are realized faster than planned, sales may be considered.
  • Sometimes strategic sales to return capital to investors or because there's no more value to create.
• IRR (Internal Rate of Return) vs. Multiple:
  • IRR is time-dependent and can be misleading; multiple shows actual dollar profit over invested capital.
  • Jacob prefers a balanced approach but prioritizes multiple over IRR.

“IRR is the most misleading return metric... If you give me money today and I give your money back tomorrow, plus a tiny bit of profit, your IRR is going to be through the roof. But your multiple... is not going to be attractive.” [09:14]

• Subjectivity remains for top cash-flowing deals that anchor portfolios despite exceeding sale targets.

4. Market Dynamics & Current Investing Environment (17:00 – 24:13)

• The thrill and challenge of new acquisitions still excites Jacob:

  “What we really enjoy is the dream of a new acquisition... It’s the dream of the execution on that new acquisition.” [17:00]

• Models are always “wrong”—deals never go perfectly to spreadsheet.
• 2024 has been a lighter year for acquisitions (only 1 deal closed as of late August, vs. 8 deals in 2023), reflecting tighter deal flow and a cautious market.
• Market conditions:
  • Wide bid/ask spread between seller expectations and buyer underwriting due to high interest rates.
  • Expectation (or hope) for moderating rates to increase deal flow and investor confidence.
  • Self-storage consumer side is rebounding with occupancy and revenue growth.

5. Post-Deal Learning and the Value of Reviewing Performance (24:13 – 27:48)

• Importance of looking back at previous deals to measure actual vs. projected performance.
• True learning comes from failures, not wins.

“In my experience, you don't learn much when you win... What you learn the most from are your failure. The failures [you] remember like they were yesterday.” [25:50]

6. Why Self-Storage? Risks and Advantages (28:14 – 36:07)

Risks:

• Local supply sensitivity; new developments can hurt rents/occupancy.

• Contrary to popular belief, it is NOT a “low overhead, easy” business.

  “We have about 19,000 units and I guarantee you right now somebody is cooking meth in one of them or stealing or doing something nefarious.” [29:16]

• Highly operationally intensive with a large workforce required.

Advantages:

• Historically resilient during downturns.
• Revenue is granular and diversified across many tenants—reduced risk vs. single large tenants.
• Dynamic, month-to-month leases allow rapid rent adjustments.
• Small changes in NOI have exponential impacts on valuation in a cap-rate-based commercial framework.
• Operators, not passive investors, must be highly engaged for success.

7. Commercial vs. Residential Valuation (36:07 – 38:46)

• Commercial is valued by NOI and cap rates—the greater the NOI, the exponentially greater the value.
• Unlike residential, where value is dictated by comparable sales, commercial investors can manufacture value.

“As you grow NOI a little bit, you see an exponential increase in value.” [37:24]

8. Advice for Intermediate Investors (39:53 – 43:14)

• “Bigger isn’t always better”—scaling up may increase complexity and not always profits.
• The ONLY way to learn is to act:

  “The only way to learn is to go out and do it. You've got to go out and take a risk. You've got to take the next step... the greatest lessons you learn are by owning and operating assets or investing in assets.” [39:53 / 00:00]

• Know the “language and lenses” of real estate (key metrics, how deals work) before jumping in.
• The two core questions for any value-add deal:
  1. “What's it worth once I make it better?”
  2. “What's it going to cost me to make it better?”
• Simple, transferable principles underpin both small and large deals.

9. Reflections on Partnerships (45:21 – 47:32)

• Partnerships are easy to enter, hard to exit—choose wisely.
• Long-term partnerships can be filled with conflict, but the right partners are invaluable.
• Always be mindful of the structure and long-term implications.

10. Notable Quotes & Memorable Moments

• “We’re less stupid every December.” [16:20]

• On self-storage operations:

  “We probably get served with like DEA search warrants somewhere like once a month because people are keeping… bad money in there and drugs.” [29:16]

• On learning from mistakes:

  “All we learned was don't do that again, right.” (on a $300,000 loss building a container house) [52:00]

11. Book Recommendations (48:13 – 50:21)

• Midnight in Moscow by John Sullivan – Memoir by a former US ambassador to Russia.
• In the Kingdom of Ice by Hampton Sides – Historical nonfiction about a doomed 19th-century Arctic expedition.

“It kind of puts your hard day at the office in perspective... you're not eating the leather off of your shoes and near starvation.” [50:01]

Timestamps for Major Segments

• Jacob’s Background, Early Lessons – 00:55 – 04:09
• Transaction vs. Wealth – 04:09 – 06:06
• Holding vs. Selling, Metrics – 07:00 – 15:01
• Market Conditions, 2023 vs. 2024 – 17:00 – 24:13 / 20:40 – 24:13
• Importance of Reviewing Deals – 24:13 – 27:48
• Self-Storage Advantages & Myths – 28:14 – 36:07
• Commercial Valuation Explained – 36:07 – 38:46
• Actionable Advice for Investors – 39:53 – 43:14
• Reflections on Partnerships – 45:21 – 47:32
• Mistakes & Learning – 51:22 – 53:19
• Book Recommendations – 48:13 – 50:21

Actionable Takeaways

• Focus not just on returns, but the duration and recurrence of returns.
• Long-term wealth is built by holding, responsibly operating, and financing real assets.
• IRR is often less useful than understanding your true profit multiple over time.
• Self-storage is operationally demanding—success lies in rigorous, hands-on management.
• Don’t let tax-driven pressures (like 1031 exchanges) force bad acquisition decisions.
• Learn from losses—they imprint deeper lessons than wins.
• Partnerships amplify both success and potential conflict—think carefully before entering them.
• Don’t obsess about perfection before acting. Once you understand the fundamentals, action is the best teacher.

How to Connect with Jacob Vanderslice

• Website: vanwestpartners.com
• Email: jacob@vanwestpartners.com
• LinkedIn: Jacob Vanderslice on LinkedIn

Closing Sentiment

Jacob’s philosophy champions humility, continued learning (“be less stupid tomorrow”), and a fundamental respect for both operational rigor and risk in real estate. His journey provides a roadmap of adaptability, focus on recurring revenue, and the necessity of skin-in-the-game experience.

[End of Summary]