A Student of the Real Estate Game


John Drachman on Launching Stillwater Investment Group

May 3, 2015 | Entrepreneurship

Stillwater Investment GroupWhen I started this blog in January 2009, a big focus was providing reviews on the various graduate real estate programs. I’d message recent grads through LinkedIn and ask them if they were willing to share insights into their experience. Most were receptive because there was so little information out there.

One of the first guys I connected with was John Drachman. John was running his own popular real estate blog, ‘The Daily Drach’ where he shared his opinion on the CRE market. He was a recent grad of the USC Master in Real Estate Development program and in October 2009, I published his review of the program.

While he no longer writes The Daily Drach, he’s recently started his own shop, Stillwater Investment Group.  A few months back I reconnected with John and asked him to share some of his insights into starting and running his own real estate investment firm.

Enter John:

Tell us a bit about the Stillwater story. How’d you decide the timing was right to go off on your own?

I have always had a strong desire to start my own company as I was an Entrepreneurship major in undergrad at the University of Arizona and actually started a company right out of college.  That business was not very successful but I learned a lot and always desired to get back to running my own company.  My entry into commercial real estate was working as an office and industrial leasing broker for Grubb & Ellis in Orange County, CA.  There I was an independent contractor and only paid on the commissions I earned and effectively was running my own small business under the Grubb & Ellis Brand.  After 3.5 years working as a broker, I decided I wanted to move to the principal side of the business and went to grad school at USC to obtain my MBA and MRED degrees.  I graduated in 2009 (terrible timing) and was focused on finding a company where I could learn everything there is to know about investing and operating in office and industrial properties in California and Arizona.  I was lucky enough to land a job at Greenlaw Partners, one of the more active operators based in Southern California.  I worked there for almost 5 years and learned a lot about how you acquire assets with a variety of different partners, how you execute strategic business plans on those assets, and how you successfully exit those assets.  I also built and strengthened my relationship base throughout Southern California and Arizona with brokers/lenders/architects, etc.  I decided last year that if I was going to take the entrepreneurial risk again, now was the time both personally and professionally because my wife and I did not have kids yet and I felt I had learned a lot of what it would take to run my own firm.  In August of 2015, it will officially be one year since I started my firm and happy to say that we have already completed two transactions while close to acquiring our third project.

What has been the biggest challenge of getting your shop up and running? What’s been the biggest surprise?

The biggest challenge was actually taking the leap.  I talked about it for a while with various mentors and friends but at some point you have to put yourself out there and do it.  You have to leave your current firm, and send out the email to everyone that you are now officially on your own.  You have to change your LinkedIn profile and your email addresses, phone numbers, etc.  That act is scary because you know that once you do it, there is no turning back until you are either successful or you are not. You also typically are giving up a salary or current income which can be hard financially especially since it can take years to build up a portfolio of any size.

The biggest surprise was how easy the technical aspects of starting my firm was, creating a website, getting an email address, logo’s, cloud drive’s, and everything else which goes into starting the company.  With technology today, I truly believe it is as easy as ever to start a company.  That does not mean it will be successful, but it is not hard to start one.

John, you teach the Office & Industrial real estate class at the USC MRED program, what advice do you give your students there about real estate and being an entrepreneur?

I tell them a couple things

  1. First and foremost set goals for your career and have a sense for where you want to go.  Then it’s easy to work backwards to figure out all the steps you need to take to get there.
  2. Focus on gaining experience during the first ten years of your career and not on making as much money as possible because the right type of experience will be worth more in the end.
  3. There is a lot of risk if you work for a company and a lot of risk in real estate in general.  Having graduated in 2009 from USC, I saw first-hand how tough our business could be and by being an entrepreneur at least I am putting the risk in my hands and not someone else’s.
  4. At some point, you can plan all you want but you need to take action.  And if you take action and fail, who really cares.  At least you tried.

What’s a couple pieces of advice you would give to young real estate guys thinking about venturing off on their own.

From starting my own firm, I would tell anyone that they need to do the following:

  • Pick a product type and focus on a market.  Don’t try to be all things to all people
  • Feel confident you know that product type and market as well as anyone
  • Work for a firm that works in that product type or market for 3-5 years and learn on their dime as no one will invest in if you don’t have some level of experience or a track record
  • Be very wary of partnering with anyone unless you think that person compliments you completely.  You can always partner with someone on a deal if you need them, but to partner with someone in your company is adding many layers of complexity.
  • Relationships – Find them, build them, and maintain them from Day 1.

Have a 30 second elevator speech for what your firm does.  Being focused at first is critical in my opinion.  I tell people “Stillwater Investment Group is an Orange County-based real estate firm focused on acquiring opportunistic office and industrial projects throughout California and Arizona.”  If you cannot define exactly it is you want to do with your firm, I do not believe you are putting yourself in the best position to be successful.

If you have any questions for John, leave them in the comment section.

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