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“Act Like You Have 100+ Units”

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You hear Brandon Turner’s voice quite often on the BiggerPockets Real Estate Podcast, but rarely is it heard advising new investors. Today, Brandon is taking on three live “coaching calls” with three investors, all in different stages of their investing career. Brandon and the guests talk through topics like scaling your business, branding your real estate company, and when the right time to hire is.

These investors have portfolios ranging from a few units to more than forty, making this an episode that any investor can listen to, no matter where they’re at in their real estate investing journey. This advice is hand-tailored for each investor, and comes from someone who has made it out of that “awkward teenage investing” phase.

Brandon:

This is the BiggerPockets Podcast show 505. 

When I got to that next level, everything got easier and less stressful. All I do now is make those high impact decisions. Like I don’t do the minor level. And it just became so much more fun because I’ve got people who are really good at what they do. But you know what that took is that leap. 

Speaker 2:

You’re listing to BiggerPockets Radio. Simplifying real estate for investors large and small. If you’re here looking to learn about real estate investing without all the hype, you’re in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online. 

Brandon:

What’s going on everyone. It’s Brandon Turner, host of the BiggerPockets Podcast here with myself today. Today’s show is a little bit different. It’s a solo show with me. But not just me. I’m actually bringing on three different investors at three different kind of phases of their investment. Different focuses, different strategies, different locations. And one at a time I’m going to spend about 20 minutes with each person just doing one on one … I don’t know. You can call it coaching, consulting or just chatting. I’m just going to try to help these people figure out how to grow their business, how to get to the next level, how to elevate themselves, how to stabilize their business, how to do whatever they need help with is the plan is today. So three investors and those are Sheena, it is Luke, and it is Joe. And so you’re going to hear from Sheena, Joe and Luke later and we’ll get to that shortly. But first let’s get to today’s quick tip.

All right so today’s quick tip. I mentioned this a few weeks ago but I’m going to say it again now is BiggerPockets is doing a giveaway for people who want to I guess better their investment life. They want to be better real estate investors. So how do you become a better real estate investor? Well, having a pro membership would probably help. And having access to the BiggerPockets Wealth Magazine would help and reading some BiggerPockets books would probably help. So we’re going to give away that. A year of pro, a year of Wealth Magazine, and $100 towards BiggerPockets books. Here’s how you enter. Just put your social security number in. I’m just totally kidding. No. All you have to do is log into your BiggerPockets account anytime now and the end of September. 9/30 at 11:59 PM. And you’ll be entered to win automatically. Don’t have a BiggerPockets account? It’s free. Sign up at biggerpockets.com and as soon as you sign up you’re automatically entered to win. So definitely check that out. No purchase necessary of course. Void where prohibited and you must be 18 to enter. Full rules are available at biggerpockets.com/bundle. 

It’s time to jump into today’s episode. Now keep in mind as I try to offer some help today, understand that I am just one man and one man’s opinion. And so I’m not a legal person, a lawyer. I’m not a CPA. I’m not offering legal and tax advice. This is just my opinion. Entertainment value for what it is about what I would do if I was in their shoes right now and I hope you get some value out of it. And again, don’t just take what I say as like oh Brandon said do it this way. My goal with any kind of consulting or coaching or talking … And I don’t do a lot of one on one stuff. But my goal is to help the person come up with their own solutions. I don’t want to just tell them, this is what you should do. They need it to be real for themselves. So if something today that sparks some new idea for you, great. But don’t just blindly take whatever I said for one of these people and go apply it to your life. Use it to spur you on, to get you excited and to get to the next level but I think you’re going to like this. I hope anyway. So thank you for being a part of what we do here at BiggerPockets.

If you are watching this on YouTube right now, don’t forget to click that little thumbs button if you find this helpful. It helps us reach more people on YouTube. And of course if you like this show, don’t forget to leave us ratings and reviews wherever you listen to the podcast. Those ratings and like on iTunes especially really helps us reach a lot of people. And I don’t know, I guess that’s all I got. Follow us on @BiggerPockets everywhere. @BiggerPockets on social media. You can follow me personally, @BeardyBrandon on Instagram or … Not Snapchat. I’m not on there. TikTok. That’s the word I was looking for. And I had a post go viral on TikTok. My first one. By viral I mean it had like 300,000 views which is crazy. And all I did was nodded and smiled to somebody else’s video. It was stupid but go check it out. It was good advice but it was just me. I look stupid the whole time. But I think that’s the key to TikTok is just look stupid and people want to watch that. I don’t know. Well, let’s get to today’s show. I think you’re going to like it. 

All right Sheena. Welcome to the podcast. How you doing? 

Sheena:

Thanks. I’m great. Thanks for having me. 

Brandon:

Yeah for sure. I want to start just by kind of getting to know you a little better and letting our audience get to know who you are a little bit better so who are you? What do you do? What’s your story?

Sheena:

Well, I live in northeastern Ohio and I was an engineer for 10 years until my husband and I had a little baby two years ago. And I took the opportunity to say I’m going to take a step back from my career, stay home with him, spend time with him but I also wanted to kind of take a dive into real estate investing because I had been wanting to for a number of years but I was so tied up in my career I never took the leap. So I kind of coincided my start in real estate investing with his birth. So I’ve been kind of in this space for just over two years now. 

Brandon:

Okay. And what do you own right now?

Sheena:

So I started off with two single family BRRRRs and it actually took me almost the entire two years to do those two single family BRRRRs. But within the last month I kind of gained some momentum and I’m really working hard on changing the trajectory of my business and I was able to close on my first mobile home park last month. It’s eight pads. Thanks. And I actually picked up a partner. My brother-in-law and I have a second mobile home park under contract right now. 

Brandon:

Oh very cool. How big is that one? 

Sheena:

That’s one also eight units. 

Brandon:

All right. And those are in Ohio I’m assuming, like near you?

Sheena:

They are. Both of them. 

Brandon:

All right. Yeah. So first of all I just want to commend you on how awesome you’re doing. Just taking action like that. I know it sounds like it took a long time to get that first two deals but it’s like the way I always talk about the train. Like it takes a long time for a train to get up to one mile and hour and then two, and then five and then 10, but it speeds up over time as you’ve clearly seen. So hopefully that’s a lesson for everyone listening right now is when it feels slow it’s okay. It takes a lot of momentum or a lot of effort to get that momentum built so now you’re feeling it. So what would you say … If you could describe your biggest problem or holdup or a thing that’s holding you back or a thing that we can work on today. 

Sheena:

I’ve started growing very quickly now and I’m just having a little bit of a problem figuring out which direction I need to go in to grow the best and to build the most solid foundation for the business moving forward. Things are happening kind of fast and over the first two years I was the person mudding the drywall and I was way too in the weeds. And I realized a few months ago that I was really lacking momentum because I wasn’t leveraging my skillset. I had been trained as an engineer, as a project manager. I was a team manager. And I realized I just wasn’t applying those to my real estate investing. So now I’m trying to zoom out, look at the big picture, and stay at a high level view looking how my business is going to move into the future. So I started small. I hired a VA for my bookkeeping. I hired a CPA because I have done my taxes for my whole entire adult life. I’ve done my taxes by myself. Like it sounds so amateur now. So I finally hired a CPA. Just getting people for lawn care and snow removal and simple things like that. I’ve got that now. 

And I’ve also … I mentioned already that I’m leveraging a partnership with my brother-in-law. So that’s going to help me grow faster. He’s bringing-

Brandon:

Yeah. What is he bringing in? What’s he bringing to the table? What are your different roles there? 

Sheena:

Well, he’s bringing capital and additional boots on the ground to just help me grow. We’re hoping that this deal will go well and we’ll be able to do more deals together in the future. Having someone to bounce ideas off of and talk through things is so valuable. It’s really helped my morale. 

Brandon:

Yeah. It’s a game changer. People who are in this game of real estate by themselves for a long time, it’s such a recipe for burnout and for boredom. You just stop caring after a while. It’s just, this is such a hard train to get moving, I think I’ll give up. So again, I’ll commend you on that one. You’re killing it there. So what’s the longterm goal? You’re trying to figure out how to scale, trying to get to that next level, so where do you see yourself headed? Let’s call it three years into the future. What do you want to have? 

Sheena:

Three years in the future, my goal is to have $3 million of real estate in my portfolio and work 16 hours or less per week in the real estate. 

Brandon:

Three million in real estate owned, 16 hours of work or less in real estate. Totally doable. Let’s talk about how to get there. So would you say … On a day to day basis, like right now, what are you spending most of your time doing? 

Sheena:

Well, now that we are … I have a mobile home park and we have another one under contract. They’ve been sucking a lot of my time up. All of a sudden I’ve got more tenants than I’ve ever had before. Trying to get them on board with our processes and systems. And then building those systems in a logical way so that it is scalable. Because I’ve just been rolling with a couple tenants at a time and anything works when you’ve got two tenants. 

Brandon:

Yeah. You’ve probably heard me say this before but I’ll say it again is the first thing I did in my outsourcing life, the kind of who not how mentality, was I hired my mother-in-law for 250 bucks a month to just answer phones from my tenants. And just that concept of getting someone else … And you’ve already started experiencing it with the VA and the CPA and the snow and all that stuff. Like you’re experiencing it. But it’s just a constant thing to be aware of is as you’re going forward is what are you spending most of your time doing? And a lot of it is going to be tenant interaction of getting them on the systems. Now at some level you just have to build the systems. It’s required. You can’t necessarily … I mean you could I suppose. But it’s hard to outsource system building. That’s the whole point of a system is so you can get out of it. But what are you doing right now for property management? What’s your systems took like for that? Do you have software? Who are the tenants calling when there’s a problem? What’s that look like? 

Sheena:

So we, or I had been using cozy.co. It just merged over to apartments.com and the tenants call me. They have my cellphone number. 

Brandon:

Okay. Okay. That’s pretty normal for starting out. I feel like I have one tenant left who has my phone number out of 2,500 so it’s completely normal. But getting out of that eventually. That’s a system right there that you can start putting into place is even if you’re not ready to hire a manager whether in house or outhouse … I don’t know what we call a non in house property manager. But you hire like an actual apartment manager. Even if you’re not ready for that yet, switching your phone number to one that can easily be shifted around to different people like with a call … What’s it called? Call Central or Ring Central. Ring Central. Or even Google Voice. I definitely recommend that. And maybe you’ve already done that. But starting there. That’s like a system that will … Digging your well before you’re thirsty. It’s getting ready for the day that you can just transfer that number without losing your own. And you get the tenants to just forget your personal number right now. Just, “Hey guys, I got a new phone number.” And it’s just like a mental thing to start with. So yeah, I’d definitely look into doing that. 

What are the next … The next kind of phase I guess? You want to close on this eight unit that you just got under contract. That’ll put you at 16. So what are your fears behind that or what are your worries? What are your concerns about that taking up all your time? Where do you think your time will be on that? 

Sheena:

Well, the first park that I’ve already closed on, it has a long way to go before it’s stabilized. I have to bring in some homes so that’s taking time right now. 

Brandon:

Yeah. The in filling of a mobile home park and the stabilization … And not just mobile home parks but any multifamily. If it’s not a super optimized already, the stabilization takes a lot of effort. I’m kind of letting everyone know that’s not familiar with the industry. You’ve got to find homes to bring in. You’ve got to be able to get those tenants to find the qualified people, put them in place so that makes a lot of sense. What else? Anything else in there? 

Sheena:

Just tenant relations. That’s the biggest concern that I think I have right now out of everything. 

Brandon:

Have you looked into hiring an actual property manager and if so, why or why now would you do it? 

Sheena:

Well, I looked at a couple of local property managers. The only problem that I see with them is that they don’t manage mobile home parks. And I’ve heard it said before that it doesn’t translate well when you have a property manager that’s used to apartments. Coming into the mobile home park space sometimes it’s not a good fit. 

Brandon:

I mean there are ones that are okay. I always assume a good property manager is the exception, not the rule. So most of them are terrible anyway. Especially when it comes to mobile home parks. Most of them are terrible. And that size. You can’t put in a resident manager necessarily. Though have you looked into that? Could you offer one of those eight units a discount on rent or even free lot rent in exchange for taking over? Is there anyone of that caliber in there that could help with that stuff?

Sheena:

I think there is one. And I have not given that much thought. Yeah. So that may be a good option. 

Brandon:

One of the best pieces of advice I heard when I got into mobile home parks … I can’t remember if it was Jefferson Lilly or Kevin Bupp that said it. I listen to both of those guys mobile park podcasts. And they said … One of them said, drive around and look for the resident who has the nicest property who takes the best care of their unit. That has like the cute yard or cute little bunny statues in the front yard. Those kinds of things. Because those people have pride of ownership or pride of rentorship. And those people become your ideas eyes and ears there. And by offering a little discount for them … And as long as you give them a system to follow they can handle 80% of what comes your way. For example if a tenant has a problem with a plumbing problem, they’re like, “Yeah, call Cindy. She’s in this apartment. She’s our resident manager.” And honestly some people will do it for free just for the joy of being an authority. Because they’ve never been an authority a lot of times in their entire life. So they all of a sudden have some authority and they feel really good about that. They’re like, “Oh yeah, I’m the resident manager.”

That can also go to people’s heads and cause problems. You’ve got to watch over that a little bit. But do the tenants own their own homes or do they rent from you the home and the land? 

Sheena:

In the first park that I bought, they own their own homes. In the second one, they’re all rented. So we’re going to look into finding tenant buyers to purchase them from the park hopefully.

Brandon:

Okay yeah. We did that with our first … I mean we do it with all our parks. Yeah. We try to make sure that as many as possible tenants own their home. Because the beauty of that is once they own their own home they are the ones responsible for their water bill. They might be that way anyway but their water leaks and their toilet’s not working right. And this might sound obvious to people but if a toilet … Like the toilet … What’s called a flapper on the bottom of a toilet tank, if that thing’s leaking and the toilet’s running all the time the part is under $5. You can go to Home Depot and pick it up or Ace Hardware for five bucks. The cost of hiring a plumber to fix that problem though is about $300. The tenant though can go and fix their own toilet if it’s their toilet for $5. And a lot of times they don’t have anything better to do. They can watch a YouTube video, they can fix their own toilet. And that’s why I was such a big proponent of buying the houses, that they own their own homes. And I’m sure you’ve probably … You see that well I’m assuming which why you said you want to buy the tenant buyers or find them right? 

So again, making one of the residents there responsible for phone calls. Have them receive the phone calls and have them deal with minor maintenance concerns. Especially the new one that you have a lot of tenants in it. You’re going to have to deal with repairs and maintenance. So if you had a list of like these are my three maintenance people, call them in this order first when there’s a problem and everyone just calls the resident manager. And you have an opportunity on this new property to start fresh. To start with these eight people differently. Because often times what we find is like … I find it very hard to change course when I’ve run my business badly in one regard and then all of a sudden I realize … Not even badly, just the way that I don’t want to do it in the future. And that I want to change course but the tenants have been trained on the old system. And so it’s way easier to bring in the new people on the new system so now obviously is the time to be thinking about this, which is why we’re talking today. 

But there’s also the avenue of like with the older tenants. I’ve done this a number of times where I’ve sent an email or … Not an email but a letter to my tenants saying, “Hey, management is changing here.” Or, “Hey, my attorney says I need to manage this property differently.” Or, “Hey, my CPA says I need to do this.” I just blame somebody else. And say therefore here is the new system. If you just come in and say hey guys, new system, that makes everybody confused and angry. If you blame it on somebody else like my CPA or my attorney, all of a sudden everybody’s like, “Oh, well the attorney said so we’re going to do it that way.”

I don’t know. People who treat one tenant better than the other or for example, let’s say you let one … Not that you’ve done this. But let’s say you let one tenant slide on rent over and over and over and you’ve always been kind of soft with a tenant. And now you’re like wait, I don’t want to be soft because they’re taking advantage of me. I want to be a hard landlord. I’m going to follow the rules. It’s hard to institute that rule unless you say, “Hey, my attorney says that if I let you slide on the rent and I don’t let somebody else I can be sued for discrimination from that other person. So I have to by law start implementing these new practices.” And everyone’s like, “Oh, okay. Like that makes sense.” So blaming it on … They call like appeal to the higher authority I think, in negotiation. So that has worked wonders for me in my life. Whenever I find that I want to change how I work I just blame some higher authority of why I’m doing it that way. And I want to be honest. I’m not going to just like lie about it but I’ll talk to my attorney or I’ll know something that they say. Like, “Oh yeah, you shouldn’t treat your tenants differently.” Okay great. That’s an attorney saying that I shouldn’t do it. So yeah, that’s a huge piece. 

Apartments.com you’re in. Are you going to stick with that or are you going to try to upgrade to something different? 

Sheena:

I’m looking at upgrading to something different. 

Brandon:

Okay. What have you been looking at? 

Sheena:

Innago. I think that’s how you say it. 

Brandon:

Yeah. I don’t know that one. I use Buildium for my smaller deals. We use Rent Manager for the bigger stuff. But there’s a ton of them out there and they all work basically the same. It’s more important that you feel good with it and you’re like oh yeah, this thing does what I need it to do. I can get in here, I can do all that stuff. How are the tenants currently paying rent? 

Sheena:

One of them is like … He insists on paying cash. I accepted his cash. Written him a receipt. That’s the first rent payment I’ve accepted in cash. Normally I would use credit cards or debit cards online on cozy.co. But I’ve found that the mobile home park tenants, they are almost across the board just like no, we don’t want to pay online. So yeah. So mailing checks and bringing cash has been kind of the norm. 

Brandon:

Okay. Yeah. That goes to the other thing too is people will … We found this in our mobile home parks. We’re at over 2,000 now. This is true for any lower income tenant. They will resist the technology until you tell them it’s not an option and then they all do it. Even old people. We offer a few optional things like hey, you can go pickup a money order from Walmart and you can drop that off. Put that in the box or mail that as long as it gets to us by the date. Some of the people will still do that because they just don’t have a computer or a smart phone. They just can’t figure out another option. So I don’t want to like say they can’t do it but everybody else, they will say … Okay, I only pay rent in cash. But your attorney just told you … Maybe not an attorney but whoever. Your partner just told you we can no longer accept rent in cash. We just can’t do it anymore. It’s a liability for us. Whatever. We could get in trouble for doing it. Whatever. 

All of a sudden now that there’s some like higher authority, it’s like, “Okay well, we have to create a new system for this. This is what I’m going to need you to do buddy. Go to Walmart, get the money order, drop it off. It’s got to be to use before the first. That’s what the rule’s going to be because of this authority person or it’s an online payment.” And you give people option like … It’s not like you’re being unreasonable. It’s like, “Hey, you can do the money order or you can go and do it online or you can pay this way. These are your three options. Cash is no longer an option.” So I would definitely implement that sooner rather than later. And with the new tenants especially. The new ones that you get. No, this is how we work it. You have these three options. When you give people three options, tall, grande, vente, they don’t think yes or no, they just think which one. And so when you give people options they’re just going to be like, “Yeah, okay. I’ll pick one of these.” So that’s a huge one. 

Thinking in terms of like you want to have $3 million of real estate owned. Let’s just say that’s the equivalent of 100 units. I don’t know. Give or take some but you might have 100 units. So thinking now, acting like you have 100 units. That’s probably the biggest encouragement I can give you is pretend right now that you have 100 units. So what management software would you need to manage 100 units? How would 100 tenants pay rent every month? How would 100 tenants call? How would 100 tenants deal with … How would you deal with late rent when you have 10 of them that are late? What’s that system look like? And so just envisioning the world where you have 100 tenants will allow you to easily grow into having 100 tenants. A lot of people might be wondering how do you even know, you don’t have 100. And that’s where getting around people more often who have 100 tenants and they’re going to be like, “Oh yeah, this is what we use for management. This is how we take the rent, this is how we deal with this problem.” Whether it’s a local real estate club or whatever. But hanging out with a few people or even just online. Knowing people who have 100 units. Picking their brain is going to be drastically different. 

Versus like … I can give you my advice but I’m at a level right now and I don’t mean it as a good or bad. But I don’t even know how our tenants pay rent. I have no idea. I know that we have those options but can they pay with credit card? I don’t know. Do we still allow … I know we used to have a system where they could go pay cash at 7-Eleven called like pay near me. Do we still have that? I don’t know. So again guys like me, I can give you advice on like a high level but the people that have the 100 units, they’re going to be better for those specific detailed questions. 

Let me ask you another one … And I love this question. One of my favorite questions. My performance coach asks me all the time. What do you need to let go of right now to get to that next level? Like you’ve already I’m guessing have identified something. What do you need to let go of? 

Sheena:

Well, the accounting and bookkeeping was a big thing. And so I’ve taken a step in the right direction. I got a CP actually just on board yesterday. So that’s definitely helpful. But feeling like I need to be physically there, watching progress and things happen is something that internally, I just have to work on letting go on that internally. I can’t be there when all the drywall is being mudded if I have 100 units. 

Brandon:

How many people live in your area like within like 30 miles drive of your right now or a 20 mile drive? 

Sheena:

There are a few big cities. Not huge cities but Canton, Ohio. You may have heard of it. That’s within 30 minutes of me.

Brandon:

Do you remember the band, Reliant K from back in the early 2000s? Oh yeah, Reliant K, aren’t they from Canton? Yeah. That awesome. Yeah. Marilyn Manson Ate My Girlfriend was like one of their first songs and I love that song. Anyway, that’s funny. Okay. So here’s another concept then that I’ll bring to you. And I’ll probably say it multiple times to the other people that we’re talking on the show today to. And this is this idea that you are a rockstar right now to thousands of people that live in your area that want to do what you’re doing. You might feel like when you compare yourself to where I’m at let’s say, you might be like wow, I’m just getting started. But you own 10 units in a world where most people don’t own anything. So the point I’m making with that is there are people, especially listening to this show right now, but at the local meetups, that would love to come and volunteer five or 10 hours a week to help you with whatever for probably no pay. I mean maybe you could give them something. But they just want to be in your world. You are a rockstar to them. So have you looked into the idea of an internship or an apprenticeship in your area? Have you looked into that at all? 

Sheena:

I have not. But it’s a great idea. 

Brandon:

I would so encourage it. And if you’re listening to the show right now and you’re like I just want to get started real estate, I want to get going but I’m not sure how to do my very first deal, Sheena is the type of person you need to find. Somebody who’s already got a little bit going. They’ve got the momentum building and you can go there. And they got this little fire right now. You can go pour gasoline on their fire. For a couple of reasons. One, if you found a rockstar, Sheena, to come and help you with this thing you could probably grow to 100 units in way faster than three years. You’d probably get there like in a year. If you had somebody that was just like pouring gas. If that was the case, eventually wouldn’t you be willing to offer equity or offer a piece to the right person if they prove themselves because they help you get there faster? Definitely. So it’s a win-win for everybody. And so because you already have this fire going, let somebody pour some fuel on that fire and grow that bigger and faster. 

Here’s the truth. This is true in my own life. I am so bad at holding myself to certain standards. What I mean by that is like I know that I should do certain things. I should make certain phone calls and cold call and direct mail and all that. I just don’t do it. Because I’m an entrepreneur and I like big thinking. I don’t like the day to day stuff and so I tend to not do it. But you know who always does what they’re supposed to do … Almost always? Employees or interns. It’s like they’re not the entrepreneur in that case. They’re just sitting there doing what you said to do. So if you’re like, “Hey, I need you to do this thing for me and you’re in charge of this. You’re going to take all phone calls, you’re going to handle all contractor stuff and you’re in charge of finding me a couple houses to put into my mobile home park. How are you going to do that? Well I want you to call every single mobile home park in the area and ask if they have any homes that they want hauled out of there. Or I’m going to put Facebook ads up in the Facebook market place that I buy mobile homes. I buy used mobile homes for cash.”

And all of a sudden those things that you know you should probably be doing but you’re not doing because you’re just busy, now that stuff gets done. And that was why BiggerPockets grew so quickly when I came on board when it was originally just Josh. It wasn’t that I was that I was good at what I did. I was terrible at what I did. I’m not a good writer. I wasn’t a good anything. But Josh had somebody just to do stuff that he knew needed to get done. So I wrote hundreds of blog posts and I went to every conference I could think of. So anyway, having that person in your life. I mean you got the brother-in-law which is great but you could also being in some intern help. And I’m sure after this show you’re going to get hit up by a bunch of people. But it’s such a great way. Every one of my team members pretty much came from an internship and they learn and I saw their character and I saw their work ethic and they became a major part of my team. It’s just such a low investment for what’s a massive upside. 

Sheena:

I think that’s great information. Honestly, very valuable. Thank you. 

Brandon:

Okay. Well, good luck to you and yeah, I’m excited to see where you head. Good luck on the closing of that property and I would encourage you on the next one, look a little bigger. You can do it. Don’t get caught in the comfortable eight unit area. If you can get 20 after that and maybe 30 after that, you’ll be at the three year goal in a year and you’ll be like dang, I did it so you got this. 

Sheena:

Thanks Brandon. 

Brandon:

Thank you. 

All right everyone. Hope you enjoyed that little segment there with Sheena. We’re going to do a couple more of these today so do me a favor everyone. If you have more advice for Sheena, you want to be able to jump in and help her answer some of her issues or you have something that you want to correct me on, you think that I gave bad advice, jump into the conversation. We want to make this an open conversation. You can do so by going to the show notes page at biggerpockets.com/show505. Again, show 505. We’ll also have a link on the BiggerPockets Facebook group if you’re in the BiggerPockets official Facebook group. I’m sure they’ll be conversations happening there as well. All right, so that said, time to move on to our next guest today and that is Joe Rivera. Joe, am I saying your name right? Joe Rivera? 

Joe:

You are. 

Brandon:

All right. I wasn’t sure it wasn’t Rivera, which I wouldn’t imagine so. 

Joe:

No. But many of people have messed it up over the years so you’re fine. 

Brandon:

All right. Good, good. Well Joe, welcome. Tell us a little bit about yourself. Who are you? What do you do? 

Joe:

Yeah. Thanks. So I got started in real estate in the late ’90s with a house hack in college and then took a nice hiatus for about 20 years and then bought a fourplex that was a section eight and had some duplexes. Sold those. House hacked a house that I was living in at the time and then bought some short term rentals down at the beach. That’s kind of where we’re at at the moment. 

Brandon:

How many do you have right now? What’s your portfolio look like today? 

Joe:

Currently I have two condos at the beach and I have a third property that we’re remodeling for a short term rental down in the hill countries of Texas. 

Brandon:

All right. What beach are you at on those ones? Just curious. 

Joe:

Galveston. 

Brandon:

Galveston. All right. My sister lives right down near there. Galveston. Okay. And if you could sum up your … What’s holding you back right now? Where are you trying to get to and what’s holding you back from getting there? 

Joe:

Sure. Right now what’s really holding me back is just a lack of investors. Where I want to go is … I like the short term rental market. I really enjoy interacting with the guests. I like all the opportunities and creating the house and the experience and doing all of that. And I have some markets I want to get into, it’s just more of finding investors and moving forward. 

Brandon:

Yeah. All right. Yeah. I know where you’re at. A couple thoughts that just come to mind. First of all I actually just yesterday invested in a short term rental fund of a buddy of mine who’s buying/building 13 Airbnbs down in Waco, Texas. So I just jumped into his investment. And so I know there are people who are looking to invest in people that know what they’re doing. And finding people that know what they’re doing, that’s the key. I talk a lot about like if you want to raise money you’ve got to exemplify the kite principle which is you have to have knowledge, integrity, tactics and then K-I-T … What was E? Experience. So if you can demonstrate that you’ve got all that stuff, you’ve got the knowledge, you’ve got the integrity, you’ve got the right tactics, like you’ve got the business plan and then you’ve got the experience, I think that that’s what it takes to be able to raise money but it’s not all that it takes. There’s another level and that’s what I thought maybe we’d kind of approach, kind of tackle this a little bit from today. Let me ask you a couple of questions though. What have you done so far to attract investors? What are you doing right now to reach out to more people that can maybe fund your deals? 

Joe:

So currently it was just word of mouth. Talking to people. I’ve tried to go to meetups in my area and that just hasn’t really worked for me. They’re always like a sales pitch or … I don’t know. I’m a wallflower so it’s a lot for me to get out there and talk to people. But I do force myself to be uncomfortable and to do it. I just haven’t succeeded at it. So currently I have two investors. One of them was just constantly talking about real estate all the time and just kind of executed on it. 

Brandon:

Yeah. Okay. I’ll ask the same question I asked earlier. Three year goal like I asked Sheena about. Three year goal. Where do you see yourself or what would you like to have in three years? 

Joe:

Sure. So in three years I’d like to have properties, short term rentals in Texas, Oklahoma, Arkansas, Tennessee, Georgia, Florida and working my out internationally. 

Brandon:

Okay. So why not deep in one area? I’m not saying it’s wrong I’m just curious of what your logic was. Instead of just like I want 20 in Texas. 

Joe:

Sure. I would like to have a portfolio to say okay, you want to go to the mountains. Great. You could go to Oklahoma. I’ve got a few places to choose in Oklahoma. Or you could go to the Ozarks. Or if you want to go to the beach, great. You could go to Galveston or you could go to Florida. Just to have a wide portfolio of places that I could offer. And different experiences, whether it was RVs, glamping, or cabins in the woods, or direct access to the beach.

Brandon:

Yeah. Okay. That’s cool. The danger … And again, I’m not saying it’s right or wrong and I’m sure you’ve thought through this. But the danger is you have too many wide locations, it’s hard to become a subject matter expert of that location. So then the question becomes, and we don’t have to dig into that today necessarily, I’m just making people aware, is how do you become an expert on multiple locations? I’m assuming you know that area of Galveston, Texas pretty well. You know what rents well, you know why people like that area and what they want there. But just knowing how to manage that knowledge at different areas is just super important. But again, I’m not worried about that for you. I think you’ll figure that part out.

Okay. So are you looking at Airbnb for all … Is that where all the guests are coming from or do you have your own kind of brand that you’re building?

Joe:

I am building a brand. I do use Sunrise 2 Sunset Properties so we are trying to build a brand. We do use Airbnb. That’s probably where I get 90% of my bookings. VRBO is 10%. Or maybe 8% and we probably get 2% based off of reoccurring guests. So we’re trying to build up more reoccurring guests. Now that we have a property in the hill country, we’ll start marketing that. We’ll start doing a campaign to guests that were going to Galveston that we could start marketing to them. And just kind of start building that. So I know it sounds like it’s a wide avenue, to your point earlier. My thought is if I had a few … Like I go to Galveston, I did a few there. Great. I understand that market. I go to hill country, I do a few there. I understand that. And kind of work my way systematically from state to state to state. I grew up in Georgia. I understand that market. I can go there. Florida, I’m familiar with. I can go there. That’s kind of my train of thought.

Brandon:

Yeah. And again, I don’t think it’s bad but when I think of the work that goes into an Airbnb, like a vacation rental … I just got my first out here in Hawaii but I’ve had one before. The systems that’s required. There’s a certain economies of scale you get the more that you have. Like I could have two on each of the main Hawaiian islands like Oahu, Maui, Kauai, and the big island and I could have eight total. But I would much rather personally have eight in Maui because I can share the same … I don’t need four contractors, I need one contractor when things break. I don’t need four everything. I have four cleaning crews, I have one cleaning crew. So again, I’m not saying you shouldn’t do it. Just that’s the benefit of going deeper in one area. The risk of course is that that area, something changes. It could get a hurricane or people stop traveling there for whatever reason or the economy changes or oil and gas disappears. So there’s pros and cons of going deep in one area.

What I like about what you’re thinking is this idea of building a brand that people come to versus just Airbnb. It’s a really tall order but I’m thinking the exact same thing. I got my whole Month In brand. Like Month In Maui. So this idea of I want to be outside the Airbnb ecosystem if possible. Airbnb. Because it’s like having an Amazon business. It can make you great money but then someday Amazon might just be like, “Yeah, we’re kicking you out.” And then all of a sudden your business does nothing. So I like the idea of building your own brand, it’s just incredibly difficult.

I want to go back to the investor stuff. We talked about the business plan. Again, I don’t think it’s bad or good, it’s just what you decide to do and you’ve decided to do it so yeah, crush it. Rock it. I love that. So how do you get investors for it? The first thing I thought you said, a lot of the meetups that you’ve been to are kind of pitching or they’re sales something or whatever. Have you considered starting your own? Like being the guy that just hosts their own?

Joe:

I have unsuccessfully. I’ve tried to do it with a few other people who … Friends of mine that are also in the business in some shape or form. Either a real estate agent or a mortgage broker. And it’s just kind of fallen flat on its face.

Brandon:

Is that because you didn’t continue along enough or because you think you don’t have the skillset to be able to do it correctly?

Joe:

Probably a little bit of both. Something I am rethinking and to revisit. Just kind of execute on and then see where it goes.

Brandon:

The cool thing about meetups … And there’s a lot of them that happen around the country. But the cool thing is you can see what other meetups are doing that are successful and it’s very much a systematized business really, to be the host of a meetup. So for example, my buddy Tarl Yarber. He’s one of my good friends and we have the Maui masterclass that we do together. But he runs these events out in Seattle, these huge events called Fixated On Real Estate. Or fixated something. And he just basically took what worked at everyone else’s meetups that he knew and just put it into his. And it’s a very formulaic thing. Like we always start with this. We stand up when we do this. I asked for this thing. Here’s how we market, here’s how we get people. And it’s all very simple stuff, but it’s really like having a checklist. So that’s one thing I would encourage you is if you decide to revisit that, reach out to guys that run meetups in other areas. I mean, they’re not hard to find. Just go to biggerpockets.com/events and you’ll see people putting on events and just reach out to them on BiggerPockets and be like, “Hey, can I jump on the phone with you for 20 minutes?”

Or even if they don’t want to do that, “Hey, can I buy you a $100 gift card to your favorite coffee shop if you’ll do a 30 minute phone call with me?” Whatever, right? You’ll get on the phone with these … And just like, “How do you run your meetup? Help me run a good meetup.” In fact, BiggerPockets, we’ve even talked about having some sort of, I don’t know even know, official standard like this is how you run a good meetup and this is what an official BiggerPockets meetup looks like. And we may go that route someday. But anyway, the reason I bring that up again is when you are the one in charge of the meetup … People in this world, and this is advice for everybody, are so desperate for a leader. People want leaders. They want people who know what they’re doing. Back when the pandemic was coming down on everyone and everyone’s freaked out, I made this video of what to do when tenants don’t pay rent because of COVID. And that video has like three or four hundred thousand views now.

And I didn’t know what to do. I just sat down and go, “Well, what am I going to do? Let me be the leader of this thing.” And I’m like, all right, this is my four point plan. I’m going to do this, I’m going to do this, I’m going to do this, and if they do this, I’m going to do this. And I just was like, this is what I’m doing. And everyone’s like, “Hey, Brandon knows what he’s doing. Follow him.” The same way with a meetup. If you’re doing a meetup and you’re confident and you’ve got a system like, this is what we do. And I’m going to do it every month and it’s going to suck in the beginning and the next month it’s going to get a little better, and the next month it’s going to get a little better. You will build up a sizable thing. You don’t need to have a great, fiery personality or talkative like I am. In fact, I think that’s probably more annoying to people than it is endearing. You can just be the knowledgeable guy. And just like I said earlier, you can bring people into your life that want to work for you for free because they want to be a part of what you’re doing, they want to see what you’re doing.

And then put them in charge of different aspects of the meetup. And you become the leader that people trust and they see what you’re doing and then they want to invest with you potentially. So I would definitely look into that. And then a second piece of this, this is something I’ve been thinking a lot on lately, is people want to invest in frameworks. People want to invest in brands. People want to invest in certainty. And here’s what I mean by that. Let me unpack that. If I were to go to somebody and be like, “Hey, I’m raising money for some trailer parks. There’s a bunch of them. I’m trying to buy some. You put in some money, I’m going to give you some money back at the end of the day. It’s going to be great. You’ll love it. Let me send you over wire information.”, people would be like, “I don’t think so.” It’s not something they can grasp. It’s too vague. It’s too big. It’s too complicated. The confused mind doesn’t buy. Or in this case, the confused mind doesn’t invest.

So I would also encourage you more and more to try to make it look like you do this every month. You’re doing five deals a month right now, let’s just say. What would that look like? What would your business look like to do five deals a month? You probably have a name for what you do. It’s not just syndication, it’s called the Sunrise Investment Fund or whatever. There’s some dumb name for it. This is our PDF that explains exact … It’s one page that explains exactly what it is that we do. We’ve got this really cool logo that we designed on Canva. It looks like a legit company. And whether or not that’s right or wrong … It’s probably not right. But humans naturally respond better the better something looks and feels. The more professional it looks and feels, the more people are going to want to invest with you. And again, I’m not saying you’re not doing that, but just kind of thinking through everything is how can you give people a framework?

A tangible example of that … And I know I’m just rambling here. But a tangible example, in Open Door Capital when we were going to raise money, we didn’t just raise money. We raised money in what’s called a cash growth fund. A cash growth fund is a real estate investment that provides cash flow from year one and the ability for forced depreciation that’s not dependent on the market. It’s a cash growth fund. We put a little TM, a little trademark next to it. We’re a cash growth fund. We also follow a rolls criteria. R-O-L-L-S. It means that there’s room for in fill, there’s opportunity for this. And I got an acronym for R-O-L-L-S. All that is is just a framework that people can then put their head around and say, “Oh, they’re professional. They know what they’re doing. I’m going to invest with them.” So I would invest some time. It’s not a lot of money or anything but invest some time and some effort and thought into how do I make this look like we’re doing five of these a month? And that this is just standard business. We do a lot of this.

I don’t know. Is that helping at all in there?

Joe:

Yeah. No, that makes sense. That makes sense.

Brandon:

What else can I help you with? I know we got to close this up pretty soon. They definitely don’t give me enough time to talk. I could talk for hours. But any specific things that I can help you directly with?

Joe:

That’s really it. I mean, that was very helpful. I really appreciate it.

Brandon:

Okay. Cool man. Well, yeah. I think you’re onto something. I think that the short term investment thing is a fascinating idea. The more you can put that into a system, a website, easy to understand, easy to explain, like a five year old could understand. This is what we do. It’s called the Short Term Rental Group Investing Program. Or whatever. That’s too long. But maybe there’s a short name there. And this is what we do and this is my experience. This is how we can do it. And I wouldn’t get overwhelmed either with like … As much as I say treat it like you’re going to invest in five a month, right now it’s way more important to you … And I’m talking to everybody here who’s fairly new to real estate. It is so much more important right now to build your reputation and to build your momentum than it is any money whatsoever. Even to the degree that if I were in your shoes, I wouldn’t care if I got 0% of my deals. I’m not saying do this, but what if you partnered with people and you raised money, but instead of a 50/50 split or a 70/30 split you were a 99/1 split.

Does it really matter in the grand scheme of things if that gets the ball rolling and that gets people into their investment and you start getting a reputation? It just doesn’t matter. The initial money is fairly irrelevant compared to the experience that you’re gaining. So don’t be afraid to be overly generous with your investors in the beginning because that’s what you need right now more than anything.

Joe:

Right. Perfect. Thanks.

Brandon:

Awesome man. Thank you very much. Appreciate you. And again, if you guys have feedback or insight or you want to say that Brandon said something stupid and you want correct me, that’s okay. Go to biggerpockets.com/show505 and you can leave all your thoughts right there. Awesome. Thanks Joe.

Joe:

Thank you.

Brandon:

All right. Luke, welcome to the call. Thanks for joining us today.

Luke:

Yeah. Thanks for having me. Super excited.

Brandon:

Thanks. Well, tell us about yourself. What do you do? How long you been doing this for? And where do you do it at?

Luke:

My wife and I, we started investing back in 2017. We’re in Dubuque, Iowa, so eastern Iowa. Basically we started with a duplex and a fourplex. Did some seller financing, creative financing with the bank. Had a really rough year. But then after that we basically made the decision like go all in or get out, so we started scaling up. So fast forward to where we are now, five and a half years later total, we have about 42, 43 doors. We’ve done about 10 flips, 10 BRRRRs, couple wholesales in there. Really changed our strategy and just did a lot of what the podcast always talks about.

Brandon:

That’s cool. I mean, that’s pretty substantial. 42 doors. How much of that is multifamily versus single family?

Luke:

We only have two single family. The rest is all multi from duplexes on up to sevenplex. We have a couple six and sevenplexes and then the rest four and twos.

Brandon:

Okay. Cool. You’re in this … I don’t know. I need a name for this. And I’ll come up with a framework name someday. But you’re in this … And I don’t know if this is where your problem’s going to come in or not, but you’re in this desert where you’re not big enough yet to be able to bring on all the teams and all the people you need to be able to outsource all your work, but you’re bigger than just a couple small deals. You’re in that weird … We’re going to call it the adolescent phase of a real estate portfolio. That’s the name of it. It’s the awkward adolescent phase. And it’s awesome but I remember having 35, 40 units and I’m like, “This is a lot of work but I don’t make enough money to be able to hire a team or a full-time employee to manage it or else I’ll make no money off this thing.” Does that feel pretty accurate?

Luke:

Yeah. That’s basically where I’m at. Where I’m stuck right now is I do have a full-time employee that does maintenance with me. But yeah, I’m swinging the hammer a ton, which I don’t mind doing that but it’s not really going to get me to where I want to be. At the end of the day, I know that. We’ve experienced … I forget what you call it exactly. But the different levels of financial freedom. Like those certain levels that we were able to take three months off this past winter and go to Florida and enjoy no snow and that was really fun. But the same time, I didn’t grow as much as I wanted to at that same point. My problem really lies in how do I scale up without either over leveraging myself time wise or money wise as well? I’m kind of in, like you said, that awkward spot. I look at it as plateaus. I felt like I hit a plateau around 15 to 20 doors and then I scaled up to like 35, 40. I had enough cash flow to survive plus hire somebody. And now in order to go to the next step, I almost feel like I have to take the plunge but I need to get over the 75, 80 door mark. You know?

Brandon:

Yeah. It’s almost like an identity shift that happens. And it happens in business too. Like not just real estate but just like you own a business and you get to this plateau and then you have to … It’s not just like you got to get smarter or think these different thoughts or read the right book. It’s like you got to change the very nature of who you are as a person. Like how you view yourself. And if you’re able to do that, you can then accelerate to that next level. And if not, you might be stuck there for a long time because our actions and our results that we get are a direct … Sorry. Let me say it this way. Our outcome is a direct result of our identity. So the kind of person you are gives you the kind of body you have, the kind of relationship you have, the kind of wealth that you have. So if you want to exceed that, you’ve got to change a little bit of identity there. And I think you’re feeling that, aren’t you?

Luke:

Yeah. I’ve kind of created a perfect storm. I took a ton of the advice off the podcast. I run our local REIA group, which gave me great deal flow. So I have more deals than I can really handle at this point. So I have kind of the opposite problem what a lot of people say they can’t find deals in this market. But we got really good at doing BRRRRs and I’ve done the refinance on the front end of the purchase so I’m almost getting paid to buy these properties at closing with rehab funds and everything. So I’m trying to decide do I continue the path I’m on and just keep scaling maybe another five to 15 doors or do I stop that and change strategy a little bit? Go bigger, something like that.

Brandon:

Yeah. How’s that feel in your gut if I were to say stop buying anything under 50 units right now? How does that feel to you?

Luke:

Little bit of shock and awe I guess.

Brandon:

Does it excite you, fire you up a little bit, or is it like, oh, that just sounds miserable?

Luke:

Yeah. I started back when COVID hit … My goal that year was to buy a 20 unit or above. That was kind of like, all right, this is what I’m going to do this year. Then COVID hit and probably a little bit of just personality, I fell back in my shell and like, I know I’m really good at buying single families or duplexes. I can BRRRR them. I can get some money coming in. So I went back that route. But yeah, I’m not opposed to it.

Brandon:

Yeah. And I’m not saying you have to either but I feel like you’re at this point where you could continue doing things the way you are. There’s nothing wrong with that. You can continue this linear growth. I talk a lot about … Especially in the new Multifamily Millionaire book, I talk about linear growth versus exponential growth. And if you’re just adding on a single family, duplex, BRRRR, a five unit, wholesaling some deals, you’re very linear growth there. There’s nothing wrong with that. But the problem with that is one, you don’t really become a different person by doing it, you just work more hours. And eventually hire employees and now you’re just a self employed with some employees underneath you kind of a thing. But when you exponentially grow and you say, you know what, I’m changing everything that I do, I’m going to either A, create a business that invests in small deals … Now, that’s an exponential way to grow. It’s like I’m going to create a team that goes out there and raises money and gets mass lead generation and we go … Maybe it’s the fund, maybe it’s syndication. It’s kind of irrelevant. I’m not talking specifics here.

But you’re doing these things that generate business at scale and you’re just managing it at a top level. You are the leader. You’re the general of that war. Or you can do it on a smaller … Ironically I say smaller, but more deeper level, which is like a large multifamily. Like I’m going to go out and buy shopping malls. Or I’m going to go buy retail strip centers. In fact, I love that concept of being in the Midwest and buying the seven, 10, 15 unit retail centers. Triple net lease stuff. I think that’s a fascinating model. But again, it all works. It doesn’t really matter the specific niche you get into. But I can just tell you from my last couple years, I was very much … I was in the awkward adolescent stage. And when I grew up I guess to that next level … I don’t want to sound like it’s better or worse. It’s not a moral thing. But when I got to that next level, everything got easier and less stressful. All I do now is make those high impact decisions. I don’t do the minor level. And it just became so much more fun. Because I’ve got people who are really good at what they do.

But what that took is that leap that you kind of are alluding to of where I think at 100 units I’m there and at 40 I’m not there. So how do I bridge that gap? And what it was was just for me, it’s like having faith that this is going to work out. I’m going to build the machine that’s going to take me to that level even though I can’t necessarily … Either can’t afford it or don’t want to afford it right now. So hiring that … You have the maintenance person but do you have a person that’s just helping you just like an investment advisor or whatever you want to call that role, like a COO kind of a role? Do you have a person in your life that’s like that right now or is that you?

Luke:

For the most part it’s me. I have some mastermind groups that I’m part of that they live all over the states. But nobody necessarily knows my business enough to really say this is exactly where you’re at. That’s high level when I talk to them.

Brandon:

Yeah. Do you run any kind of EOS, like the Entrepreneur Operating System from Traction? Anything like that in your business right now?

Luke:

No. We just have the management softwares for the actual tenants and stuff like that.

Brandon:

That’s one thing I would really encourage you to look into heavily is the idea of … Have you read Traction by Gino Wickman? That whole system just revolutionized my business in getting to that next level. One, it gave some very clear goals. Like this is where we’re headed. We’re going to have $50 million of real estate in three years. That’s what we’re going. And then from that you can work backwards. Do you have any laid out, very specific goals on number of units that you want to have and what timeframe?

Luke:

When we started, my wife and I decided we wanted 100 doors within about that five year mark. Five and a half years. So we kind of backed into like I want to buy 14 units a year. But then really we got to that based on we wanted 10,000 a month free cash flow. Well, we basically have gotten almost there with the units we have currently. So we hit my goal sooner with lower unit count and so that’s where I was scratching my head like I hit my phase one goal, now I’m kind of wandering again. What’s the next step?

Brandon:

Yeah. And I said this to the last two guests as well and I’ll say it to you as well. You are such a rockstar to so many people in your area that if you can find somebody … There is no greater joy in business than watching people that you helped train up to do what you’re doing. And I don’t mean that in a volunteer aspect. I mean, like as an … I mean, that’s great too. But as a team. You get to impart everything you’ve learned into them doing the work to build that. And it doesn’t cost a lot of money. When you’re a rockstar you can find people to play a show with you because you’re the rockstar. So if you could build a small team, two, three people, if you pay them great, I don’t think that’d be a bad use of … At your level, investing in people is more valuable than investing in real estate. That’s kind of a weird way to think about it, right? But a person is way more … Like in real estate, you buy a piece of real estate, you’re going to get a 10% return on it. So you spend 100 grand, you’re going to make $10,000 a year.

So $100,000, you make 10 grand a year in cash flow. That’s probably pretty typical, give or take a little bit. Maybe you’re really good and you get 20, 20,000 a year. Let’s go with that. You were getting a 20% cash on cash return on your property. You spent 100 grand. What would a $100,000 salary do? Could that not make you so much more than 20 grand a year? Yet entrepreneurs, especially real estate investors, are so reluctant to make that call. We’ll spend 100 grand on a piece of real estate, but 100 grand on an employee is a scary kind of proposition. Even though there’s almost no chance in my mind that that would not pay back significantly more at that level. For the right person. You can’t just hire anybody of course. So if you can find that person, they can come in and help you lead to that next level and then your identity shifts to that next level. You are now the leader. You are now the general. You’re now managing this team and they’re going to do their own thing.

It’s shockingly simple. Let me explain what I mean by this for those who are listening and doesn’t understand what I mean by this. Real estate is fairly simple. To build that scalable machine that I’m talking about, just build this engine, what’s the engine have? You have somebody who’s in charge of deal flow. Like an acquisitions person. So we’re going to call it deal flow. You have somebody who’s in charge of the money. We’ll call that investor relations. So you have the money, the deal flow, you have the management. How are you currently managing right now? You guys in house?

Luke:

Yeah. We’re all self managed.

Brandon:

Okay. Which is another reason why scaling is so helpful because managing 40 tenants sucks. Managing 200 is easy. It’s shockingly that’s the case. I don’t know why. Just economies of scale allow you to hire the right people to be able to manage 200 units. So you got somebody who’s like an asset manager, we’ll call them. So you have asset management, you have the investor relations, you have the deal flow. And then maybe you have what I call the COO role or somebody who’s in charge of the actual day to day. And then you have maybe an admin assistant. Those five roles … I’ll read them again. You have a acquisitions person, you have a money person, you have a management person, you have a leader or a COO role or an integrator we call it in the EOS system, and you have an admin assistant. If you had those five people … And they don’t even have to be five separate people. Right now you’re doing probably all five of those, or at least a good chunk of those yourself. Those five roles covered, it creates this little engine and your job is simply the mechanic that’s squirting oil in the right spots to make sure it’s well greased and it’s running correctly. And every once in a while you have to find a new piece and replace it because something goes wrong or one of the pieces breaks.

But that machine is what’s going to take you to that next level. And when I say the identity shift, that’s what I mean is you are no longer a piece in an engine. You are now the architect. You are now the mechanic and you’re putting this thing together. And when you can start adopting that, it just changes your life because now you get to really scale by leveraging other people versus leveraging your own time. And that’s where you’re going to find more wealth, you’re going to find more freedom, you’re going to find more excitement, more joy, more wins. I mean, I just closed on a 530 unit property this morning and I did so little in that, yet I have the same joy as if I did the whole deal myself. It’s almost unfair, right?

I don’t know. Did that help at all?

Luke:

Yeah, definitely. I think one of the questions I had … Like in our local market from a property manager side, there’s only really like two that are even accepting new clients. So the problem I’ve run into them, I’ve been interviewing them because I’ve seen this coming for a while. They’re willing to take on my portfolio from the lease ups and all that, but the maintenance side, they don’t have anybody that they actually have on staff. So they’re going to farm it out to the same people that I already farm stuff out to if I don’t do it. So I’m kind of stuck. And maybe it’s the money side. Again, I’m concerned about the costs of well, I know these people, why should I pay them to mark it up again? But then if I was going to do a hybrid approach where they manage the lease ups and tenants and then I did just the maintenance stuff or have my guy do it … Do you have any opinions I guess on the hybrid approach versus straight on?

Brandon:

Yeah. I think you could go either way, but I’ll reframe a couple things. The way to look at this. Instead of asking what it costs for property management, ask what’s it costing me to not have property management? So when you frame it that way it’s very different. Like let’s say you’re going to pay them … I don’t know. Whatever. So you’ve got 42 units at, what, $500 in average rent. You’re bring in … What’s that? I don’t even know. $20,000 a month?

Luke:

Yeah. We’re close to like 25. About 25 grand.

Brandon:

Okay. 25 grand a month and they’re going to charge 10% most likely so yeah, 2,500 bucks a month for property management. That’s crazy. You could get by way cheaper doing it yourself. Who needs to do that? But if you weren’t doing that, could you generate more than $30,000 a year in additional net worth growth to your portfolio if you weren’t touching any tenant whatsoever?

Luke:

That’s the part that I dislike the most out of all real estate stuff is that it feels heavy to me, to put it in your terms.

Brandon:

Yeah. So if you weren’t doing that … So again, not what does property management cost, but what is it costing me not to have it? And when you look at it in that way, it’s like oh, shoot. Same with bringing in partners. It’s like well, I could bring in a partner but it’s going to cost me 50%. The question’s not is going to cost 50%. And I’m not saying you have to do a partner. It’s an example for people listening. But not is it costing me 50%. It’s costing me way more by not having that partner most likely. Or by not bringing in that person or by not giving all my equity to different people. So again, another way to look at it is don’t worry about costs, worry about opportunity costs. It’s way more valuable. The other side of that though, if you’d rather … What I did, I just built my own property management in house for all my local stuff in Washington and my mother-in-law runs it. I made the same machine and I literally … Like the book Heather and I wrote, the book on managing rental properties, that’s just our systems.

And we’re like, “Here mother-in-law. Just run this.” So she just runs that. And I don’t … I mean, I spend like a minute every month dealing with my whole 30 some units, whatever I have left in Grays Harbor, because it’s just a machine. You could go that route as well. But again, that’s where it gets easier once you have the 50, 60, 80 units. So I would look at it and encourage you, how do you get to 100 units by the end of the year? What are we at right now? We’re recording this in end of August. So what would it take for you to buy 60 units by the end of the year? My guess is it would be one big shot, like one big apartment complex. And there’s a lot of people who … That range, that 60 unit, anywhere between 40 and 80, it’s really hard to run those unless you’re local. Because like you said, there’s no property management companies that want to take them. They’re hard to deal with but you could deal with it. And if you had that, could you bring on a full-time manager at that point you’re paying three grand a month to and they’re managing your whole portfolio the way that you want it done? 

It’s one of those go bigger to go smaller or to get more freedom. Freedom’s found in the scale, not in the … Yeah.

Luke:

We found freedom in the scale, like I said earlier, with going from six units to like we need to scale up but now it sounds like we need to do it again.

Brandon:

Yeah. And again, maybe you could just sail off into the sunset right now, let these properties pay off and just go and relax more. But I know for me, that awkward adolescent phase is just tough to get through. It’s like you got to get past that. You’ve got to get through the awkward teenage years of investing. Because it’s fun being kid, right? When you’re a kid you got no worries. It’s fun and so you got five units and you can manage them yourself and it’s easy and you’re just flying by the seat of your pants. It’s great. In that 40 range, you are just awkward and you’ve got braces on your teeth and your left leg’s longer than your right leg and you can’t dance. So yeah, you’ve got to get to that 20 year old phase where you’re actually awesome and riding a motorcycle around Europe cool. So I think you can get there. 

And the last thing, it sounds like you’re already part of some mastermind stuff and that’s the last piece is the more you get around those people who are at that level, the more you’re hanging out with guys that are doing what I’m doing, the more you’re just going to be naturally thinking like that. That’s the best, fastest way to shift your identity in my opinion is to just get around a bunch of people who already have that identity. So joining those groups or being a part of those organizations of people doing that already, it will just be a game changer for you, the more you can do that.

Luke:

Okay. Yeah. That’s great.

Brandon:

Cool man. Any other final questions to throw at me while you got me?

Luke:

No. I hope to see you at BP Con. We’re heading up. We have five people locally going so I’m excited.

Brandon:

Sweet, man. Yeah. That awesome. Yeah. I’m super pumped for BP Con. It should be great. It sucks that the COVID stuff’s coming all back right now but we’ll have a good time no matter what. Even if we’re wearing a mask, it’ll be fine. So cool man. All right thanks. Have a great one. And of course, everybody you can go check out Luke on the show notes page. Biggerpockets.com/show505. You can learn more about Luke there. You can ask questions of him. You can offer some advice. You can tell me I was stupid in something I said and just get involved in the conversation there. So again, Luke, thank you.

Luke:

Yeah, appreciate it.

Brandon:

All right everyone. Hope you guys enjoyed today’s episode where we kind of walked through my advice for three real estate investors at different levels of their investing. If you, again, want to jump in the conversation, biggerpockets.com/show505. In the meantime, make sure you follow BiggerPockets everywhere on social, @biggerpockets, Instagram, Twitter, Facebook, Snapchat, TikTok. Whatever your thing is, we’re probably there. And yeah, you can follow me personally over at BeardyBrandon. That’s beard with a Y. So I guess that’s all I got. I don’t have David today to get us out of here so I got to give myself a nickname. For BiggerPockets, my name is Brandon Awkward Teenager Turner, signing off.

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