The following conversation was conducted over email and edited for flow and clarity.
Arthur P. Johnson, Jr. is the chief strategy officer at Pure Storage. He has held several senior level positions in technology and finance. In addition to his very accomplished career he has built a real estate portfolio of 50+ units across four states.
Asha Atkins of Wealth Noir (WN): Arthur, thank you for taking the time out to talk with the Wealth Noir community today. I’m excited for them to hear about your story and the lessons you’ve learned along the way. You have an incredible career and a wealth of knowledge about leadership, technology and real estate. I want to dive right in. Can you share with our readers how you got started in the technology industry and breakdown your overall career journey?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: Thank you Asha! Ever since I was young, I have always been good with numbers and had a fascination with investing. So, I decided to major in business administration in college. After college, I took a job with the U.S. Treasury department as a bank analyst. Three years later, I decided to go to Stanford Business School to advance my career, which is where I got bit by the technology bug. I wanted to combine technology and finance. I subsequently got a job on Wall Street advising technology CEOs on mergers and acquisitions. After five years in investment banking, I decided to go “in-house” and work for Hewlett-Packard. This began my journey into corporate America. Throughout my career, I have been fortunate enough to work for large multinational companies such as HP and Cisco, a venture capital firm, Andreessen Horowitz, and a pre-IPO hyper growth company, Twilio, with increasing management responsibility.
Asha Atkins, WN: Wow, I love that you became intrigued by technology in business school. You’ve been very intentional about your career moves. What led you to the senior leadership position you have now? Can you share some of the challenges you faced, if any, while climbing the career ladder? Any advice for the younger generation (Millennials) on how to successfully grow their careers?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: My current role represented an incredible opportunity to work for an executive that I highly respected. The role also provided the opportunity to help transform an innovative growth company. There have certainly been many challenges along the way throughout my career. Probably one of the biggest was self inflicted: I suffered a great deal from imposter syndrome. I never quite felt good enough or that I deserved the roles I was getting. Many of my colleagues went to prestigious colleges and had much better pedigrees. I often thought that at any point in time, they were going to find me out and send me packing. It took me a while to overcome this fear. The other major obstacle I faced was being “the only one.” In many situations I was the only person of color in the room.
Oftentimes, I tried not to notice or tried to fit in, but one of my mentors gave me one of the best pieces of advice: use it to your advantage. He said: “Since you are going to stand out, say something intelligent. Let them know you are not afraid to speak your mind. Make them remember you for being bold and outgoing.” I have been trying to do that ever since.
My advice for the younger generation is three-fold:
- When adversity strikes, use it as motivation and don’t let it define you.
- Hard work creates opportunities.
- Networking and mentorship are invaluable.
Asha Atkins, WN: Imposter syndrome is real and thank you for being honest about having that experience. That feeling of being the “only one” is relatable. What advice do you have for those who desire to be a part of a board, how can they position themselves in order to become a board member?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: This area is new for me, but I can share what I have done over the past 12 months. When I initially decided to pursue board opportunities, I talked to several executive search firms (that I trust) that have a specialty in placing board members. Then I talked to people in my network who are on current boards to understand what they did to get their board positions. I also asked them what it takes to be an effective board member. I told them if they hear about any board opportunities to keep me in mind (most current board members see a lot of board opportunities). Finally, I talked to several private equity firms about board opportunities with their portfolio companies.
Asha Atkins, WN: You’re obviously in a good place career wise and congrats on all the success you’ve attained thus far. As mentioned before, you’re not only experiencing success in your 9-5 but you’re also an expert real estate investor. What role has your career played in getting you to where you are now as a real estate investor?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: This is a really good question because many people think the skills you use in your career are separate from your side hustle. It is actually very important to select a side hustle where you can leverage the skills you developed in your career to excel in your side hustle. To that point, my career in strategy, finance and operations has helped me hone my analytical and team building skills, which is really important when you are building a real estate investment business. I go through a fairly rigorous analysis of each of my properties before I purchase them (including a detailed spreadsheet). This helps me make better decisions. Once I have a property in a new market, then I set out to build a team to help support me. This will include a realtor, property management, contractor, etc. My experience building teams in my career has definitely helped me build my real estate teams.
Asha Atkins, WN: You make a great point about choosing a side hustle that allows you to leverage the skills you’ve developed, what piqued your interest in investing and why did you choose rental properties as your investment strategy?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: I have always had an interest in investing. I purchased my first stock when I was 16 years old. Real estate attracted me because it was one of the few asset classes that was stable, tax efficient, leverageable and passive. I chose the buy-and-hold approach with real estate because that is the best strategy for me to create tax efficient, passive cash flow.
Asha Atkins, WN: I like that you mentioned the ‘buy-and-hold’ approach is the best strategy for you. What advice would you give our readers who are trying to figure out which method of investing best fits them?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: I would first say, begin with the end in mind. To figure this out, ask yourself: What do you want and why do you want it?
Here are a few other key questions to ask yourself:
- Introvert or extrovert?
- How much time do you have?
- How much money do you have?
- How much experience do you have?
- What experiences do you have?
Your ‘why’ is really important because this will have to motivate you when times are tough (and things will definitely get tough). Then I would develop a plan to get there, but don’t get stuck in the planning phase. You need to take action. I see too many people that talk about investing in real estate and five years later they are still analyzing. It is so important to take that first step and remember to start small. I guarantee you, you will make mistakes, but consider that an investment in your education.
Asha Atkins, WN: You talk about the importance of planning but not staying stuck. Understanding how money works is an important part of the planning stage. Financial literacy is a crucial part of making smart investing decisions. What are three recommendations for books or other forms of financial literature you use(d) to expand your knowledge on investing and finance as a whole?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: Yes, financial literacy is extremely important! Here are a few recommended books: The Book on Rental Property Investing, Rich Dad Poor Dad, and The Millionaire Real Estate Investor. And I would also recommend these podcasts: Bigger Pockets Real Estate Podcast, Coach Carson, Rental Property Owner & Real Estate Investor Podcast, and Lifetime Cash Flow Through Real Estate Investing.
Asha Atkins, WN: Thank you for sharing these great resources. Earlier, you mentioned taking action and not getting stuck in the planning phase. Tell us about the moment you put your plans into action and how you got your first rental property.
Arthur P. Johnson Jr., Chief Strategy Officer, Pure Storage: I started in earnest in 2003 / 2004. I read as much as I could on real estate investing. Back then there weren’t as many blogs available so I had to read books on real estate. I also attended several real estate meet-ups and conferences. I’m analytical by nature, so I went right to a spreadsheet as well. I tried to understand what are the key measures of a good real estate market. I boiled it down to these key factors—job growth, population growth, income growth, income-to-rent ratios, and affordability.
I then ranked the markets based on this criteria and the markets at the top I investigated further. I called several realtors and property managers in these markets to get a feel for the area. When you start hearing the same things over and over a pattern emerges and you can develop a point of view on that market. This led me to Texas and New Mexico. Once there, I purchased my first rental property in Albuquerque, NM.
Asha Atkins, WN: The steps you took were incredibly in depth and intentional, which is important in ensuring success in the long run. Tell me more about your first rental property. Was it a single family home, a multi family home, a condo, or an apartment complex? How did you find it? Did you use an agent or listing site, drive around searching, or were you referred?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: My first property was a three bedroom / two bath single family home in Albuquerque, NM. I found it based on a lead from my realtor. I drove around the neighborhood and liked what I saw.
Asha Atkins, WN: How many units do you have now? Can you break them down for us?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: I currently have 29 properties (53 doors/tenants) across four states; my portfolio breakdown is as follows:
- SFH: 10
- Duplex: 15
- Triplex: 3
- Four-Plex: 1
Asha Atkins, WN: Twenty-nine properties is quite impressive and I imagine a lot to manage. What factors did you consider when searching for and hiring a property manager?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: This is probably the most important member of your real estate investing team. I tend to focus on property managers who have a lot of out-of-state investors as customers, so they know how to deal with email, video and pictures. Next, I tend to focus on property managers who are larger and more well established. There are a lot of mom and pop property managers. I don’t usually like to use them because these property managers can go out of business or decide to do something else. Finally, I like property managers who are technology savvy. I want them thinking about ways to use technology to give them an advantage, which provides me better service.
Asha Atkins, WN: You mentioned that investing can be tough. What have been the crucial learning mistakes in your real estate investing journey?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: There have been many mistakes along the way. One mistake I made was trying to find a market that had good appreciation and good cash flow at the same time. After a few years of trying to do this and buying several properties, I realized it is very hard to find both in the same market. If you want both in your portfolio, you are better off locating a good cash flow market and a good appreciation market. Investing in those two individual markets will provide your portfolio with the diversification you are looking for. Another mistake I made was giving a contractor too much money up front. Because of this, he took his time to get the job done and when it was completed, it was hard for me to have him do the necessary corrections. After that experience, I set up a very deliberate payment schedule where most of the money is paid after the job is completed. If a contractor doesn’t agree with this, then I’m on to the next one.
Asha Atkins, WN: Thanks for sharing those unfortunate situations. These lessons are invaluable. What are the key lessons you have learned from being a landlord?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: One of the best lessons I have learned is to treat your tenant as your customer. I’ve worked in Corporate America for my entire career and at most of my companies, we had a laser-beam focus on our customers. I tried to apply these same principles to my tenants. I want to make sure I understand my tenants’ needs and prioritize accordingly. I also seek continuous feedback from my tenants on what we can do to better serve them. Finally, I make sure that everyone on my real estate team understands that the tenant is the customer and we have to serve them well. I have also learned that it is okay to sell underperforming properties. When I first started in real estate, I believed that once you purchase a property, you should hold it forever. After a while, I realized that if a property is not living up to its expectations, then it is okay to sell it and re-deploy the funds elsewhere.
Asha Atkins, WN: I want to continue talking about the not so glamorous aspects of real estate investing. You shared the value of a good property manager and strategies for selecting the right property. Can you share the downside of owning and managing rental properties?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: One of the biggest downsides of owning and managing rental properties is that it can sometimes be time consuming, like when you have a bad tenant that damages your property and you have a hard time getting them out. Even though you have a property manager, as an owner you should actively work with your property manager to handle these situations. Some states have tenant friendly laws and the pandemic put a moratorium on evictions. Because of these factors, you could face a situation where a tenant can stop paying rent and trash your place and you have little recourse as a landlord to do anything about it. That is why it is very important to screen your tenants properly and fully understand the local landlord-tenant laws. The other surprise people may not realize is that while buy-and-hold real estate investing can be passive, it can take one to two years to fully stabilize a property. During that time, it can be quite active and time consuming to manage your property.
Another downside is that the equity in your rental properties is not liquid. Although you can take out a loan to access the money, you will have to pay interest on it and potentially loan fees compared to having your money in the stock market, where you can sell any amount right away.
Asha Atkins, WN: That is a lot to think about and I can see why researching real estate investing is integral. For our readers who are in the latter stages of planning and ready to close a deal on their first rental property, do you have any insights or tips to share?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: I would say, make sure you have a solid investment thesis on the deal. This means that you believe in the long-term trends in the area. You should also have a strategy for property management (either self-managing or hiring a property manager). Finally, make sure your assumptions on operating costs and potential renovations are solid. There have been many times when I have underestimated the renovations costs, schedule and vacancy rates.
Asha Atkins, WN: You mentioned having a solid investment thesis on the deal. What factors do you consider when negotiating the deal?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: One of the biggest factors I consider is how competitive the deal or the market is. If I feel I’m the only buyer or the property has been sitting for a while, I will be very aggressive in the negotiations. Conversely, if this is a great deal that is very competitive, I will do my best to develop a rapport with the seller or agent and provide details on why I’m the best buyer for their property. I also generally like to go with all cash offers and a quick close. This helps me to stand out in competitive deals.
Asha Atkins, WN: I promise this will be my last question about the downside to real estate investing, but can you briefly share a time when a real estate deal went south?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: About three years ago, I purchased two triplexes in Indiana. Although I tend to focus on single family homes and duplexes, these triplexes were cheap ($10,000 each) and the cash flow (at least on paper) seemed great. The only issue was that each property needed extensive renovations. Also, I usually don’t like purchasing one bedroom / one bath units (which these properties had) because the tenants usually turnover more often than those in single family homes or duplexes.
The mistake I made was that I paid the contractor too much money upfront to do the renovations. It turned out he took all my money and didn’t complete the job. I then had to get another contractor to complete the job. He told me that the work done by the previous contractor was bad so he had to redo some of that work. Once the renovations were completed, I had a hard time trying to keep the place full. I always had one or two vacancies. So the cash flow that I projected didn’t come close to reality. Now I’m trying to sell these properties and I’m having a hard time finding a buyer that will make this a break-even transaction for me.
Asha Atkins, WN: That is definitely stressful, but as you mentioned earlier, the lessons serve as an education. Now let’s shift gears. Tell us about one of your best real estate deals to date. What made it the best?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: The best deal I have done so far has to be a duplex I purchased in Wisconsin about three years ago. The property cost $85,000 and total rent is $1,545. I have had the same tenants in there since the beginning and they both pay rent on time each and every month. On top of that, there have been minimal repairs on the place. I expected this property to provide an 18% cash-on-cash return with a monthly cash flow of $392. But so far the property has had a 32% cash-on-cash return with a monthly cash flow of $707. I wish I could purchase 10 more properties like this one.
Asha Atkins, WN: That is definitely an ideal situation. They really do sound like great tenants. We’ve discussed several investment strategies, but I know many of our readers are intimidated to start because they may think they don’t have the capital. What is your take on people truly understanding the value of how a high-income career can help them create wealth and build generational wealth? Should people change their perspectives about their careers and income from their employers to help them in their wealth building journey?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: While I do think it helps to have a high income career to build wealth, I think people with low or moderate incomes can also build wealth. My grandmother always used to say: it is not what you make, it is what you take home. I do think people should find a career where they can be happy and make a good living. The income should not be the sole driving force on which career you select, but it should be a consideration.
Asha Atkins, WN: Shout out to your grandmother, she’s right! What useful tips do you have for people looking to increase their capital so they have money to invest?
Arthur P. Johnson, Jr., Chief Strategy Officer, Pure Storage: The most important thing people should do to increase their ability to invest is to be more intentional about how they spend their money. You would be amazed at how many things people waste their money on. If you create a spending plan with a goal of allocating some money for investments, that will be the best way to increase your ability to build wealth.
WN: Arthur, thank you so much for spending time with Wealth Noir. Building wealth is a journey and one that many are on or starting. It’s always nice to be able to hear from someone who is open to sharing the ups and downs of their journey the way you did. The wealth of knowledge you shared is invaluable.