BiggerPockets Real Estate Podcast - 26: Building a Scalable Real Estate Business and Tenant Management Tips with Chris Clothier

Episode Date: July 11, 2013

Successful real estate investing involves a lot more than just tenants, toilets, and trouble. Successful investors have learned to manage their investing like a business and not a hobby by creating systems to scale their efforts and build wealth faster and more securely. To get a better idea on just how to do this, on the show today we talk with real estate pro Chris Clothier of Memphis Invest, who shares his story and his view on how to start working on your business and not in your business. If you are looking to take your investing to the next level while maintaining more control – don’t miss this episode. Chris also has some awesome tips on getting your properties rented quicker and dealing with difficult tenants so be sure to take notes! Read the transcript to episode 26 with Chris Clothier here. In Today’s Show, We Cover Student housing: a good idea or a bad idea? When NOT to use partnerships – and the perfect kind of partner. What comes first: hiring employees or ramping up your marketing. What true marketing really is… and why it costs nothing. Tips for outsourcing parts of your business that don’t excite you. Why Chris didn’t use a formal business plan but you probably should. How to hire people and guarantee you can always pay their salary. Chris’ unique “game” for filling vacant units. The one tenant trait that is an automatic denial. Specific questions to ask a property manager before hiring them. Links from Today’s Show: BP Podcast 009: Using Hard Money Lenders to Grow Your Business with Ann Bellamy Keyword alerts Do You Feel Like You Are Drowning In Your Business? Start Outsourcing! Books Mentioned in the Show Make it Big by Frank McKinney Rework by Jason Fried and David Heinemeier Hansson Tweetable Topics “The best marketing you could ever do is simply talking to other people.” (Tweet This!) “If you are going to start a business… why not go all in?” (Tweet This!) “To scale your business, you gotta bring in the highest quality people.” (Tweet This!) “Surround yourself with people who believe in your vision and are up for the challenge.” (Tweet This!) “Don’t be scared to share in the wealth of what you are doing.” (Tweet This!) Connect with Chris Chris’ Company Website MemphisInvest.com Chris’ BiggerPockets Profile Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 26. You're listening to Bigger Pockets 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. What's going on, everybody? This is Josh Dork, and host of the Bigger Pockets Podcast. here with my co-host,

Brandon Turner. That was awesome. That was a good way to introduce me. I'm going to do it from now on. Do you like it? Yeah, hi, I'm Brandon Turner. That's talent right there. What's up, Brandon?

And not much. I'm going to San Francisco today. San Francisco, really? Why are you going to San Francisco? Because I am going to the Inman Connect conference, which is a big real estate conference there. Nice. Nice.

Nice going to represent bigger pockets. Yeah, represent. So if there's anybody listening to this for some reason on Thursday morning and wanted to come hang out, tweet me. Do it. Do it. Awesome. Yeah, Inman's cool. It's a great place to meet some of the business leaders in the industry.

And it's exciting that you'll be there. You're going to have a good time. I hope so. I haven't done that before. This is actually my first official conference. Oh, boy. All groans up. I know.

I even bought a tie yesterday. And I told him not to, which is the funny. It's a trendy tie. I'm going to look cool. We'll have to see. I expect photos. Oh, yeah, lots of photos. Nice, nice.

Well, yeah, and the reason I'm not going is I actually just had a brand new baby this past week. Well, your wife did. Yes, yes, she did. So, yeah, we're a little tied up right now, but. Well, congratulations. Thank you. Thank you very much. Thank you very much. Well, enough about me and you and our wanderings and wonderful things. Nobody cares. Let's talk about this podcast really quick because I believe last week or something like that, we officially kind of became the top real estate podcast on iTunes. Is that kind of a fair way of saying it? Yeah, I think so. We have the most radians and reviews for any real estate podcast in the entire

world on iTunes right now. So that's awesome. And not only that, but we have the most best ratings as well, right? Yeah. It's cool. Yeah, 311, 5-star reviews, ratings, 204 reviews. Feels kind of good. Six months in, man.

You know, Brandon and I work really hard on this show, and we definitely appreciate the listeners and hopefully, yeah. And those of you who haven't left a review or rating, please, you know, we'd love more. It's certainly boosts Brandon's fragile ego. It does. I cry in the corner sometimes until I get reviews and radiance, though.

Yes, yes. So don't make Brandon cry. Leave a review. Thank you. Well, before I cry, let's jump to the quick tip. My quick tip is, it's Brandon's birthday today, so wish I'm a happy birthday. Okay, so today is Tuesday, two days after, before you're going to be listening

to the show. So leave him a happy retroactive birthday. Belated birthday. Yeah, whatever. You know what? That's not my quick tip. My quick tip today is something I learned this week and I thought it was pretty cool. Did you know, Josh, that you can listen, I mean, obviously you can listen to a podcast

on an iPhone. Did you know you can listen at one and a half or two times a speed? So you can like get twice as much bigger pockets podcast for the same time as you would, like one episode? Now, while I like listening to myself talk, and you, for that matter.

Thank you. Listening to us like Alvin and the chipmunks might be a little bit annoying. It actually, it doesn't raise the pitch. It just raises like the speed like the stuff like this. But you can understand it. So anybody, if you're listening to an iPhone right now, try it out. I don't know the exact button, but I was playing the other day with it. And I thought it was pretty cool.

It's on the mobile app. Yeah, you can just click on the podcast. But I think it's not necessarily a quick tip I would agree with here. But, you know. We'll agree to disagree. I guess we'll have to do that then. I like to consume as much. many podcasts I can get in.

So I'm a podcast guy. Anyway, let's move on. Yes. All right. So today, we've got a little bit of a longer show, guys, but this thing

is filled with so much actionable content. We're going to just get right to it. Today's guest is Chris Clothier. Chris is a real estate investor from Memphis, Tennessee. His company manages over 100 million in assets.

And Chris, Chris is a thought leader on building scalable real estate business, a scalable real estate business. Chris has been in real estate for a while now. He's got a successful company. He's not shy to take questions and help people out on Bigger Pockets. He's one of our bloggers. And we're certainly excited to have him on the show. Here's the thing about traveling. If you buy food at the airport, burrito, salad, bag of peanuts,

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Fast, simple, reliable. That's Dominion Financial. Check them out at biggerpockets.com slash dominion. That's biggerpockets.com slash dominion. So today we're going to talk about growing not just a real estate portfolio, but the business behind it as well of a lot of tips, tricks, things like that about managing tenants and managing your rental properties. So with that, why don't we just get to the interview? What's going on? Chris, welcome to the show.

Thank you very much. Josh. Brandon, good to be here. Awesome. Awesome. Good to have you. Absolutely. Absolutely.

All right, Chris, well, let's hop right in on this, man. We got a lot of things we want to cover with you. but why don't we take it back to the very beginning? How did you get started in real estate? Day one? Day zero. All right. Day zero. It's kind of funny.

I was watching TV and I saw an infomercial from Carlton Sheets. Nice. There you go. I actually still have that entire program start to finish. That's how I got started with the very first deal I ever did was watching Carlton Sheets, bought it. actually did use one of his techniques to do my first deal. And so, you know, that's me personally. That's how I got started.

Cool. I just actually talked to an investor yesterday who told me the exact same thing, just a local guy said he started with Carlton Sheets. So I wonder how many of you older guys, you know, started. I mean, you know, like Carlton, Chris. Carlton Sheets wasn't on the air when I was looking into real estate. We had flipped this house and stuff. That did not take long.

to that old guy come out to this. To the audience, it is Brandon's birthday today, so be sure when you're listening. You're listening a couple days ahead, but when you're listening, be sure to give him a hard time about turning old. Yeah, this will be old news, but I'm still doing real estate in my 20s here, so I'm okay. Yikes. All right, so you start with this. What was that first deal? What did it look like?

Yeah, I had a, actually, I had a house that I was trying to sell, and it was. It was a personal residence, having a lot of difficulty selling it because it was outside the city, a lot of land anyway, kind of a, just one of those houses that was going to take the exact right buyer. And I had a guy come to me. He wanted to buy the house, but he had a contingency. And that was he had a house to sell first. I didn't want to take the contingency, but it dawned on me that he had a house that was right next to Rhodes University. And it was a, obviously, that's a beautiful university here in Memphis, a great. a place from what I'd read to invest. So I made him an offer. I said, I'll buy your house to free you up to buy mine. And we both came off our prices a little bit, kind of worked him to an area that I thought I could make money. Ultimately, I did.

I bought his house at a price good enough for me to be able to rent it out to a student. And, you know, that's what I did. That's how that happened. Nice. Nice. And how did that go thereafter in terms of renting out to a student? There's a lot of people who listen who are like, yeah, you know, buying property in a university.

town is potentially a good idea. Was it a good idea? No. It was a great house, but it was a single family house. So I ended up, I brought a student in. He rented it. Went well for the first year. He moved out, broke the lease. Didn't trash the house. It wasn't destroyed or anything. But I had a little bit of work to come back in and do, which all investors expect. But the second time around, I had a family that ended up renting the house. So that was one of the first applicants I had the second time around. It worked out. I wanted them to rent it because they had a good application. They ended up taking really good care of the house. It was much better. Nice. Nice. There you go. Well, yeah, renting out to folks who are qualified and who are less likely to destroy your property,

I guess, is a good way to go. Well, it was a good lesson for me to learn because that was the first house I had done. Strangely enough, I was living in Denver and the house was in Memphis. And so it was one of those. It was a long distance transaction, long distance deal. But I was under a lot of pressure. I had to get it done. This was my personal residence back in Memphis I was trying to sell. So I had to get it done. It had to be creative and kind of think outside the box. And, you know, unlike a lot of investors, I had only thought about it. This was my, this was the thing that said, hey, you have to do this. You have to get started if you're going to get going. So it's right here in front of you. Go make it happen. Right on. So you get this first deal done. You're,

you're running to this guy in Memphis. You're now in Denver. Do you continue to rent in Denver to invest in real estate in Denver or what happens there? Yeah, no, I went to Denver. But at that point, it's kind of funny. That was, that was an accident. I was lucky. That was really kind of that first investment deal. I was just lucky on it. From there, I actually started doing fix and flips in Denver. That's where I really cut my teeth on real estate was buying and selling houses that I was, you know, I don't know, I guess fix and flip, that's our terminology. That's the best way to say it. I was buying it. Holding these properties, you know, anywhere from six to nine months is how long it would take me to renovate them and then selling it back on the open market to an owner occupant.

Were you doing your own work at that point or were you hiring stuff out? Like what work is like actually? Yeah, were you doing your own labor on the stuff or was it still contractors? No, no. If it requires anything more than a hammer and duct tape, I am challenged. So, no, we actually, we had a contractor that did that house with us. And I had a partner as well on those deals in Denver. But we had a contractor that did all the labor for us. We did all the rest of the work, all the, you know, finding it, marketing, all that kind of stuff.

Okay, cool. Nice, nice, nice. All right. So what kind of transition you from the, hey, I'm going to start and do this deal in Memphis to the, the flipping the renovations. Yeah. Well, I was just interested. I mean, like everybody else,

I was interested in real estate. This was the early 2000s. I'd gotten Carlton Sheets book. I was just interested and kind of had this romantic idea that it was really cool to buy a house and renovate it and watch it go from what it was to what it can be.

I don't know. I just, I was, I romanticized real estate a whole lot in my mind. I thought this was like this really awesome fun thing to do and it'd be so you know, enjoyable. I can make so much money at it. So I looked at all the positive aspects of it and said, I'm going to get started. And I quickly learned there's a lot more to it than just that. Right on. Right on. And so the rehabbing, I mean, what kind of, what kind of things did you, did you learn? You know, what you obviously you can't just jump it and flip a house, right? I mean, there's some lessons.

There's some things that, you know, mistakes you might have made. What, you know, share some of that with us. Well, a couple things. Early on, I've shared this a lot with, you know, through different ways in the past. I brought a partner on, which, you know, for a lot of people they have to and for others, they don't. I didn't have to do it. I did it because I was nervous about doing it myself the first time around. I don't know if I was more scared of failure or success, but one of the other, it caused me to bring

somebody else on. You know, hindsight, 2020, I would never do that again. The other things that I learned, you have to be really good at managing people. If you're not good at managing people, you're going to struggle with hiring different contractors and all the different parts that make a successful, you know, purchase, fix and flip, you know, style transaction. Yeah. So if you're not good of managing people and delegating and preparing, you're in trouble. Right on. And in terms of the partner, you don't have to get into all the details, but is any reason in particular why you don't want to do that again or wouldn't want to?

Well, because I gave the partner a lot more credit than I should have and I gave myself less credit than I should have. So in other words, anybody could have done what he was doing. I was the money partner in it. He was the, for lack of a better way to put it, he was the real estate area expert. And, you know, my own common sense should have told me that some of the advice that we were getting that I was getting that he was giving wasn't good enough. And this was a guy, I want to make sure I'm real clear.

He was a friend of mine. It's not like it ended badly. It just neither one of us, he wasn't experienced enough in real estate. He'd only been a real estate agent for a very short period of time. He wasn't experienced enough investment. for me to giving the credit I was giving him. I just, you know, when I look back on it, I was nervous about doing my first deal on my own. Yeah.

And so, absolutely. Okay. No, that's fair. So for other people who are just getting started or who are out there thinking, hey, you know, maybe I should grab a partner. You know, maybe you can share a couple tidbits on, you know, what to look for or how to, how to maybe set up an equitable partnership that makes sense and how to kind of manage that relationship.

Well, sure. It should be, in my opinion. And you know, I'm in a partnership today. It's a little bit different than what it was back then. And it's a different style of partnership, but just the same. The difference between the two, the one, the reason why the first one didn't work and this one does is the same reason why someone should look for in a partnership. And that is whoever you're going to partner with, there has to be, they have to bring something to the table that's different than you. It's either they highlight really good at your weaknesses or they really kind of bring out your strengths.

one or the other. It has to be. Because if you get two people that are almost exactly the same in a partnership, you're going to have, you know, you're going to have trouble. It just tells you right off the bat. You're going to have trouble. And if you're both brand new at real estate investing, neither one of you are good at organization and delegation. It's just going to be, it's going to be a struggle. That's the best way to put it. So you need to find somebody that complements you. They bring strength that you don't have. Right on. Right on. All right. No, that's, that's great. So, you know, we really want to, with this show, kind of take, take things to the next level a little bit. We want to start getting into some more advanced topics. But before we do, so you went, you're flipping houses in Denver. You know, today you've got this business that's a, you know, it's a really substantial, sizable business where you're doing these turnkey properties down in Memphis. How did you go from that house flipper who was just figuring it out in Denver to, you know, to, this guy who's now got this business today.

Sure. It was just the easiest way to put it is my, I was raised in an entrepreneurial family, okay? I was just raised in a family that just, you know, when you see an opportunity, you create something out of it. And so my father is the one who started this company back in Memphis. And he was, I was his first client, actually.

You know, he knew that I was buying houses. He knew I was doing fix and flips in Denver. He knew about the first property I bought in Memphis. And he had actually started investing in Memphis at the same time. And he just simply told me if you want to buy more houses at the lower price point, which that was the key factor for me, I could purchase more properties in Memphis with the same dollars than I could in Denver. And so he said, look, if you want to buy them, he would handle all of the legwork, all the groundwork

for me. And so that's really how it started. I was the original client for our company. Wow. And yeah, I had a lot of friends in the real estate field up in Denver, and several of them were interested. They were, you know, what are you doing? Let's see what you got going on down there in Memphis. Maybe we want to invest.

And really, that's kind of, that's how it all got started. My father was working in Memphis and he was having the same conversations with other investors. I was working in Denver and having those conversations with other investors. And pretty soon we had people coming to us saying, hey, if you can buy and renovate and rent and then hold these properties long term yourself, would you mind doing that for us? And that's exactly how this whole thing started was, you know, one guy started it and said, hey, well, you do this for me.

And then that became two and so on and so forth. Okay, perfect. Well, so obviously to get from there to today, you've got to build a scalable real estate business, right? So why don't we kind of jump into that, how that scaling kind of happened? So what comes first, I guess, ramping up your marketing or hiring people to handle it? You know, obviously you've got to start getting customers, right? Sure. So where we started first was hiring people.

It wasn't ramping up the marketing because contrary to what a lot of people think, when this style industry first started, I can't speak for everybody out there, but I know for us, we didn't have clients all over the country. We had clients right here in Memphis. We had, you know, located in Memphis, we had FedEx pilots. We had executives at International Paper and Autostom, you know, people that knew who we were, knew of our background. And, you know, kind of take that one step further. We were extremely active in the real estate investors associations.

So, you know, a lot of people knew what we were doing. I think that's really important, right? You said right there. It's just you were active in the real estate investor associations. I mean, like, I think that's a huge, huge. importance just to get out there and let other people see who you are because you never know where you're going to be two years from now or three years from now. So the relationships, yeah, your form now will definitely help later. Oh, man, I'll tell you what. And that's the thing. So many

people talk about marketing as if it's like a very expensive thing that you have to do outside of like your everyday activities. And I could not disagree more. The best marketing you could ever do is talking to other people. And if you're at Aria, if you're at, a chamber of commerce, if you're at a mixer, whatever, you know, wherever you're at, the opportunity to tell people about who you are and what you do exists. And if you just get out and shake hands and tell people what's going on, that's the way we started. Gotcha.

Yeah, yeah. So you just basically, you went to the RIA. You're out there. You're letting them know who you are, what you're doing, you know, just shaking hands. And that's kind of building your network, right? Yeah, absolutely. And let me, I'll tell you that for us, we're the kind of people also that just, you know, when it came to the RIA, there was a local RIA here that was good. But we also decided that, and this was my father that decided this, that, you know, he wanted to do something more than that.

He thought that there was something missing. So he started his own RIA. We, you know, we, I think we were one of the only Riyas in the country that had a lunchtime meeting once a month. And so kind of what we had done is we created an avenue for more people to hear about our story while they were learning about real estate. Yeah. Yeah. That's smart. Anne Bellamy talked about that back on the podcast we had with her as well, where she just said, you know, like she started her own real estate group because there wasn't any that, you know, met her needs and that were doing what she thought a real estate group should do. Yeah.

And why not, right? I mean, if you're going to go out there, go all in. If you realize and you understand that your ability to make friends and network with people and earn others trust, I mean, that's key to any business. And so, you know, why not go out there and start a real estate investors association that's going to teach and talk about what you firmly believe in? And before anybody thinks that that's like this real daunting task, the very first meeting my dad had was around a conference table with seven other people. and they sat there and they just talked about what was going on in the real estate market that day and questions of those other people in the room. And that grew from seven people to a few years later, you know, 300 people.

And that's all it was, though. So it's not like it has to be day one. You've got this huge group. It could be a handful. Absolutely. Yeah. And I don't mean to plug BP, but one of the cool things about what's been happening lately on bigger pockets is you see a lot of these people doing that. You know, people are setting up their key.

word alerts for meeting up in Austin and Washington and all over the place. And essentially, it's, you know, just a couple little people starting out, but it's amazing to watch it grow and grow. And even on meetup.com and elsewhere, I mean, it's, it's amazing, you know, just use the tools that are available to you to help you build up your little local groups if there's not a RIA or if the RIA that is in your area is one that you, you know, doesn't show your values. Yeah. And, you know, the question that you guys asked to make sure that I come back to it, you were asking, what do you do first?

You know, do you ramp up your marketing or do you hire? And, you know, for us, the first thing we did was we hired somebody to handle some of the tasks that we didn't really want to do anymore. That was one of the very first things that we did because we knew that the marketing was every single day and it was low cost. And it was a whole lot more about being out there and letting people know what we were doing and a whole lot less. about, you know, the mundane and really technical side of it that we do today, like SEO and, you know, the blog and all that kind of stuff. I mean, it was much more handshaking back then when we were first getting started. So the first thing we knew we had to do was bring in people that would help us take the task that we didn't want to do. Yeah. Sharon Vornholt in her

post on a Tuesday set a line just like that said, figure out what your inner genius is and run with that. And don't try to make something that you're, you know, not good at. Don't try to be the the pro at that because it's just you're wasting your own time. I love that. I think that she's, she writes a lot about that. That's really, really good stuff. I mean, that she's a big believer in, you know, kind of outsourcing the things that you're not good at that you don't enjoy and you don't have the time to do. And I couldn't agree more. I mean, that's, she calls it outsourcing for us. We, we hire. But just the same. Yeah. And she talked about that too, is some people do it internally. Some people do it externally. It just depends on your.

business model and and yeah very very smart definitely something that I need to get better at because yeah I mean it's key if you want to ramp up your your business that's important so sure yeah well going back to talking about hiring who was your first like hire like when you got started so the first person we hired was a lady named Carol Henderson and when my dad hired her he told that he wanted her part-time and he had really no idea what exactly she was going to be doing. I mean, you know, he had an idea and a lot of it was going to be spreadsheets and reporting so that he could always track what was happening. So how many offers was he making in a week?

What was being accepted? Which real estate agents were accepting his offers? Who was, you know, who was working best with him? What was he selling to different investors? How long was it taking them to close? these little, little bitty tracking things that he needed somebody to track for him. So that's what he brought her in. So almost like an assistant, you know, for nothing more than just helping him track his business

so he could see what he needed to do to improve. That's awesome. I think that's just really cool about tracking stuff like that. I don't track any of that stuff. But I should be. I mean, that makes sense. Well, it's, you know, I think Josh said a little while ago, you know, when you're talking about, I know y'all already covered the newbie, the new guys off the block, but when you're talking

about experienced investors and how to ramp up and get to that next stop, you know, that next position and keep going up the ladder, a lot of this kind of stuff comes down to it. It's, I don't want to say basic. That's not really what I mean. But I mean, it's business concepts. It's not so much about just real estate. It's about, you know, really the business side of it. And what do you have to do to be scalable?

Yeah. Yeah. No, definitely. So when's the right time then, so to say move from your home office and suddenly start hiring that first person? You know, hey, I've done six deals. Now I want to hire that assistant to start kind of quantifying things and managing and working on things. When do you do that? Well, it's going to be different for everybody.

But it's, you know, for us, we moved out of our homes early on and into just a small little one-man office. And that was, we had done maybe 60, 60 deals in a year. So you're talking five a month. But a lot of that was also mentality. I mean, we wanted to feel like we were getting up and going somewhere every single day, not just sitting in a home office. And that, you know, from there, small little thousand square feet, you got room to able to put Carol into.

We actually made our second hire, which was, somebody that was going to come in and help us to market to the real estate agent. So help us actually make enough offers, get out there and market the rental properties, that kind of stuff. Those next progressive steps to building out a bigger company was bringing somebody in that could help us figure out what all those next steps were. So we wanted to start a rental division where we actually manage the property. So property management company.

but we weren't 100% sure what all those steps were. We wanted somebody that was going to help us make more offers, but we weren't 100% sure what those steps were. So we brought a guy in, and we told him, it's your responsibility out to start to get this thing up and going. We're going to meet on a daily basis, and you tell us the progress you're making. So it's almost like we knew what we wanted,

but we didn't want to slow the business down to figure it out. So we brought somebody else in and said, here we want you to help us figure out what these next steps are. And that was a great hire for us. And I'm going to tell you something that may be a little bit shocking at first. Yeah. We brought him in. He has gone out there now and he's got his own company.

We've actually had about half a dozen people that have come in, worked for us, learn this business, and then gone out and started their own companies. Like to compete with you? Well, yeah. In some respects they have. And I wouldn't exactly say that they do today, but that's not a negative. I'm not saying a negative about it. I'm just saying that they grew out from underneath our wings.

They came to workforce. They ended up going out there and becoming an entrepreneur on their own. More power to them. I mean, you cannot be scared of that if you're going to grow and scale your business. You've got to bring in really quality people and understand they may leave. Absolutely. Absolutely. Well, really quick, let me just plug the show notes here, you guys.

This is show 26 of the Bigger Pockets podcast. And you could check out our show notes at biggerpockets.com slash show 26. Let's jump back for a second here because there's been some debate. We're talking about scaling your business, growing it out and these hires. And some people will just go and say, oh, who's our next hire? How do we do it, right? Let's talk about business plans. How important are they and really how formalized do they need to be?

Did you guys have a plan? Would things have been better if you did, if you didn't, that kind of stuff? I'm going to give you advice in this answer here that's going to be so contrary to what a lot of people would tell you. But no, we didn't. But I want to also make it real clear that we were extremely experienced business people. We had started, you know, between us, nine companies that had grown to over $10 million in annual sales. I mean, we just, we had a lot of experience hiring, a lot of experience training. We knew what we were doing.

So as far as scaling and growing a business, for somebody that's just getting started off that has never owned their own business or they've worked in the corporate world, they know they have the skills, they have that right attitude. They're ready to get going. Yeah, a business plan is extremely important. And when I say a business plan, I mean laying out where it is you want to go. What is your ultimate vision? And this is not something that you can do just overnight. It's something you have to put a lot of heart and soul into of where do I want to go? Why in the world do I want to do this in the first place?

And then you begin to make a plan of how do I get there? Yeah. Yeah. No, I agree completely. I always talk about that. Like a business plan is like a roadmap and it helps you get, helps you figure out how to get there. Well, it also helps you say, okay, I know I got to hire this person because I'm lousy at it. I got to hire this person because I hate doing it.

and I got to hire this person because I don't have time for it. You know, those are the reasons why you hire somebody else. And so you got to know, this is what I'm going to have to hire. And it's kind of funny. I've had this conversation with a lot of people that have talked to me about property management companies that called me up and said, how to, you know, just that one little piece, what do I need to do? And what are the numbers and how many do I need to manage and when can I be profitable?

And, of course, it's always different. But, you know, it's one of the first things I tell them is sit down with a business plan and begin to write out, you know, some of these numbers of, what it's going to take for you to be able to get to that next hire and get to profitability and get to, you know, scalability. So in terms of the hires then, you know, take you, for example, we'll take a hypothetical, right? So you've got this first hire and they're helping you analyze and organize and market and all this stuff.

And now you're paying a salary, right? So you've got to cover them. You got to cover yourself. You got to cover your partners. You may not have the cash to hire that next person, but you need that next person. So, you know, do you think then perhaps it's better for these companies to just keep working on deals until that cash flow starts to come in or to maybe perhaps take on some debt? All right. So we never took on debt.

We paid everybody out of the deal. So everybody's tied to the performance, period. That's the way we started. Okay. Okay. Can you expound upon that a little bit? Yeah, so we didn't bring in a bunch of people and say, okay, I'm going to pay you X, Y, Z salary. Everybody was when we first started anyway, everybody was brought in as independent, 1099 employees, part of the team.

And if you did your job and I did my job and that lady or man over there did their job, then deals closed. And when the deal closed, it brought in X dollars of revenue. and out of that revenue, everybody gets paid, the bills get paid, and what's left at the bottom is what I make as an owner. That's how we started. Everyone got paid from the deal. And, you know, so for us, we thrive under pressure. If you are a experienced business person and you know that you are good under pressure, that's a great way to start it. It's one of those things of we only eat what we kill or grow if you're a vegetarian.

I mean, if you're not growing it, you ain't. ain't eating it. If you're not killing it, you ain't eating. That's the way we started off. And it worked really well for us because somebody that would accept that position, they're the same kind of say, yeah, I like that challenge. Let me do that. And that's what we did. We surrounded ourselves with great people. We were honest with them from the beginning. This is how you're going to make money. And you couple that with the fact that we were super confident. You know, we really believe that we, you know, what we were doing. And we were, we were also very open and honest. We told everybody we had no idea where we were going to how we were going to get there um there wasn't there wasn't a

whiteboard somewhere that had you know step one step two step three there was just very very simply we knew we were going to do it and we surrounded ourselves of people that believed in that said you know what i'm up for the challenge and that's that's that's how we did it pay for it out of the deal now if you if you don't do that josh and to your original question i would say that that you have to have capital in your business before you go out of and hire somebody. And, you know, it's probably too short to sit here and go through all the steps of advice. Yeah, yeah, of course.

But surround yourself with great people. Surround yourself with experienced business people that can help you, make sure you got all of the questions answered, all the T's crossed, eyes dotted, good lawyer, good accountant, good people that can say, okay, this is what you need to do and how you're going to do it. You know, and I think for some of the newer folks who might be listening, you know, what you said actually presents an opportunity for them because there might be a guy like Brandon who's, you know, an experienced investor who's doing well who needs to build this team.

And he's looking for somebody who just wants to hustle, right? He's looking for somebody who needs to work his backside off. And if you are a local investor who's like, you know, hey, I know this guy's successful. I know I'll work my butt off and I'm willing to only get paid upon the closure of a deal for him. you know, you go in there and pitch them, right? Hit them up. Yeah. How do you turn that down?

It's like, I'm going to make you money and it's not going to cost you anything and really no risk. Well, let me tell you one other thing too, guys, and that is for all the listeners out there, is that don't be, don't be scared to share. Don't be scared to share in the wealth of what you're doing. You know, a lot of times there's just certain emotions that we allow to get in the way, whether it's, you know, it's kind of funny. Sometimes people feel guilty about making more money.

And if you really think about what I just said there, people feel guilty about, you know, I can sell a investment property for round numbers at 50,000. And I do well. And my team does well. But the marketplace says I can sell this for 55,000. But I feel guilty selling it at that price, you know, because I'm doing well at 50.

I do good. My team does good. that's if you want to build a scalable business that is built on good solid business principles you have to you know you have to watch your market and capitalize as much as you can based on your market well let's talk about that for a second so sure so if you're if you're in a market and you know you're thinking 50 and and markets in 55 now that 55 you sure surely have to have a better, a top quality product, right? Absolutely. You can't sell the bottom of the barrel property at the top of the barrel price. No. I mean, and think about the other side of that too,

Josh, is that if you're surrounding yourself with really good, high quality people, and because you're taking on more responsibility, because you've got more mouths to feed, you have to get your price up. Well, you should also hold all those people accountable to something. I mean, and so I'm going to kind of tie it around to something that Sharon had said. What is your core competency? You know, what is not just you personally, but what is going to be your company's core competency? And that's what you focus on where that higher quality comes in. So what I mean by that, Josh, is, you know, are you the type of company that says our core competency is just selling properties super low,

price. They're not the best property, but they are good. They're serviceable. They're going to bring you the type of return you're looking for, but it's going to attract a person that's interested in a Toyota Corolla. You know, it's dependable, but it's not top of the line. Or are you the kind of company that's going to sell at the top of the line? And what you're bringing is every bell and whistle, everything's been touched and handled the customer services, you know, above and beyond. So you're selling the, you know, the Lexus or the Mercedes of the housing world. That's the, that's what I mean by that. And you nailed it. That, um, whatever you are, are, whatever your core competency is, that's what you offer and you base your price on that. Gotcha. Now that's great. Well, so really quick,

because we want to move on to some other stuff. Yes. The show we could, we could, we could yap forever here. Um, working on your business versus in your business, right? So clearly you get to a point and you've got to look at it from the big picture view versus, you know, hammers the nails, right? So how does an investor, you know, step out of working in the business to working on the business? Well, if you have to, it goes back to what I said a second ago. Surround yourself with some really good advisors, some really good people. And it doesn't necessarily mean they have to hold a position of advisory.

It could be, you know, a really close friend of yours that you have a lot of faith in as a business person. but you take time to go meet with those people and away from your day-to-day activities. So many of us, we jam pack our schedules and we feel like we, you know, we're so busy and so, I guess so busy doing all the really, really important things that we don't take the time to step back. We don't make the time to step back and ask questions like, what do I need to be doing next? What can I hand off to somebody else? I'll give you a great one, okay? And this is a question we ask a lot.

Every time we get ready to hire somebody new, we always ask ourselves, are we getting maximum effort and efficiency out of the people that we have? We have people that actually work in multiple different departments. They do multiple different things for us because where we originally hire them for, we couldn't maximize them.

So my point is step away, go to dinner, have a weekly breakfast, have a weekly meeting, whatever it is, get away from your business, sit down with people that you trust around you and just say, look, here's my business. What do I need to be working on? That's great. Yeah, that's awesome. That's really, really good advice. Managing properties can feel like a full-on circus. You're juggling vendors, tracking payments, chasing approvals across multiple properties, and maybe a few HOAs, all while trying to keep tenants happy and owners confident. One delay can

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Awesome, man. All right. So let's shift gears a little bit here and move over and talk about property management a little bit. It's something that you guys do. How many units, why don't we just start with what you guys are doing to give people an idea? How many units does your company currently manage? A little over 1,800. Wow, that was a lot more than I thought.

Yeah, and it's in two cities. So we're in two cities now, a little over 1,800. Wow. And how many people do you have working in those kind of divisions of your company? Well, just specifically full-time in those divisions is 14. And then we have about a half a dozen that are part-time, 1099. And then there's another half dozen or so that kind of bleed over to help out in those particular divisions. They work elsewhere within the company, but they share responsibility

over there. Okay. Gotcha. So let's talk about real quick if I could jump in. I want to know about how you fill vacancies. I guess what's the process for you? Like a unit goes vacant. What do you what do you guys typically do? Well, from day one, the way that we market properties, we're a little unique, but we have, we actually put four rental signs in a yard. Yeah. Four signs.

Four signs. Really? Are they all the same signs? Okay. So they look similar. So they are blue and white. They have to be blue and white. But for those you out there that are right now thinking what in the heck did he just

I kind of imagine this, that we created a system early on that was all about competition. So we wanted, as I said earlier, we wanted people that were hungry that really wanted to work, work hard, and earn their living. So we pay our rental agents very well. We pay them very well. And what we've done is each of them has their own sign that has their own independent number. So we don't have this one branded sign that sits in a yard. everybody has their own sign.

They had to be blue and white. The person that rents the highest number of homes in a month gets to put their sign as the very first sign next to the curb. So all the signs are lined up. They had to be lined up vertically or yeah, vertically from the curb. So between the curb and the front door vertically so you can see it from both directions. The first sign by the street is the lead rental rep. the second sign from in is just whoever gets out there next. We only allow four signs.

We have about nine people at any given time that rent houses for us. And this is in Memphis. This is where we have a majority of our homes. It's slightly different in Texas, but it's not really worth going into because it's such a different market. But that's how we do it here in Memphis. And what happens is, if you think about it, a renter pulls up in front of a property and they're going to call that first number.

And if somebody doesn't answer the phone, well, they're going to call that next number. And if they don't answer, they're going to call that next number. So what it does in the way we train our people is, if you're not answering your phone, you're not making money, you're going backwards. And if you don't answer it, somebody else will, they're going to get that rental. And pretty soon they're going to pass you. They're going to be number one.

I'm sorry, that sounds crazy. Hey, the funny thing is, is everyone that comes to visit us. And we do have, you know, entrepreneurs, whatever, they come in to visit us and kind of learn about our systems. But they all, I mean, they just smiled and then shake their heads like, I cannot believe that this is the way this happens. But we, you know, we run on average a vacancy rate of this year anyway a little bit. It's around, we'll just call it round number 4%.

So it's been a little bit under 4%, a little bit over 4%, running right through there. Properties typically take less than 40 days for us to get not just rented, but to actually get a tenant moved in. And what's happened is, is we've got people, two things, people that really, really, really want to rent houses for us because they know they can make a lot of money if they're willing to hustle. So just real quickly, what we don't do, and I don't suggest anybody does is we don't have that one branded sign. We don't have that one call number where you've got to leave a message and someone will call you back later because the tenant, they're ready to see it right then. Yeah. And so, I mean, that's what we do. are rental agents. They're not in the office. They're out. They're on the streets all day. That's what they

do. And we pay them well for. I was going to say, I love how you kind of gamify it. Like you make it a competition. That's cool. Oh, man. We, every week in the office, we don't ask them, you know, we'll put it this way. We make them give us a goal. How many houses are you going to rent this week? And then they come in, you know, wherever that on their goal, we come back to them, say, you know, we've been known to ask people before, what are you doing here? You know, for two weeks in a row, you haven't rented house. Why are you even coming to this meeting anymore? What's your purpose?

Do they leave crying? No, they don't leave crying. We've had some people that, a few that they eventually stopped showing up, but that's okay. We want to surround ourselves with great people that are willing to work hard. And in return, I keep going back to this point, in return for working hard, there is a substantial reward there. I mean, we don't, we don't, a lot of times you hear people talk about hire. somebody and you know for this position it's a it's a 25,000 year job or that's a 40,000 year job and for us it's we try and create as many jobs as possible where it's you can make

whatever you want to make. It's you know we always sell our rental agents you cannot outrent us because you know as soon as uh and you'll you'll find this crazy but one of our earlier conversations earlier this year was when our when our rental vacancies are down below 4% we're not buying enough houses. You know, we have, we, our rental agents have become so proficient at what they do that they're, they're out renting us. So it, that's a sheer sign of get more houses bought, get more houses sold, get more houses rented. Go ahead. Well, you know, yeah, so what are these, what are these rental agents doing to attract tenants? Are they putting ads in the phone, you know, with a phone book or the newspaper? What are they doing? So 75% of our rentals, um,

come from two areas, one drive-by. And that's by far our biggest, lead generator. You know, when you see four signs lined up in a house, you pretty much know whose house it is now. And, you know, we're not spread out throughout the city. You know, we're, we're concentrated in areas that we like to invest in and we like to manage it. So, you know, we've cut the city down into about a third. So we manage and own and operate in about, you know, a third to half of the city. So, you know, we're managing so many properties now that when you're talking about a 4% vacancy, you're still talking about 80 properties out there that have a rental sign up or those four rental signs up in them. So we get a lot of street traffic. And if somebody

sees a house for rent, but it may not be affordable for them or it may not be the right size for them, we can very quickly direct them to one nearby that meets their criteria. Right on. So let me ask you this. I'm imagining seeing four signs and I'm like, what the hell is going on here? I'm like, there's four different phone numbers, four different names. you know, as a potential renter, I wonder, you know, is there any confusion there for those guys? And when you guys get people calling who are not familiar with you, does, you know, is there like, hey, what's going on? There's four different people renting this house.

Or do people think it's kind of scandalous almost a scam? Four have four signs. What's up? Well, you know, that hasn't been said to us. I'll put it that way. We haven't anybody come in and say that to us. But one of the things that we really, really do, and you may have kind of picked up on it for me saying that, is that we have a lot of accountability. We do a lot of training within our company.

So, you know, those phone numbers, it's not somebody picking up the phone and saying, you know, hello or, you know, yo. They're answering the phone as premier property management or, you know, we have one young lady that actually with not. I'm not going to say with our help, but she's just gone out there and she's now an entrepreneur herself. She started her own rental company that is an independent contractor for us as our management company. So if you follow everything I just said there, she went out and she said, I can rent so many houses that I can actually afford to hire people and start my own company. It's called Memphis Rentals or something where she goes out and she rents house. So her, she has people now to answer the phone as Memphis Rentals. And they come out, they look at her properties.

everything is from that point becomes premier property management our company but it's very actually these the people that we have doing this for us they're very professional um and the signs i will tell you that we don't have just this core plast signs and out there on a bandit sign stand we have a you know black metal um riddle signs it's almost like a it's a it's a it's a rittle stand it's much like a for sale sign would sit in so it's you know you want to we want to try to make it as uh appealing and as professional as possible, but we don't want to remove the competitive atmosphere. And there's a lot of debate in our company that the bigger we get, that maybe we need to make changes. But, man, I tell you, why change something that works as well as this system does? And it is funny. It's

funny because the one thing we do get told Josh, now people, they recognize four blue signs, Premier Property Management. Yeah, yeah, yeah, that's cool. Real quick, I'll jump in. I noticed in my area, when I tried to call some property management companies a few, years ago. I was thinking about getting property management instead of doing it myself. And every single one of them answered the phone with, hello. I mean, that was just their answer. Was it with that accent? Yeah, it was exactly. It was like old, like, yeah, like angry, you know, like I hate the world. Right? Yeah, yeah, exactly. Hello. Ross. Yeah. And so I just thought if I could, if I could answer the phone, I would be one step above all these people. Oh, man. You know, I've talked a whole lot in the past

about basic customer service. And it's amazing how low the bar is to be really great. Yeah. I agree. Yeah. And the way you answer the phone, Brandon, that's a great point for anybody listening out there. Because no matter what you're doing in real estate, no matter what your business is, man, the way you answer the phone, the way you react to that very first phone call, the very first depression, man, it means so much whether or not you're going to be successful. Yep. Definitely.

Definitely, definitely. Well, let's talk a little bit about tenants. What would immediately disqualify a tenant from renting from you guys? They're breaking a lease with someone else to come rent from us. I'd say that's a great one. That's an immediate disqualification on our part. And let me put that in the point. That's an immediate red flag.

You know, that's something that we would have to think long and hard. but I can't imagine a scenario where we'd rent to somebody that's doing that. Yeah. Yeah. And that's, you know, it's interesting. That's one of those out-of-the-box things that, you know, people set up their own criteria, obviously, within the law. But, you know, that's a really good criteria to have because, you know, you know,

you know, if they're going to break somebody else's lease, well, you know, shoot, you're next. Hey, look, it's, you know, you can go back. And the reason why I kind of qualified that a little bit is because there's always a reason for everything. You know what I mean? And so, whether it's a bankrupt. or it's a eviction or it's a, you know, or breaking a lease, there's always a reason for it. Now, whether or not they can make us feel comfortable, that's a different story.

But, and most of the times when somebody's breaking a lease, they're not going to be able to make us feel comfortable. But if they come to us and say, you know, we can verify. You go to their house and they've got missing ceiling and water dripping in there and, you know, somebody won't come take care of their house. It's a bad landlord. That's a scenario we'd probably work with somebody. Oh, sure. So a couple months ago, I wrote this guide called, it was like the ultimate guide to tenant screening.

And I think I wrote like 6,000 words on how to screen a tenant. But I'm curious, and I'll link to that in the show notes, but I'm curious your process. What do you actually look for then in a good tenant? What's the most important things? Most important thing. I want to know what their job and their job history are. So, again, there's not a lot of construction going on in certain parts of the country. So if you're renting in certain parts of the country and you've got a guy that walks in, he's a bricklayer.

And that is his trade. And he's been a bricklayer for a long time. Maybe he's independent. And but what he can tell me he makes and he's renting at the top of the level. So he's renting, I mean, this is the maximum rent he can afford. I may struggle to rent to that person. You know, I have to think long and harder. I had a lot of conversations about him because, you know, his industry or his income is tied to an industry that's hurting.

So that's something I really look at. Where are they employed? How long have they been employed? And what's the likelihood that they're going to stay employed and continue to earn at that level? And it doesn't mean I wouldn't rent to them, but I may encourage them to rent at a lower rate. That's a great criteria. And again, I think that's something that a lot of property managers, I think, you know, I've had a lot of experiences, most of them bad with property management. And as we talked about, the bar is so low when it comes to this.

And, you know, if you could find somebody to look at the big picture like that, I mean, it seems like it's just so important. Well, and you got to remember that my business, my property management business is tied back to my turnkey company. I mean, so it's got to kind of remember that when we're making decisions that and the way we're setting up our property management company, it's, it's much more bigger picture. And so, Josh, we, it's important that we don't have failure. And so we don't want investors to fail. And one of the best ways to help an investor make sure they don't fail is to help their tenants succeed. You know, don't let the tenant fail. So if you've got a guy that wants to rent a house and they've fallen in love with it, but it's too expensive for them, the one month's rent and the 9% income and all it, it's not worth it.

It's not worth it to the hassle that it's going to mean for that tenant, which is your client. And also the investor somewhere that owns that house, it's just not worth it to them. So it's much better to set everyone up for success from the beginning. And when you make a habit of doing that, you build a business over time that just works that way. I mean, it just, you know, I guess that's the best way to put it. You have to set everyone up for success. And when you do, your business will grow. Yeah, that's great, great, great, great, great advice.

All right. So let me step that up a bit here. I'm an investor. I have a property management company, and I have got a property that's sitting for one month, two months. How do I ensure that the property managers are doing their job? Obviously, if it's not renting, then they're not doing their job to make the tweaks that need to happen, right? How do I avoid not getting in bed with those guys?

How do you screen the managers? And I think Brendan and I kind of talked about this before. hand. We really want to talk about this a little bit. I know you wrote a really brilliant piece. I was maybe earlier this year or last year about finding screening property managers, one of my favorite articles I've ever read on that topic. But let's dig into that a little bit. You know, I'm biased on this. So it's kind of, it's hard to answer this question 100% Josh, because I'm not going to sit here. I don't want to, I don't want to to toot our horn or how we do things. No, no, of course. But it's just, you know, there are, I know that there are really good,

high quality management companies in every city. I mean, they do exist. I don't know who they all are. I haven't networked with all of them, but I just, you know, I know that not all of them are going to be the horror stories that we hear about. But there are certain things that I believe any investors should look for. And, you know, it's kind of funny. It doesn't, it's not real estate experience. It's not real estate license. It's business experience. You know, it's set up of their company. How many employees do they have?

Do they have the infrastructure and the network set up to, one, be able to keep me informed of what's going on to be responsive to me and to the tenants? And these are, again, in my mind, these are just basics. These are things that, unfortunately, they're, you know, property management companies and they've dug their own or built their own reputation have oftentimes been kind of gone off the the idea of stay small, keep it all as a as an attitude. I don't mean stay small as in rentals. I mean stay small as in staff. And I know I know some guys that are managing the same number of properties we are and they've got, you know, three, four people

maximum on their staff. But they have vacancy rates in the low to mid teens. They have turnover about every, you know, six to eight months. And, you know, for some reason, whether it's location or whatever, the people, they accept that. So what are then, you know, we can go through the whole thousand questions. We could go on and on about it. But, you know, say I'm somebody who's going to hire property manager. Give me, give me like two or three key things to ask that property manager that I could use to screen the bad guys out and find somebody who's potentially going to be at that level of

professionalism that's going to kick some backside. Okay. So everybody, every property management company out there is going to talk about their vacancy rate. I mean, that's, that's going to happen because it's a number that anybody could pull out of their backside and say, this is what it is, or this is, you know, and whether they know it or whether they think it, it's, it's one those numbers that people tend to throw out fairly quickly. Don't ask them that. Ask them, what's their average length of stay? What's their average length of stay? Next question to ask them is, how many properties are they managing? And then the next one to ask them is, how many properties did they rent last year? When you have those three pieces of information, what you have in front

of you now is, are they a good company or are they not a good company? Because if they tell you that our average length of stay is two, three, four years, okay? And, and, and, you, and, And they have 100 properties under management and they rented 50 last year. What's their average vacancy? What's their average like the stay? I mean, do you know? At that point, you do. And I'll tell you how you know that if somebody says-

Were you waiting for an answer? Yeah, well, that was a rhetorical question. It's my birthday. I don't do math on my birthday. They've got 100 properties. And I probably lost some people that. I want to make sure I don't do that. They've got 100 properties.

They rented 50. That means they turned half of their portfolio. in one year. On average, they'll turn the other half the next year. That means your length of stay on average is going to be less than two years. It's a quick little way to find out, do these guys, you know, what kind of service are they offering and what kind of service are they doing for their clients? And that client being that tenant over there.

Some of the other questions I would ask, obviously, is how many people do you have on staff? What are their job descriptions? What are their roles? What do they do for you? then what should be very important, I think, to every investor out there that owns a property is going to have a management company, whether they're in town or out of town, is how responsive are they to the tenant? So ask a question of, tell me about your tenants.

Tell me about your relationship with your tenants. And you're going to get real quickly, if they have empathy, which is required, if you're going to be a successful business that deals with people, or do they have a, apathy where they could care less. It's just, it's a business transit. It's just some dude that's coming in and dropping the rent off. And, you know, and you'd be surprised at the number of management companies that actually hate their tenants. Yeah.

They hate doing it. They hate dealing with them. Yeah. And I'm going to tell you, as an investor, if you find somebody that's that way, you don't want to do business with them. Yeah. You don't because they're not going to keep your properties occupied. They're not going to have a good reputation. they're not going to have a long length of stay, a longer occupancy.

And there's a higher probability that the way that they operate is, look, I'm good with people moving out. The more they move out, the more money I make. Well, let's move on to our last little section here. This is something we started a couple weeks ago. Yeah. Got really good feedback. So we're going to, we call it, I guess, the fire round. Fire round.

Yes. Fire around. We're going to just ask a bunch of quick questions, and you're going to fire answer those questions. So if that's cool. Awesome. So, yeah, why don't we just start? We're going to stick on the management topic for a little bit here. Section 8.

What are your thoughts? No. No. Why? Yeah, I'm going to ask why, too. Strictly, guys, this is strictly just my city. Every property is available for Section 8, but we generally rent them well before Section 8. section 8 ever comes around to them.

Only, that's just strictly our choice. We are so good at what we do, and that is a little plug, that I don't need Section 8. Okay. Okay, cool. What are your thoughts on renting to tenants with pets? I don't like it.

And I especially don't like it when they don't tell us. If they don't tell us, they're evicted. If they tell us, it requires a higher deposit and an approval of the particular pet that they're going to put in the house. So you interview the pet? We want to meet the pet one-on-one. No, we want to know. I do want to know what kind of dog it is.

So there's certain vicious breeds that we have a policy that we will not rent to. And depending on the size of the dog, depends on the size or the cat, is how big the pet the boss it has to be. And it's automatically forfeited from the front. And what if it was like a cat person like Brandon who's got like 17 cats? I have three. Probably, probably. not going to happen, but I can't say for sure. We don't have a policy, but it's...

He won't rent to you, Brandon. It's going to be questionable. I'll sneak them in. It's going to be questionable. Yeah. All right, cool. Well, how do you deal with problems? You already said eviction for, you know, that,

but let's say somebody you expect them to be a drug dealer. What do you do? I expect them to be a drug dealer? Suspect, yeah, suspect. Yeah. All right, if I suspect them to be a drug dealer, we're going to get the authorities involved. It's not, we're certainly not going to do it ourselves.

It's going to be the authorities are going to get involved. If the authorities come to us that they've got a case working against somebody that's occupying one of our properties, the law has a, a, a, a, met or what is it, a process for you to go through. So we just follow the, the law's process and evict them. Okay, got it. Tenet calls and says, oh, Chris, I'm going to be a week late on my rent. What do you do? I asked them for the exact date and time they'll be in, the exact amount that they're bringing in.

I confirm it with them. I make them repeat it back to us. And then we'll send them an email confirming that this is what they told us. And then we update our notes and prepare to receive their rent on that day. Okay. And do you charge a late fee still? Absolutely. Now look, the question you just asked, if they're being proactive, you bet you're, yeah, I'll work with them.

If they're, if they violate that, they're, they're, uh, more than likely going to be taken to what we call an eviction court just to get that process started. It doesn't mean we're going to evict them, but we're certainly going to let them let them know that we're not going to, we're not going to let them make an appointment with us to pay rent and then not keep it. And for me, nine times out of ten, they don't ever tell me proactively ahead of time. They just disappear and I never hear from them until I issue a three day. I don't know if that's like that for you, but it is different for us. And only because, you know, we as a management company, we put a heavy, heavy emphasis

on relationships with our tenants. So, yeah, we have, well, I think we did, last year we did a dozen evictions and we managed 1,500 properties at the end of last year. We only had a dozen evictions the whole year. A lot of that goes to just a very, very open relationship. The other side of it, too, guys, you're late. The day you're late, we're starting to let you know about it.

And we, you know, it's all right in our ability. We will let you know every day that you're late until you make arrangements with us or get it paid. Yeah, yeah, that's great. And really quick, you know, Pete Gardini, who used to write for us a lot, he had a saying about training your tenants. And I think that's kind of what you're talking about, you know, beyond just the relationship. And we're not talking about demeaning your tenants, but literally training your tenants to know and understand what are your processes. How does it work? This is what happens

upfront before the dotted line is signed, right? Yes. Yes. Before the dotted line is signed. And it's a, I'll tell you, Josh, real quickly. It's respect. You show their respect and you expect them to respect you. Cool. Cool. Switching gears a little bit here. What statistics should somebody look for when deciding a good city to invest in? I personally like the economic side of it. I like, you know, jobs, companies moving into the city. What are the industries that provide most of the jobs for the city? Are they dying industries? Are they growing industries? For me personally, I just like, I like the economic side of it.

Right on. All right. For the young guys listening, what should someone who say 23 just out of college do to get started in real estate investing? I tell you what, man. I would find one or two things. I would either find somebody that has some really good experience and go to work with them, offer to, you know, again, almost like a mentor, mentee type relationship. I'm going to work for you, but let them know up front that I may want to do this on my own fairly soon.

that would be my biggest thing. Get out there, let people know that you're willing to go to work with them, have them teach you the job, have them, you know, pay you a little bit of money, but get a whole lot of knowledge in the meantime. Right on. Is it smart to purchase an investment property before your first primary residence? Sure. I mean, why not? You know, the, there's nothing wrong with, I guess here's, there are two different things. One is an investment almost for my business. standpoint and the other one is an investment from a personal standpoint. So look, if you aren't ready to settle down, if you're good with condo living or apartment living or renting, man, get out there and invest in those houses. It only helps you buy something better later on down the line

if that's what you're hoping to do. There you go. What color should you paint the exterior on a rental property? Exterior? Exterior. That's the outside. These questions all came from the forums. That's why this one was in there. I thought that was an interesting, it's a very wide open question. I also saw on the forum, somebody said that they hated tan, the color tan, but I will, and there was a whole big discussion about it, but I'll tell you that any of those types of neutral style colors, whether it be a tan or a light yellow or, you know, something that adds some contrast and allows you to put a nice, do good stuff with the trim, the face of the softet, come with a different color of the of your guttering.

I mean, things that allow you to put some contrast between the curb and the house, I think works really well. So I wouldn't go with any crazy colors, but, you know, those neutral tans, that kind of stuff, that tan family works really well. Cool.

Earlier you said about in Memphis, you're, you know, a third to a half of the city you're investing, or you're managing in. How do you decide what neighborhoods to focus on? Right now, it's from experience. So, but when we first got started, we were looking for a rental rate that was above the median rents for the city.

So, you know, if the median rents in a city you're in is $600, I was looking for $650 and above. So I wanted to get the higher end because I knew the demand of what I was looking for was from that style of a property. So that's what we did. We looked for areas and neighborhoods where the rent rates were above the median. Nice. Nice. All right. And for the last one, a person owns a house. They owe what it's worth and they want to move. Do they rent it or sell it? That is absolutely a question that's based on what you can rent it for. I will tell you that I regret not keeping every house I've ever owned. I look back and I wish I'd kept every house I'd ever bought and just rented it out. But I didn't. And I've sold them all. And the reality is that I have never made money, a lot of money anyway, on any of my, you know, selling the properties.

So if you can rent it and either make money or it becomes an expense that's small enough that it just fits right into your monthly budget, I mean, I would rent it and keep it. There you go. That's just me. Right on. Right on. Well, and that brings us to the next segment. which is our famous

four. Come on get in on that, Chris. Like that, Chris? Come on. Do it. A three-person harmony probably wouldn't sound as good

as y'all's two-person harmony. And we do sound pretty good. There is nothing harmonic about what we're doing. Nothing. I'm just, I'm speechless at this point, which is hard to make me.

All right, Chris, famous, famous, favorite real estate book? Favorite real estate book? Uh, wow. That's a good one. Um, I like Frank McKinney's, um, God, I can't think of the name of it right now. Uh, you know, it slips my mind. Make it big by Frank McKinney. Is that it? That is it. All right. Make it big. And the 40, 40 secrets to success or whatever it is, it's 49 secrets to success. I just, I love it. Excellent, excellent book. Cool, cool.

And you can get it for a penny on Amazon, actually. There you have. You think so. All right, favorite non-real estate business book? Rework. Oh, me too. Rework is, I think that's a great book. I love it.

Hey, I just want to tell a quick story here. When I met Josh, you know, I went to his house, I don't know what, a few months ago, I left rework sitting on his desk and said, Josh, you need to read this book. How are you liking that book so far, Josh? Hey Brandon, I've opened it once. Good. I turned a couple pages. Actually, that's not true.

I've probably opened it two or three times. I've moved it from my dresser, my couch to my dresser. Yeah, I haven't had time, man. Nice. Well, now we're both on you. Yeah, thanks. Wow. You called me out.

It's fine. I'll get you back. All right. Well, that's my question. Oh, yeah, your question. Go. Yeah. Do it.

Chris, hobbies. I know you've got a great, nice, great big. family. What do you like to do outside of real estate? So yeah, I've got four, four little kids. So I do a lot of stuff with them. I love coaching their little teams. I was real big into soccer. So I coached, that was my original job. I thought that was going to be my profession was as a professional soccer coach. So I love playing soccer, love coaching. I do a lot of stuff with the kids, still run. You know, so. So that kind of stuff. It's just getting outdoors and having lots of fun, but doing a lot of stuff with my family.

Cool. All right. Final question for the day. What do you think sets apart successful investors from those who never really gain traction? I'm going to tell you that for me, I think that's a very, very easy question to answer. And it is who you surround yourself with. you know if for a successful investor the difference between them and someone who's not is almost always who they choose to surround and spend their time with spend their energy with spend their mind with it's going to be entirely who you surround yourself with and i'll add one last little thing and it's luck you know if you if you surround yourself with great people mixed with a little bit of luck you're going to get there. Nice.

Absolutely. And you create your own luck also by a lot of other things, but I agree with you completely. Well, it's one of those things that you're exactly right, Josh. And if you've got the right people around you and you're in the right position, when luck happens, man, I mean, you can take advantage of it. If you know, sometimes you miss it. One of my favorite quotes is that the harder I work, the luckier I get. I don't remember who said it, but I always like that. Yeah, no.

And it's true. So to the question, yeah, the one. thing. It's who you surround yourself with. That's great. That's great. Well, listen, Chris, thank you. Thank you so much for taking the time to be on the show. We definitely appreciate it. Lots of great tidbits. And we hope the listeners got a lot out of this thing. And me too. I really enjoy it. You guys, both of y'all, you know that I believe in what you're doing. I love it. And I wish y'all the absolute best of luck through the rest of this year and on it to the future. Well, thank you, Chris.

All right, everybody. That was our interview with Chris Clotheier of Memphis Invest and Premier property management. It was a really good show, Brandon. It was. Definitely. I'd say actually one of my favorites because, you know, Chris is, you know, really rocking the business side of things. And I think that's, you know, we focus a lot on the real estate side, which is important. But when you're trying to build a scalable business and you're trying to get bigger, you have to definitely keep an eye on the business side of things. Yeah. Yeah. There are a lot of great tips and I thought it was fantastic. And definitely one of our higher level shows, which we're certainly going to be doing more of as well. Yeah, cool.

Awesome. Awesome. All right, guys, well, you know, otherwise, listen, thanks for checking out the show. Be sure to like us on Facebook at Facebook.com slash bigger pockets. Twitter at Twitter.com slash bigger pockets. Gplus at some really long string of things. Just look up bigger pockets and you'll find us. Check us out on LinkedIn.

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partners, things like that. So make it happen. Thanks again for listening. Show 26, Bigger Pockets podcast, Josh Dorkin. I'm out of here. You're listening to Bigger Pockets 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. Here to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online.

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