BiggerPockets Real Estate Podcast - 343: Using Checklists and Systems to Get More Done in Less Time with Pilot/Investor Steve Rozenberg

Episode Date: August 15, 2019

Want to build a cash flowing portfolio while working a full time job? Today’s guest did just that! Steve Rosenberg shares his incredible story of how he built a huge property management company (along with several cash flowing rental properties) while working as an airline pilot and travelling the country! Steve has a genuine, straight forward style and shares what he did wrong buying real estate, where he learned what his strengths are, and how he and his partner resurrected a dying business. Steve also shares how he learned why systems are so important, how he learned to build them, and which systems he uses in his own business to save time, make money, and scale! Steve shares some of the most painful lessons he learned through failure so you don’t have to learn them yourself. This is an episode you definitely want to download today! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast show 3.43. I can get in the cockpit with any other pilot that I've never met. We can sit down. He has his systems and flows that he does. I have mine. We run the checklist. And it's like we've been flying together for 30 years, even though we've never met. Because everything is so systemized.

And that's why planes don't crash. Yeah. Because we don't even move, flip a switch unless we're pushing a checklist. 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, everyone?

This is Brandon Turner, host of the Bigger Pockets podcast here with my co-host, David Green. What's up, buddy? Not much, man. It's another beautiful day. I'm kind of wishing I was out there in Hawaii hanging out with you and all these cool real estate investors. Yeah, you know, you'll have to do that some time. Yeah, we just got done, wrapped up a, some of a mastermind weekend with a bunch of really great investors, including the gentleman that we're interviewing today. So this interview that we're going to get to here in a moment,

actually we recorded it in person. Well, me and our guest were in person. Dave was over on the recording, I mean, I don't know, the computer screen, which was actually kind of fun. So if you want to see the actual like three camera angle, like high quality video, you can check that out on our YouTube page, BiggerPockets.com, slash YouTube, or YouTube.com slash bigger pockets.

Both should get you there. Anyway, Steve is, Steve Rosenberg is our guest today, a fantastic real estate investor, an airline pilot who uses the methodology that an airline pilot would think through, like checklist, processes, systems, and he applies that to his real estate business.

So he's built up a really amazing business, both in real estate and property management, that takes very little time out of his actual life because he still has an actual career besides real estate. So really phenomenal interview. And just one of the best. best people I've ever met. I mean, Steve is just a phenomenal guy. So I'm excited for that. But before we actually bring him into the interview, I think it's time to get to today's

quick tip. Today's quick tip is short and simple. We publish all of our podcasts over on YouTube. Like every one of our podcast is actually also on YouTube. So be sure to subscribe to our YouTube channel as well. In fact, sometimes the YouTube videos are just a little bit different than our podcast, not usually too much, but a little bit. And then there's like 10 times more content besides the podcast over there on YouTube. And Zach, who's running the video platform of BiggerPockets has been just doing a really good job of organizing more and more and more great high-quality content over there. So make sure you're following us. You're subscribed to our YouTube channel and check it out there. Oh, one last thing. I don't know if we

mentioned this, but we are transcribing every podcast as well on the show notes page. So for example, today, if you wanted to read the transcription of today's show, to go to biggerpockets.com.com slash show 343. All right, and that was our quick tip for today. Do you ever notice how every passive investment somehow turns into a very active lifestyle. Active spreadsheets, active phone calls, active stress. Here's a better question. What if you could buy brand new construction homes, 10% below market value in the best markets across the country without making real estate your second job? That's exactly what rent-to-retirement does. They're a full-service, turnkey investment company handling everything for you. In some cases,

investors get 50 to 75% of their down payment back at closing, plus interest rates as low as 3.75%. They've partnered with Bigger Pockets for over a decade, helping thousands invest smarter. If you want to do the same, visit BiggerPockets.com slash retirement to learn more. For decades, real estate has been a cornerstone of the world's largest portfolios. But it's also historically been

sort of complex, time-consuming, and expensive. But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Fundrise flagship fund. Now, you can invest in a one, 1.1 billion dollar portfolio of real estate, starting with as little as 10 bucks.

The portfolio features 4,700 a single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns and start investing in just minutes. Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship Fund.

This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. A lot of property managers think their job is answering tenant emails and coordinating repairs. That's not the job. The job of a property manager is protecting and growing your operating income and earning your trust while they do it. And that comes down to three numbers.

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hire one that manages your investment like an investment. And now it's time for our interview with Steve Rosenberg. All right, Steve, welcome to the show. Good to have you here, man. Thanks for having me. Appreciate it, guys. Yeah. So, all right.

So let's get into your story, your journey, how you got into real estate. I know you still work. You're a pilot now, right? I am. So what I find fascinating and we'll get into this is how you're able to do that while working a job. And I know you've done some cool stuff. Sure.

Let's go very beginning. Well, I would say, you know, at first I never even wanted to be in real estate. I didn't know anything about real estate. You know, my life growing up, grew up in Southern California, and my life was always I wanted to be a pilot. You know, a little kid, see the planes in the sky, it's what I want to do.

And so I was one of those people that really worked really hard, overachiever, whatever you want to call it. I got hired real young with the airlines. I got hired at 25 years old with a major airline. And best job in the world, right? So I get shipped out. I'm flying out of Guam in the South Pacific, flying all over Australia, Asia, and then August of 2001, I moved to Houston.

Obviously, a month and a half later, 9-11 hits. And basically what ended up happening was the safe, secure job that I thought I had being an airline pilot actually proved to be the most unsafe, most unsecure. Because the illusion of me being basically untouchable because I had this airline job and I'm in a union and, you know, pension and contracts. September 10th, I had the best job in the world. September 12th, I had the worst job. And September 13th, I was given a furlough notice saying, thanks for playing.

But basically, we don't need you. We're cutting contracts, pensions. Good luck. And so you realize that, you know, when you're, when you're so specialized in a field, there's not much other things that you can do. You don't have any other talents because you've been focusing your whole life on this one skill. And so it really is a point that you have to actually do a self-check on yourself to go,

man, you know, did I make a big mistake of this? Everybody told me this is what you do. You know, this is what our parents did. This was, you know, you get a job with a big company and now it's gone. And it wasn't like, you know, when you're dealing with situations like an industry turning, let's say oil prices are turning and, you know, oh, they're laying off. This is coming. I need to prepare for it.

This was in a matter of 72 hours from the best job to nothing. And so it really made me realize like, man, I need something else. And I don't know what that something else is. And so it took me about probably about three months just to get my head around the fact that I did not have a safe, secure job anymore. And for people that remember that time frame, all of a sudden we had foot and mouth disease. We had SARS, Asian bird. I mean, it was like the locusts were coming next for the airlines. I mean, it was.

And so, you know, it was more and more impactful for me to realize that I needed something else to do. And so I started reading books just to kind of get an understanding. And everything kind of gravitated towards real estate. everyone that was wealthy at some level was tied to real estate. I thought, okay, well, I'll go down this path of real estate. And I started just reading books. I read a book a week on real estate, just devoured it. And I think because at that time, I'm 29 years old, and I thought, man, I'm behind the curve. Like, I've been going down this wrong path, and I need to make a hard correction. So I need to do as much as I can. Because if there was another attack, another, you know,

anything else that happened, I would be out of a job. And not only out of a job, but I'd be out of a job with about 100,000 other people just like me. So now where are you going to go? And at the time, pilots that were losing their jobs were going over to Asia to fly. They were going down to South America. And I'm thinking myself, I don't want to do that. Like, I don't want to run to save onto this dream. If it's not there, it's not there.

And so I just started learning more and more about real estate. And I started getting in doing wholesaling back then. I was flipping, not flipping, wholesaling option contracts and stuff like that. Can you explain what that is for those who might not know what wholesaling is? Yeah, sure. So basically, I would find somebody that couldn't sell their property and I would go ahead and put an option contract on it, which is basically a one-way contract that they have to sell it, but I don't have to buy it. And then I would go and I would find a buyer and I would basically marry them up. I had equitable interest. I had money in the deal. Maybe it was $10. Maybe it was $20, depending on the day. But I would basically put them two together and then I would make the difference of what I got the option at and to what I assigned the new price at for the buyer. Yeah. And so basically, you're basically putting them together and you're making the difference between the two. And it's a good way to make money.

I mean, now it's obviously everybody does it. Back in 2002, 2003, it wasn't very known. But it's a job. I mean, you know, you're constantly putting people together. But I was using it as a means to learn more about real estate, understand verbiage, understand terminologies, and just get a lay of the land and also build up money. And so I ended up building up enough money that I bought an apartment complex. So I went into partnerships with another business partner of mine at the time.

And we went in and we bought a 39, I think it was a 39 unit apartment complex. And it was funny. So the grass is greener. He wanted to learn what I was doing. I wanted to learn what he was doing. And so he's like, hey, if you teach me. And I'm like, hey, if you teach me. And so we basically did that.

And we exited that deal of the apartment complex. Turns out a church bought it. The church next door bought it from us cash. Wow. Because it was a landlock scenario. And it was a C complex. in an A area that was being regentrified and stuff in Houston. So I want to dive in a little bit because I mean, that's, I guess, I don't know,

courageous, bold, whatever the words, like to go from like, I'm doing wholesaling of these houses. Yeah. I'm going to go buy a 30, 39 unit apartment. Like, that's a big jump. First of all, let me back in before we get there. Do you recommend wholesaling? I mean, you said it's a good way, job, but it's a job.

Do you recommend that today still for newbies that are listening to this? Maybe, hey, go learn wholesaling or would you actually recommend starting somewhere else? You know, the one thing that I've learned about all these different things is a lot of people, they get into a, these are strategies, right? So buy and hold is a strategy. Flipping is a strategy. These are all strategies. And if they don't have the end destination of where they want to go in life or as a result of that, it's like saying, should this person get on the freeway and start driving north? Well, where are they going?

Yeah. And so to me, it's a good way to make money. It's a good, it's a good strategy to get you to a goal. as long as they can identify what that goal is and where they're going in their real estate life. So if they can't tell me this is what I want out of flipping and wholesaling through, then I would say maybe they need to identify that a little bit more before they just jump in. Because now they did as they bought a job, right? Now they're busy.

They're working. And don't get me wrong, you can make a lot of money at it, but it's very competitive now. There's a lot of people doing it. It's kind of the buzzword. So I don't think it's wrong. I think what's wrong is people get into it without the strategy to the end. End destination. And I think that's the challenge people have. Yeah, that makes a lot of sense. So, Steve, I really like what you mentioned about meeting an end destination. In fact, that's

where a lot of people, they don't ever actually sit down and plan that. In fact, I think a lot of people are surprised that they're actually going to be successful. They find themselves successful. They're rapidly trying to keep up with their success. They don't know where they're going. Do you feel like you've got that mindset from being a pilot and part of a flight plan? You always have to know where you're going and how you're going to get there? You know, that's a good question. I wish I could say yes, but the reality is, is the answer is no, because the second half of my story is after we sold the apartment complex, we started buying a bunch of low income properties. And we got our butts kicked.

And we bought, within about a year, we bought about 20, 20 in about a year. And all of a sudden, we had a lot of problems. And I mean, you know, these people called tenants started calling us, right? They wanted things fixed. They couldn't pay their rent. And nobody ever asked me, why are you buying those properties? Those do not align with what you want out of life, meaning properties that cash flow appreciation.

These may appear to cash flow, but the way you want to run them as a passive income role is not going to work because, again, we didn't do that. So I learned by my mistakes. And one of the things I talk about a lot is, you know, you can learn a lot by seeing how other people fail and what they make of the things. failure. So I wish I could say that it was a strategy, but the reality is, back then, there was no bigger pockets, right? There was no one to talk to to say, what should I do? Where am I going? And if I would have had that, if somebody would have asked me that one question,

like, what is this, why is this strategy going to get you to where you want? I would have said, I don't know where I want. And I think that would have queued something to go, well, maybe you need to think about that before you start putting your money on stuff. Because my thought was, I've always been a hard worker. I'm a grinder. And I thought, well, if 20 didn't work, let's buy more. So then we buy 35 of these or 40 of these things. And it was like gasoline on a fire. I mean, it was unbelievable the problems we had. And it was, I mean, if I didn't have the airline job, I probably would not be able to be financially able to sustain the losses. I learned a lot of valuable lessons. And that's why I'm such a huge proponent of telling people like, look, don't make

the mistakes I made. Like, do this the right way. And, sharpen the mental acts before you start swinging. And so because I've touched that hot stove and I've been burned. And so that I wish I could say I was smart enough to say I had this plan and this master strategy, but I really didn't. Well, I want to know more about this. So like the apartment complex worked out okay, right? Yes, it did.

So that worked out good. Probably gave you some confidential. Like, oh, I got this. We're the smartest guys in the world, man. We just sold an apartment complex. Yeah. We got this. So you jumped from that.

And then you bought, you said 30 or something like. Yeah. So what was going on is, is I was still flipping. properties because I had a good system down for it. And we'll talk about systems later. I had some pretty good systems around it. And we started seeing the market turning a little bit where this was 2007, 2008, where all of a sudden people were not able to get as many loans. So we were noticing that it was slowing. So we thought, why don't we just hold some of these properties? And so my business partner, it was still my business partner today in the management company, he says, hey man,

I found all these properties. They're like they're huge cash flow on paper. They're super cheap. They're called low income high cash flow. We can get as many as we want of these things. And I'm like, well, we just, we're flush with cash. We're the smartest guys on the block, man. We just sold an apartment. Let's roll. And one of the lessons I would tell people is that is a different business strategy. And I never thought that there's, I never thought that there was a business strategy to begin with. But more importantly, anything you go into, you've really got to map it out to make sure that you have the strategy for the end goal. And we just went crazy like, you know, two kids with money. We're just buying stuff, buying stuff.

And again, that was a big problem that you think you're smarter than you are. And that was a problem with us. Why do you think those low-income housing? Because a lot of people, they get really excited about the cheap, really cheap rental houses. You know, like back in the day, Josh Dork and the other host on the show would make fun of Detroit all the time. It was like a running joke forever because you buy a house for a pack of smokes in Detroit. Yeah. What's wrong with those?

Like what went wrong? Well, so I could tell you what we did wrong. And from managing them, we were kind of the ghetto kings for a while because everybody said, well, we're just going to hand them to you to manage in your management company. So we got to really understand the dynamics. First of all, the one challenge is the tenant in general is a month-to-month mentality tenant. So right out of the gate, you have a tenant, let's say the rent is $600 a month. If you, you know, when you start doing this on a large scale, and I'll talk about the state of Texas.

I don't know about other states, but in the state of Texas, anything over four units, you are basically in the same pool with fair housing, discrimination. So when you charge one tenant late fees, you have to charge them all late fees. You can't let them slide. So all of a sudden now, we can't let this tenant slide, but these tenants are month to month. And so now you have late fees. The late fees are almost as much as half their months rent. So what do they do?

They skip. So our average tenancy was eight months. Our make ready costs were three times the amount because when the tenants, left, they would take a lot of parting gifts with them. Yeah. Wiring, air conditioning, light bulbs, I mean, plants. And so we realize that it's not that it's not that the model doesn't work. It's that the model didn't work for the way we were trying to run it.

So low-income properties are great. And I tell people, it's not that they're bad. We were trying to be hands off and run it systematically where they all paid on time every time without any, you know, without any variances. And I think that is where it's as you want to scale that. I think that gets harder and harder. Yeah. Because if you don't, what a lot of people don't realize,

and, you know, one out of three landlords are in a lawsuit every year for some kind of fair housing discrimination law, they don't realize that they're breaking laws by letting tenants slide on late fees, by not charging them. And, you know, one thing that I had learned is that a lot of landlords, and again, I did it. I'm sure you guys have all done it where, you know, you have a tenant that you let them slide on their rent,

well, a lease contract, and I'm not an attorney, but a lease contract, it's a bilateral contract, meaning if they don't perform, meaning they don't pay the rent, you have to perform and you have to enforce that contract, meaning if it's in the contract that you're charging late fees, you have to do it. And so again, you don't realize that what you're doing is you're actually setting a precedent that you're discriminating against your other tenants possibly, and you're putting yourself in a bad position.

And not only that, but you're putting your business, your family, your finances, because you're trying to let someone slide. So if you don't let them slide, what happens now? Now they leave. Yep. So it's this vicious cycle. So again, I'm not saying they don't work, but that's what we, we had the wrong model for what those properties represented.

And that was a mistake on our part. Yeah. There's a lot of really good stuff in there. I mean, like we could pull out a ton of just property management lessons out of that, right? I mean, just the fact that you're talking about, you know, if you let tenants slide all the time.

First of all, like, I find that whenever I let tenants slide, those are always the ones that cause me problems later anyway. Once that pendulum swings. Exactly. Once they learn that they like, if you give them out of cookie, they're going to ask for a glass of milk.

It's like that just keeps going. So we started, and you probably do the same thing as we started like because of the fair housing thing as well. A lot of people don't realize that. So I'm really glad you brought that. I'm a sure anybody ever has. It's huge. Yeah.

If you treat your tenants differently, you can get sued for fair housing problems. So don't treat your tenants differently. Instead, rely on the lease. So my wife has been huge. She wrote that in the book on managing rental properties. It's like, make the lease the bad guy. Like that way, because I'm a, I'm a nice guy. I don't like to do.

It doesn't matter. I even would, I would tell my tenants, I have to do this. Or else I could get in trouble with, you know, legal stuff. Because it blames the government. It blames the lease. It blames the state. It flames the courts. It's not my fault.

I'm just doing my job. Yeah. And everybody generally understands that. Well, and what I've learned, and not to go down this path of management conversation, but what we've learned is when you set the proper expectations in the beginning with the tenant. Yep. And we explain to them, listen, you know, we have a thousand properties that we manage. That means we have a thousand tenants and we have about 800 owners.

and everybody has a different definition of happiness. All we can do is run it down the line of what the law says. And the law is the agreement that everyone has signed. Our job is not to interpret the law. We have to enforce the contract. And we tell them, listen, this is our systems. This is what is expected of you. And I think the biggest challenge landlords have, especially new landlords,

is they're afraid to basically have that bad conversation of if things go wrong. And we're a business. And we explain, listen, this is what you can expect of us. This is when we will make payment. This is when we will fix your property. This is what is cosmetic. This is what's inhabitable. These are the things that you're responsible.

We're responsible. And then this is what we expect of you. And if you don't do it, here's what will happen. And it's kind of like when the aircraft pushes it 1201 off the gate. It doesn't matter if you're stuck in traffic or security line. It's gone. And that's just, and so you have to realize that you have to take the human factor out and you've got to run it like

a business. So what you just described right there, Steve, is exactly why I don't want to manage my own. properties. We all know about fair housing laws, discriminatory practices, but I think the majority of people who want to own real estate are due, just think, well, I would never discriminate, so I don't need to worry about that. Having zero idea of how discrimination is even defined, because as you just said, not charging somebody a late fee could be defined as discrimination. What we would consider helping somebody could actually get you in trouble if you're not offering

it to everyone else. And if you're not offering it to everyone else, then you can't have it in the lease at all. I think that for the vast majority of investors, who think I want to get into this and I want to manage my own properties, they need to start with the end in mind, like you said. Do you want to be a property manager? Do you want to have a business of property management? If so, manage your own properties, learn on your own dime. That is a great model. But if you know you don't, like me, for instance, I never ever bothered learning property management. After the first house, it went so bad and I realized this is just a terrible waste of my time. I don't want to get involved in this stuff. I let someone else do it and I never look back.

I think that's a very good point that you just made. As far as your experience, what do you think makes a good property manager? What should people be looking for when they're wanting to pick a property manager? That's a great question, which I actually answer a lot on bigger pockets for people. But I think that one of the things is, are they running a business? Meaning, to me, you know, and I'll use my airline background, everything is about systems, policies, procedures, and structure. You know, I think one of the challenges with landlords is they don't get into it thinking they're running a business.

And one of the things I explain to people is when you are running a business, whether it's one property or 50, you own a business when you own that rental property. And if you are not going in there with the mindset of having a business plan and having what is your income, what is your loss, what is your profit, who is on your team? I've never, and I don't know if you guys, I have never read a book that talks about how to become wealthy and saying this is the part that you're going to do. yourself. Everything is about leverage. Everything is about getting smarter people in certain realms to do what they do best. There's never anywhere that says this is where you should spend all your time. And David, to your point, I don't even manage my own properties. I hand it over to a company. It happens to be my company, but the point is, it's all about systems. So if you're talking to a company, in my opinion, and you're asking them questions like, what are your average days on

market? What is your eviction rate? What is the average rental property? price range that you manage. If your property is $3,000 a month and they manage $500, they may have a different way that they handle things in certain situations. To me, it's not so much their answers, but do they have the data to back it up? Because if they don't have the data, that tells me they're not running a business. And look, we know a lot of property management companies that don't run, like any business in general, they don't run it correctly because they don't have policies, structure, and they're not running like a business. And again, And we know a lot of landlords that do the same thing because they get into this thinking,

well, I live in a house. I'm renting a house. It's kind of the same thing. And I have explained them, you're buying four walls in a roof. It's the business running inside the four walls on the roof that is actually going to get you that return because, look, we all know a lot of people that bought great deals and ran them right into the ground because they didn't know what they were doing. And so I tell people, it's not the house.

It's the business running inside of the house. And that's what a property management company should bring to the table is. their business model. And I tell people, I said, if, you know, we talk about self landlords, I said, if you owned, let's say you owned 10 properties and there were $200,000 each, so let's just say you had a million dollars in assets. And some guy comes off the street and he says, hey, Brandon, I got, I've never done this before. I don't know anything about the law. I don't know how to deal with tenants, but I feel pretty good that I can run this for you. Would you hire that person? The answer is no. The problem is is we are that person and we,

hire ourselves and now we're running a business that we have no idea what we're doing. So the odds of being successful, you know, of not hearing these horror stories. When you hear these horror stories, and again, we get a lot of the landlords after the fact when they're going, man, I got my butt kicked. I don't know what to do. I'm in a lawsuit. And I'll start asking them questions. Well, what is your policy for this?

What is your, you know, I learned that if you put the right tenant in, a lot of these problems go away. So we have a very strict tenant acceptance policy. and we have a 1% eviction rate because we know that if you put the right person in, a lot more things go right after that. But if you don't have a policy on that, and again, now you're getting into fair housing and all that stuff. But it's just a way to systematize your business so that you can,

I tell people you should systematize 80% humanized 20%. If you can do that on a scheduled basis with anything, you know, whether it's using a virtual assistant or a software or CRM, whatever it is, you're going to make things a lot easier because you're able to focus on the important 20% and not the white noise 80% that really it's got to be done but it's not important. And so that long way to answer your question, David, I think that just seeing how are they running their business because that's how they're going to run your business in the rental property. That is such a good point.

Yeah. And when I think of the property managers that have had in the past who have been horrible and I think of the ones that I have right now, I have one that's really, really good right now, I can clearly see the one that's good has a very good business model. It's actually a franchise and like they have a way of running. business. They know what they're doing. It's a proven model. Yeah. And the other ones were like, I own some rentals. I can manage properties. And like, I got nothing better to do. So I'll manage yours. Yeah, exactly. And so that was rough. People love to call real estate passive income, which is

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That's Dominion Financial. Check them out at biggerpockets.com slash dominion. Again, that's biggerpockets.com Dominion. So walk us through the rest of your story. So you bought these properties. What happened after these 30-some properties that were just rough? Yeah. So it was it was bad. And basically my wife ended up coming to me and said basically you suck at buying houses. You are not good at this. Like you need to stop. And I, in my thoughts were I can fix this. Like I kept thinking, I can, if I buy enough properties, I can push through the hill. And she was like, no, you can't. Like this, you need to stop. So what we ended up doing my business partner and I, we sat down and said, okay, we have three options. One option is, is we hand these over to a management company.

The other option is, is we sell them. Or the last option is, is we self-manage them. The first option, he says, I know some management companies. Let me make some calls. So a week later, he calls me back and he's like, we got a problem. I'm like, did we buy another one? And we don't know or like, well, what happened? He goes, nobody wants them. I'm like, what do you mean? He goes, they said they'll never make money. They're always going to be a problem. And he said, we're never, it's not going to work. So they didn't want them. I'm like, okay, well, that sucks.

But now, it's 2010. No one's getting loans. Can't sell them. The last option was, okay, we need to figure this out on our own. So he and I sit down for about six months as investors and we plummet the foundation of how we would want our company to run for self-preservation. So it was about six months. We kicked out about 70% of our deadbeat tenants.

They weren't paying anyways, but they're taking them there. But so we basically said, we're going to do this, we're going to stick to it. Yeah. And so we did that. And what happened was, is we actually had other people start approaching us, other investors, saying, hey, man, you guys seem like you're fixing your problems. What are you doing?

We told them, could you manage our houses? And our first answer was no freaking way. We do not want your problems. We barely fixed ours. And then we started thinking, well, we could get, you know, we can keep buying. We can keep marching on. And so we started taking on properties. And, I mean, literally within about six months, we had about 80 we were managing.

And because they wanted to give us their problems, basically. We were looking at it as investors going, okay, well, this is how I would fix it. This is what I would do. So it was almost like we were giving them consulting. The first thing we did, the smartest thing we ever did is we went to a business coach. And we said, do we have a business? And he looked at it and he said, well, you have scalability. You've got opportunity.

You have marketability. By definition, yes, you have a business. You guys are not very smart based on what you've done. I don't know if you guys can run it. So we hired our business coach that day. Yeah, good pitch, right? Yeah. Good closer.

So for the last six years, we've had a business coach every week. We're coached. Nice. And so I think the difference. And so our company, flash forward now, we're managing about 1,000 properties in three different cities, Houston, Texas, Dallas, and Fort Worth. And we're very big in scaling. And we're very well known in the industry because I think we look at things as business

owners, not as property managers. Everything to us is sales, marketing, acquisition. Everything we do is KPIed and tracked with spreadsheets, and we're very, very detailed because it's the devil's in the details. And so that's how we've been growing and scaling. It's funny that you say that because what I found is that no matter where you start, whether you're a real estate agent, you're a loan officer, your real estate investor, you're a house flipper. When you talk to people in the very beginning of starting something, they don't even know what a KPI is. I bet a lot of our listeners don't know what that means.

when you talk to anyone that's been doing it well, KPIs or key performance indicators is like the first thing they talk about. In fact, they might tell you, like Jay Scott, he runs the Bigger Pockets business podcast. He's a big time house flipper. He probably doesn't even care about flipping houses anymore. He's running the business podcast because he learned it was business skills

that he needed to run that well. And Brandon and I have had this talk before that, and with Brandon that told me, it doesn't really matter what you do. You just got to pick something and do it because if you're good at business, if you understand these principles and these fundamentals, you can make anything work. And I know that I'm bringing this up because a lot of people that are listening, they're in love with real estate.

That's great. We're in love with real estate too. But to be good at real estate, you have to run it like a business. You have to understand business principles. And one of those that you mentioned is scalability and that happens through systems. So this systems gets talked about a lot. We throw this word around. It's always in a very general vague way.

I get asked a lot. Tell me about your systems. Can you tell us when you, you say systems, what you actually mean, and then maybe give us an example of how a system would be built and how that would save somebody time and allow them to scale. Sure. So when it comes to system, that's a great question. And let me start by saying, you know, systems and checklists are vital and they're used in

every business. We just don't really notice them or see them. They're very prevalent in the airline industry. And so as an example, everything that we do has a checklist and behind that checklist is an expanded version of what that means. The way checklists are run, which is opposite of what a lot of people think, is it's the things that will kill you that you check. It's not the, hey, sit in your pilot seat and put your seatbelt on. It's, hey, put the landing gear down when you're going to land. So it's those kind of things. And people will inundate the small details of a checklist to

where it's a lot of white noise, which is not the way you want to do it. Now, because things can be so systematized. The company I work for, there's 12,000 pilots. I can get in the cockpit with any other pilot that I've never met. We can sit down. He has his systems and flows that he does. I have mine. We run the checklist. And it's like we've been flying together for 30 years, even though we've never met because everything is so systemized. And that's why planes don't crash. Yeah. Because they, like, we don't even move a flip a switch unless we're pushing a checklist. So with that being said, when we're trying to scale our company, the one thing we learned especially when you're scaling a company rapidly, 50% of the systems and 50% of the people will break.

They are just going to break because what worked when we were at 100 properties doesn't work at 400, doesn't work at 600. And, you know, we learned our job as leaders of the company is to always be looking ahead for the bottlenecks and to figure out where the choke points were going to be coming that we could fix and see them coming. And again, it could be call volume. We're getting a thousand calls a month on our vacant properties. Didn't have that problem at 100 properties, but at 600 properties. properties, that was now a problem.

Yeah. So in any event, so what we realized is you basically, first thing you have to do, when you have a system that you're trying to figure out that's automated, you have to first flow it out. And what I mean by flowing it out is you take a basic flow chart and say, okay, Brandon, what do you do on day one when rent is due? Tell me what happens. Okay. Now, tell me what happens. What is the next step in responsibility? You may say, well, rent is due on the first and then it's late on the third. Okay. Now, what happens then? Well, on the fourth, Now something happens. Okay.

And when something happens, who does that? Who is that person? And again, when people have a business and they're scaling this out, whether it's flipping or anything, it doesn't matter. You always attach the role, not the person. You never attach anything to a person because this goes into disprofiling and having the right person in the right seat. But what you need to do is you need to make this so that anybody could walk in, look at this flow, which the flow, chart ends up going, let's say, let's say, for example, you said on the fourth of the month, notice to vacates are sent out.

That's all it is, right? And that could be a check item. Yeah. But what does that really mean? Well, what happens is, as you're doing that, you're creating a manual, a systems manual that actually says in detail, what does that mean when you send out a notice to vacate? You're going to go in the software, you're going to check to see who's delinquent and you're going to do this.

So that's the detailed version. Yep. You checking off saying sent, that means. that you know what that expanded version is. So then you're going through all these systems. And again, we've been able to do this where every, you know, the property management company, that's, we don't sell gadgets. We don't sell product.

We sell services. And those services are backed up by a lot of processes and procedures. All of those are a lot of them are tied into one another. So one, we have checklist that are cloud based and a lot of things now are cloud based. That basically one ties into the other. And so much so that we actually have people in other countries, virtual assistants that actually do the tasks. And yeah, because the reality is, is if something's scalable, right?

And if you've been able to sit down and basically, I don't want to say dumb it down, because that's not the right term, but if you can make it to where it simplified to exact, that person knowing exactly what they're responsible for on a daily basis per the checklist and what that duty is, and if they don't know that they can look it up somewhere else, now it's a scalable model. without that, the reason a lot of people don't put systems in place or they don't put checklists in place and they don't put outsourcing of virtual assistance is it shines a light of a weakness in their own company and they don't want to do that.

So as an owner, you're going, you know what, don't look over here, look here. I'll just do it myself because nobody can do it as good as me. And the reality is, everybody could do it better than you because if that's their only task, they're focus on it. And when it comes to property management, there's so many things going on. And whether it's flipping, it doesn't matter. matter, there's things that you're good at inherently and there's things that you're not good at like me. We all have skill sets. And the way that we know if somebody is good or bad and if they're

doing their job or not is through key performance indicators, which are the metrics. And those are what we call KPIs. And so the way we run our company is everything is based on KPIs. And you can even take a step further as an upper level CEO role of the company, we have them color coded. They're red or green. If it's green, it's good. I don't care. If it's red, maybe we have a problem. If it's red two weeks in a row, we definitely have a problem. We need to look at it. Is the parameters off? Is it a person problem or is it a system problem? And again, now what you're doing is, you're pulling yourself out to work on the business instead of working in it. And again, everything that we're talking about is owning a rental property. Yeah. It's just doing it on a

scalable model because the one thing I think we all can agree, nobody gets into real estate to own one property. Yeah. They know it. Look, they want to be you. They want to own hundreds of properties. They just don't understand how to do it because they don't understand scale and they don't understand leverage.

And they're afraid to go out there and get in that uncomfortable zone of saying, I don't know how to do it or I don't know how to do the systems because they think it's a matter of owning the rental. And I disagree. I think a rental property, in my opinion, is a mathematical equation. It's an inanimate object. It either hits the mark or it doesn't. If it doesn't hit the mark, it's like buying a stock.

Yeah. And that's where I think people have a mistake with owning rental properties is they don't, they just, they don't look at it as business owners. They look at it as living in a rental and owning a rental. Can you give an example of what a KPI is at you, like a couple of KPI's in your business that you look at on a other basis? Absolutely. So one of the biggest challenges in owning a rental property and having a management company is maintenance. Yeah. Maintenance is a big problem.

One of the things that we have are work orders that are over seven days. We want a certain percentage that are under set, that are over seven days. We want it to be a certain percentile, right? we want a certain percentile of month-to-month tenants. So their leases up, have they renewed? What's our percentile? We, and again, what normally, what you want to do is you want to have maybe three to five. You don't want too many.

But if you see a problem, then you've got to dig deeper and you got to put more KPIs on that. So all of a sudden you see, that's bleeding a little bit. We need to go a little bit deeper to see where is it bleeding? Because we'll use a sales process, for example. if you have a salesperson and the salesperson is not closing, and we had this example, I had this exact example where the salesperson was not closing doors, bringing in new clients. They were answering the phone, they were contacting the person,

they were setting up the appointment, but they weren't getting the contract. If you didn't have KPIs, it actually broke down each one of those steps. I would say that salesperson is no good. But when I was able to break it down and look at individual KPIs, I could say there's a problem at the appointment. with that salesperson not able to close. There's a scripting problem. Let me go with this person and let me see what are they saying.

Went there, fix the problem. And it was that simple. If I didn't have KPIs, I could have gotten rid of a good team member because I didn't know. And to me, that's not being a good leader, right? Because you got to investigate it. So sales step processes are huge for KPIs because you've got to break down. If someone's in realty or something in sales and they cannot break down their

sales step process to tell me everything that happens and what those percentages should be, then they're just winging it. And they don't know. And then they don't know how much, you know, what's your conversion rate? What's your lead rate? What, you know, so I think to me, maintenance, vacancy, eviction, you know, why would you get pissed if you had a rental property? What are the things that would piss you off?

If my property is costing me money. Yep. If it's making me no money or there's a maintenance on the property that's not being done. Yep. Because ultimately the tent's going to leave and it's going to cost you money. What's great about this, too, is it translates this idea of KPI. I've been talking a lot about this the last six months on the podcast because I'm obsessed with it. Yeah.

Like I feel like I'm, I've grown more in the last six months than I have the last six years because of this idea of like leadership. And this is what leaders do with it. They look at KPIs and they figure that out. So if you're brand new to real sales, so you're brand new trying to buy your first deal, like your KPI isn't going to be eviction. It's going to be whatever. But you have something. Maybe how many deals did you analyze this week? Absolutely.

How many offers did you make this month? Absolutely. Like once you start having the data, good data leads to good decisions. Absolutely. 100% agree. Yeah, it's huge. And so, like, I mean, another perfect example, you would say vacancy or occupancy, right?

Same size of the same coin. What was it? Four months ago, five months ago, I mentioned on the podcast here before. But Ryan and I, who worked together, I said, whoa, dropping my pen. So Ryan and I, who worked together, uh,

I, we looked at our numbers. Like, I finally got good data. After the move to Hawaii, everything got crazy and I, like, lost track of a lot of like KPIs in my business. Sat down, looked at it and I realized I was at 15% vacancy. And I was always at like five, six, four.

You know, I didn't really tracked. that closely. Sure. I know it was better than I was. And I saw my, my revenue, my cash flow is down dramatically. Right. So once I knew that, I dove into it and me and Ryan investigated and figure out, oh,

our vacancy is really high. Okay. Now let's set some, now let's set a weekly meeting. We know what the number is. Every week we set a goal. Hey, we got 95%. Right.

95% we're at. We're at 85 right now. How do we get there? Absolutely. Just by tracking it. It took like a month. And we were like, up at 95.

Yeah. Because then we knew there was a problem there. And we have a dozen KPIs now that we monitor on regular. basis. Yeah. And what we've learned, and look, what's a KPI right now may not be a KPI in the future. You fix that problem and you go, okay, we don't need to, we may want to put one KPI, but we don't need five on there now. We just need one. And what we've learned is every time we have a problem, it's because we don't have focus on it. And it's like a rock on your shoe when you're running. It doesn't go away. It just gets worse. And whenever we have something and we dig deeper and we put

our focus on it, we fix it. You ignore it. It doesn't get bad. Like it doesn't fix itself, right? it's like a bad tenant. They're not going to all of a sudden make themselves right. They're just going to keep getting worse. And again, it goes to show it. And to David's point, business is business is business. And I've been fortunate that I get to talk in Australia. I talk all over the U.S.

And I tell when I'm done talking, they're like, that really wasn't real estate related. I'm like, no. I'm like, it's business 101. That's what I've learned is we're all running businesses. They just don't realize they're running a business. And if they can start to learn first to run the business, business and think of it that way, a lot more things become less emotional. Because look, we all know that when you're making, I've never heard one person tell me,

man, I was so emotionally fired up and I made the best decision because of it, right? I've never, I've never, I've never once, I've never done it. I've never heard it. So I tell people, I go, if you think of it that way, that just goes to show that if you can run your business without emotions and remove yourself with KPIs, because if you looked at it, you said, okay, here's the problem. Here's how we fix it. Let's fix it.

It's very simple. Yep. And then it's not emotional getting upset. It's just fact. And that's one of the things I've learned. You know what I like to tell people is that emotions are terrible when it comes to making a decision. Should I do this or do that? If you rely purely on emotions, we have to make stupid decisions.

You want to make decisions on what direction to go in based on facts and logic. But emotions are wonderful when it comes to powering or fueling the journey. So if you sit down and you say, you know what, this is where I want to go. We need to have a 95% vacancy or occupancy or occupancy. we need to add this many units to our portfolio by the end of the year. We have to make this many offers. That's a logical decision. Now, let the emotion of how bad you want that fuel the effort you put into making it happen.

It's better than when you switch the two. Yeah, I agree. And to your point, you know, if you go back to the rocket fuel and EOS system, there's always a visionary and there's an integrator. And, you know, there's the leader. And people want to follow a leader. And what people don't realize is when you're a, when you're a, when you're running a one one person rental property, you still have to put yourself in different

roles. And, you know, when me and my business partner started, we had an org chart, right? Our business, our business coach said, make an org chart. So we make this org chart and our names are in every single thing. But we realize that when we were doing that task, that was our job. And we had to take the hat off and put the other hat on. And that's what we're doing. Yes. But to your point, David, is that people want to be led and they want to follow a leader. And that's the visionary that, you know, we were told a long time ago, if you get bad employees, it's because you're a bad leader.

You get the people you deserve. So if you're getting bad tenants and you're getting bad vendors and you're getting this, you're probably a bad business person. And it's probably something that you've got to look within you. And if you don't have that vision,

that drive, people don't go work for a dollar, right? They don't come work for money. They work because they want to make a difference and they want to be a part of something, right? Bigger pockets is a great example. People want to be a part of what bigger pockets it's doing.

It's not because they want to make money in bigger pockets. They believe in the mission, the vision of what you guys are doing. That's a great example. It's not that you're going, hey, I'm going to make money. You guys are not. So you guys should all join me. They're going to go, I don't see that vision. I'm not following you. So that I completely agree with you. Yeah, that's great. Can you tell us about, I mean, just a few minutes ago, we did a Facebook live. Tarl and I up on my Linai. Yeah. Did the Facebook live. And then we brought you into it because Tarle knew a story. For those of you

unaware, Tarle Yarbr was on our show, I don't know, mid-200s, super cool investor. Yeah. a good friend of ours out here in Hawaii with us right now. Anyway, so he had you tell a story on that Facebook live about your son. Can you tell us a story? Sure. It was fantastic. Yeah, and there's a great lesson that I learned from this.

And I really try to pass on to people now. And again, it was never planned. I'll say that from the beginning. So I have a 14-year-old son. He's 15 now. And he basically came to me one day and said, Dad, I want to buy a rental property. And it kind of took me by surprise.

Now, understand that, you know, I'm on a lot of radio shows, podcast shows. I'm always listening to anytime I'm in the car, I'm listening to an audio book or podcast. So he's immersed in it. Without me even realizing it, he's getting it, you know. You think your kids just sitting there staring out the window, but he's actually listening to this. And so I said, okay, I said, well, you don't have any money. I said, how are you going to buy a rental? And he says, well, I do have some money. And I said, well, how much money do you have? And he said, I've got $10,000. And my first thing was like, how did you get $10,000 without me even knowing, you know? but he said, I've been saving my money and I got this money and that money and, you know,

can I buy a rental? And I said, well, that's not enough. And he said, well, what do you mean? I said, well, you need more money for if you're going to buy conventionally a standard deal, you need more money. And he said, well, how much do I need? I said, well, you probably need, you know, for decent, you're probably going to need about 20, $25,000.

And he said, and this was the thing that I thought was very interesting is he said, well, how do I do it? I said, well, I said, you've got two options. You can either save the rest of it or you can try to get some creative deals and maybe partner with someone. And he said, okay, so he comes back to me a couple days later. And he says, so if I save the money, I'm going to be 28 by then, because it's taking me 14 years to get this. And I said, yeah, you're right. I said, so what's your other option? He goes, well, you mentioned that you can partner with someone. And I said, yeah. And he goes, what does that mean? I said, well, you can somebody else can put in the money and you can be 50, 50 partners. And basically, you take on half

the debt and he takes on half the debt and you buy it together. I said, or you can, you know, do things where they run the property and you put up the cash or vice versa. There's many ways to do it. And he said, well, would you go in half with me? And I said, well, what are the terms? And he looked at me like, come on, dad. I said, hey, I said, this is business. I said, this is how you're going to learn.

I said, because if you don't know the answers to this, this is how you get burned. And this is how people take advantage of you. I said, so this is a lesson that don't let me take advantage of you. Tell me the terms. So he went back and he did some more homework. And, you know, what was funny is about three months prior to that, he was asking me about real estate. And I talk about appreciation and debt paydown and equity captured.

He asked me to explain it to him, which I did. I explained it to him. I drew a map of the U.S. and what properties appreciate where and why people buy. And one day I went into his room and it was up on his wall. Like he was looking at it and studying it. And he just was always up there on the wall. And I never said anything. And then a couple months later is when he asked me this question.

So he says, well, how about if we did 50-50? I said, okay, I said, so what are you going to do? He said, well, I'll put in 50%. I said, okay, so I said, who's going to manage the property? He goes, well, your company can manage it. I said, okay, well, is that a good deal? He said, well, I don't know. I said, well, first you got to work this backwards.

I said, you have to explain to me what is a good deal. What kind of property would make sense with all everything taken out, all the expenses? What kind of property makes a good deal? Like, what is your exit strategy on this deal? because again, no one ever talks about the exit strategy, which is one of the things that I've learned that even if you don't know what it is, you at least have to think about it. Is it a 1031?

Is it, you know, what are you doing with it? And so we went through the gymnastics of it. He got a couple sample deals. And I told him, I said, listen, we're not going to go, we're not going to go looking for a deal until you can tell me what is a good deal. Because if you cannot identify a good deal, there's no way, no one else is going to tell you if that's a good deal or bad deal, and they're going to rip you off. So I said, do you have to know what a good deal is to you?

before you can go outside this realm. So we went through the cash flow, the cash on cash return, and I forgot what exactly the numbers were, but we both decided, okay, this is the deal. So I said, okay, this is what we're looking for now. Now we know. So when this deal comes across our plate, we know it's a good deal.

There's no question. It's not, hey, is this a good deal? Is it not? It either fits our parameters or it doesn't. So the deal that we got was I didn't want him to have to learn make-readies or big rehab jobs. I want him to get a cookie cutter type. property. And I had some buddies that, you know, flipping and all that stuff. So I told them what I was

looking for pretty much something done, knowing that I said, listen, we're going to pay more money for this, but it's done. Either pay now and do the rehab or you, or you just get it. This house, literally, we got the property. We closed on it. Four days later, we put a tenant in. It's been rented ever since. Never hear about it. My son gets the cash flow. My wife makes him put 40% back in to reinvest to buy another property and he gets to keep 60 himself. So now he's understanding. And I said, and I told him, I said, listen, his name's Jed. I said, Jet. I said, if you had 10 of these, think of the cash flow coming in. Yeah. He's like, I wouldn't have to work. I said, or you could work and exponentially speed this up. So he's like, that's good point. I said, but you're,

you're getting in a position. So his goal now is to own five before he gets out of high school. That's cool. And I'm thinking, man, I mean, I didn't own a property. I didn't own my first house. saw as 30, you know, and so I just think the one thing I've learned, and you and I were talking about this in Seattle, is that we all work so hard to get wealthy. We all work so hard, and we never want to see our kids suffer. But giving our kids a portfolio of properties is not actually helping them. Yeah, no. Teaching them the legacy of how to keep building that, I think, and again, I can't take credit that I want to do this, but now I'm realizing how many people out there are out there trying to be successful, but they never teach it to their kids.

kids and they're not building a legacy for their family because giving them that money, it's like giving someone a good deal. They can lose it just as easy if they don't understand the fundamental. So it's something that, you know, I think is very important to take this education that we're all working so hard grinding, trying to get better and actually sit down with our kids or whoever to show them how they can carry that legacy on because I don't think many people do that. And I think it's something that we should be doing, you know, because it's going to stop, right? It's not going to. keep passing through generations if we don't keep doing that.

They're going to say, oh, my dad made a lot of money and I got the inheritance and I spent it. That's not really doing them any favors, in my opinion at least. Yeah. You know, people often ask me if I'm going to homeschool Rosie or if I'm going to go public school with her. And I'm like, well, I'm going to homeschooler, but she might go to public school too. But either way, like school doesn't end at 3 o'clock. Like, I will be like, she will know more about cash flow and financial freedom and wealth

and all that when she's seven. Absolutely. And most people know when they're 30. Because think of what they're learning. I mean, they're learning a skill that. that they can, you know, they're learning that things that people fear are really not real. Yeah. You know, they're learning these things going, you know, my son's been on radio shows with me.

I've gotten speaking at events with me. So he kind of sees that. So the things that other people fear, he's like, it's no fear. Yeah. And again, I just think you're teaching them a skill that I don't think they're going to learn in school. I really don't. Yeah, they won't. No, not at all.

Yeah. So very, very cool story. I mean, just the fact that you're able to get more people need to be doing it. I agree. And I think that, you know, I think even creating a course. or doing something. I mean, I just think it's, I think it's something that's such a void out there that all of us are working so hard. I mean, how many people on bigger pockets are out there grinding, trying to make a living, but they never really show how to pass it down. And again,

I think we're busy being busy. And I don't fault anyone for that, but at some point, you've got to step back and go, okay, what am I doing this for? Why am I doing this? And how do I help other people, meaning my family carry this on for me? Because, you know, look, we've all work hard. You're in the middle of the night in Atlanta, David. I mean, we're here. I mean, you know, we're working hard to be better. We don't do this because we're getting paid to do this right here. We're doing this to all be, we're all trying to be better at what we're doing in life, right? But how do we pass that to our kids to be better? Yeah. You know, in the real estate sales side, I see a lot of 25, 26-year-old kids that are selling like twice as many houses as me. And it just blows me away. How did you do this?

every single time it's that their mom or dad was an agent. They grew up seeing it. The stuff that we're trying to teach people at 30, 35, 40 when they get a new career that takes a long time to adjust the personality you've got to have, the way you have to think. They've been seeing this since they were 13, 14, 15 years old. It's no thing for them. And they walk in with this supreme confidence and just start dominating right away. And it's because they had parents that cared.

And their parents were often not top producers. They were just standard run-of-the-mill agents, maybe a little better. than average, but the kid who saw that for 10 years before they even got in the industry flies right through. And I think that's such a good point to make is we're all, when you're the first generation of someone learning this, when you're listening to Bigger Pockets and you're trying to figure this out and you're reading the books and you're hammering away knowing how to analyze a property, you're trudging through this sludge, but you can lay a path behind you that's like a nice smooth concrete trail that someone else can come walk and get much further than you where. And I think

we forget, it doesn't have to be this hard. It's very hard in the beginning. And then for a Brandon and I, man, we can, we can buy deals or we can analyze deals in what takes like maybe seven minutes. It just doesn't take very long once you know what to look for. Steve, you can, I can say, hey, Steve, should I buy this house? And you can say, what's the address? And you can probably come back to me in 14 seconds and give me a yes or a no. You're so experienced, right? That did not happen when you were brand new whatsoever.

Once you've got that, if you're not passing it on to the next person, like you just went through all the sludge for nothing. Yeah. And the one thing I learned from our business coach in business, he always says, business doesn't get easier, you get better. And to your point, right, the houses don't get easier to buy. We just get better at what we're doing, you know? And so it just goes to show that the more and more you work on your craft

and the more you try to refine it to be better, you're getting better. It's not getting better. It's still the same house that we could have burned. We could have overpaid for, right? We just know it bore and we're faster at it. Oh, that's such a good. We need to tweak that, Brandon. Trademark it, huh?

Yeah. You know, weeds don't get lighter. you get stronger. There you go. I like it. Yeah, that's awesome. That'll be the new t-shirt. By the way, speaking of T-shirts, BiggerPockets.

Now sells T-shirts, biggerpockets. com-sized shirt, S-H-I-R-T. I finally, after five years of people asking me, I went and put up the Burr shirt on the website. So anyway, go check it out. And, uh, all right, so we're going to move on now to the next segment of our show, which we lovingly call our deal deep dive. All right, this is that part of the show where we dive deep into one particular deal

that you've done the DDDDD and let's jump right into you got some in mind uh yeah I'm gonna fire a bunch of questions that you we'll go back and forth David and I kind of fire an answer number one what kind of property is it and where was a located single family property in Houston Texas all right how did you find this property uh I found it uh from an expired listings when I was doing wholesaling and the guy couldn't sell it and so I was going to do an option contract on it and then I was going to sell it uh through wholesaling okay so you're trying to wholesale it uh you're trying to wholesale it You found it that way. How much did you get under contract for?

And what were you going to hold it for? Do you remember? I got it under contract for, I'm going to have to guess. It was about 72,000 and I had a buyer for 95,000. Okay. That's nice. And how did you negotiate the 72,000? The way that I would go in negotiating is that I would come in with a cash price of maybe 60%.

And then I'd come up to about 70% with the option idea with a 30-day. give me a 30-day window and I can get this done and you'll get a bigger deal. So I'm working on their greed. Okay. All right. How did you then? Okay. So I'm going to ask, how did you fund it?

You weren't really going to fund it. You were in wholesale it though. I was going to wholesale. You're going to wholesale. You said, yeah. So what's the story? I was going to wholesale it. The guy, there was an older gentleman, nice guy.

And, you know, I just, I felt bad for him. Mistake number one is I got a little bit emotional in the deal. And the buyer backed out at the last minute. and I was pissed and I felt bad. It was going to be a slim deal, even though I got it at 72, it needed some work done to it. At 95, it was an okay deal for someone at 95, but for me, for my parameters,

I didn't like the deal even at 72 because of what I was going to have to put into it. And I made the ultimate mistake, and I just bought it because I felt bad for the guy. And it was not in a good area. It was not, there was a lot of indicators that were saying it was not a good deal, but I made an emotional decision, which is never the right one, and I bought the deal. And I just, I think I used a line of credit and I bought it with a line of credit. Okay.

Gotcha. You know, that's actually the richest man in Babylon. One of the rules they talk about is never do something to help someone else if it's going to hurt you. They have a close stuff. That's what that made me think of. Okay. So once you bought it, what did you end up doing with it?

Did you keep it? Did you flip it? How did you go about this property? I turned it into a rental after my third tenant moved out three days after. somebody came in and borrowed some stuff from inside the house and it was about $30,000 in air conditioning, copper wiring, refrigerator magnets. I mean, you name it. They made, or engines, they took everything from it within, within, you know, three days of the

tenant moving. It was gone. So now I'm into it much more. And at this point, I was done. I was just done with this. So at the time, was that your question? What did I do with it? Was that your question?

Yeah, so you kept it as a rental, basically? I kept it as a rental, yeah. Yeah, so what happened long term, I mean, like? So long term, I, we had a lot of people from Canada coming down buying properties. And if you're a Canadian citizen, you can't get a loan in the U.S. But we were already managing the property. I had to put the money back into the property to fix it. I had to deal with it.

And so because a lot of Canadians can't get a loan, but they wanted to own real estate, I did an owner finance. I did a rap. Oh, cool. And I owned it to them. with a 20-year amateurization with a three-year balloon. Okay. And so I basically sold to them.

They bought it owner finance. They put it in an LLC, and then they bought it. Refied it out. I love your shared a pig with us and not a huge winner. That's so cool. Yeah. This is one of those properties that every time my wife would say, I told you. This is what I told you deal?

And I knew it from day one. That's funny. All right. Our last question. What lesson did you learn from this? Well, the obvious one. me was never, ever let emotions dictate a deal. Never. That was the biggest one. Yeah. And no matter how many times I tell myself that, I still do it. We all do it. Yeah. Hopefully

less and less. Exactly. Yeah. We get better over time. Yeah. Exactly. And that's another reason why it's so good to like, you know, like Steve's here in Maui right now because we're doing a like a mastermind get together with a 20 really high level investors because we need that. We need other people to look at a business and be like, hey, what what are you doing stupid right now? Yeah. That's a really. That's But I want you to tell me this week, like, what am I doing stupid? What am I not thinking about? Where am I letting motion cloud my judgment? So if you don't have that in your area, people, like find people in your area you can get

together with, invite them out, go somewhere cool like Maui, and get people that can get around you and tell you, what are you doing? What can you move on? Absolutely. If you're the smartest person of your friends, you're with the wrong friends. You've got to elevate yourself to smarter people to tell you. And you got to be okay with people telling you, hey, you're doing this wrong. It's all wrong.

And you have to be okay. and not let your ego come into play. Because that's a lot of times we all know people's egos, you know, they don't want to be told they're doing something wrong. Yeah. And that's the challenge, you know. Become friends of Brandon Turner, you will not have an ego for very long. I don't know what that means.

You are not trying to tell people when they're doing something else. Hey, David. Way of doing it. Hey, David, you should probably not wear pajamas everywhere you go. What's that? You should probably not wear pajamas everywhere you go. Yeah, exactly. You should probably get dressed a little nicer, David.

Come on. that was the first thing apparently I told David when we hung out the very first time. I don't remember saying that. If you had better clothes, you kind of like like, I'm David. Nice to meet you too, Brandon. I think we have been talking for a while and you were talking about how you wanted people to take you more seriously. And I was like, well, you're in sweatpants.

I know that's why I decided I wanted to be your friend because I knew about me enough to say that without worrying about how that would make you feel. And that's, I mean, that's what people need to look for in their friendships. Like, Steve, you said, your wife told you, you are not good at this. It was not hard for her to say, I love you, and you suck. This is the not bad part. And that is really why you said, you know what, then I need to systemize this and get other people that can do it.

And in order to do that, I need to have crystal clear systems. And boom, you're on the bigger pockets podcast teaching about it. So tell people the truth. That's how you love them. Absolutely. Absolutely. I agree. All right.

Well, we got to begin wrapping this up. Normally, we would go through a fire-round set of questions here, with your questions of the forums. but to be completely honest with everybody, the sun is getting closer and closer to our faces. Yeah, we are sitting here in the afternoon sun of Maui and the sun has been going like just down over like the edge of where we are right now and we're about five minutes from getting blinded.

It's getting close. And our face getting bright red sunburned. So we're going to skip right ahead and get to the world famous famous four. Famous for. All right, Steve, let's get to the same four questions we ask every guest every week. Number one, favorite, either current or past, favorite real estate related book other than the one you wrote? Favorite real estate book. I would say my favorite book of all time would be Rich Deadported.

All right. So it's a mindset shift. It is so good. Yeah, that's what I answered too back on episode 92. That was my answer. Yep. So good. All right.

What about your favorite business book? Favorite business book, the e-myth. Yeah. I just got finished reading that the other day. I was going to say this earlier and I didn't get a chance. I'll say now. you mentioned this idea where you had the org chart and your names were on everything. Yeah.

So I just reread that in the myth. And I don't remember that from last time when I read it. Last time all I remembered was don't work on your business work and don't work in your business work on your business and, you know, franchise model, which I love. But this time I really got that as like org chart. Every single person, like every role, because not about the person, it's about the role. So now, like, Ryan and I sat down the other day and talked a lot about this. Like this is Ryan's role.

This is my role. This is what Lance Wakefield is doing. Like this is. And like, I'm doing like three roles. Ryan's doing like 400 roles. And Lance is doing a couple roles. And that's okay. Like I am like one of my roles is CEO.

Like that's one of my roles. But I'm also other little things. Like I'm building the slide deck for my real estate fund. Like that's one of my roles I have to do. I'm the money raiser right now. Eventually we'll hire somebody to help raise money. But right now that's meantime, both.

And so we can take that hat off. Anyway, that's totally E-Mith. I'm 100% on that. And real quick for people that do the org chart thing, you know, what I would suggest is never ever, again, and never ever put a name by the org chart role. And also, I would say put a, I use disc profiling, put a personality profile to what type of person should be doing that role.

Because you may go, well, Ryan does that, but he kind of sucks at talking to vendors. So he's not going to talk to vendors. So we're going to, we're going to change the role around. And that's what you don't do. It's like, this is the role. This is the disc profile. This is the duties. This is the KPIs.

And it's unemotional. Yep. And so that, that's the one thing I would say, never change it around a person. I had a call this morning with my business coach. I have one as well. I've had a couple years now been phenomenal. And he encouraged me to do the same thing. He said, look at, he's like Tony Robbins and Michael Gerber have the same thing.

There's three types of people. There are entrepreneurs. There are in what Tony Robbins calls them artists, but Michael Gerber says technician, people who do the work. And then there's managers, people who control the systems, right? And he said, like, every one of those roles in your org chart is either a technician, a manager, or an entrepreneur. Make sure that you have identified what those are.

So, like, your C-O better be, like, focused on operations, which is a manager role. Absolutely. But your money raiser is going to be more focused on a technician or artist. Anyway. And what is the disc? You know, we're very big. We hire and fire. We hire people on disk profile.

Yeah. So we don't care what the resume says. I want to know what is their disc. And I want to know I'm not going to hire a C person that should be a salesperson. Because I know they can't do that. That's just not their role. It's like me. I couldn't be an accountant.

It's not my role. So, yeah. Always hire. I always say higher on disk and higher for the role, not the person. Yeah. And if people don't know what disk profile is, David, want to tell us real quick what that is? Your is your favorite is my favorite things. In fact, this was the Rosetta Stone that helped me understand how to communicate with other people.

It's a way of measuring four different aspects of your personality. Each disc is an acronym that stands for D's decisiveness. I would be interactive or influential. S is the stability rating and C is conscientious or compliance. And high D people make decisions very quickly. in environments that they're not used to. These are typically like your CEOs. They're usually leaders.

High eye people are often the best salespeople. They're going to eye. Oh, me too. Sorry. Go ahead, David. Sorry. See? You guys are fine.

That's an eye move right there to interrupt me in the middle. Squirrel. Yeah. Is this what you wanted, Brandon, or is this too much? Yeah, yeah. That's exactly. Eyes are your influential people. They're typically the best salespeople.

These were like the homecoming. King or Queen, the most popular people in school. Everybody likes them. They like to make people happy. They do really good in sales roles or concierge type roles. Your S is your civility score. High S's are systems people. They like the same thing all the time. They really do not like change.

If you give them a task, they've already done. They do it very quickly and very well. They don't like to let people down. But they're kind of the opposite of a D. They don't like to be put in unfamiliar situations and have to make decisions there. And your C scores, your compliance people, these are your engineers, your architects, your lawyers, the people who really

who really love policy, the people who love spreadsheets, if you take everything that comes your way and try to put it into a spreadsheet, turn it into a formula, you're a high C type person. These are your really good analyzers, but they tend to not be as good with the personality side, the networking type of stuff. So just understanding that alone where you fit in will help you figure out what role you should play in your own business. And then when you're hiring, like Steve said, you don't want to put a salesperson like a high eye in charge of analyzing stuff or in charge of running operations. And you don't want to put a highly analytical person in charge of sales or raising money because they're not very charismatic. They speak very monotone. They're kind of dry. That's what he meant by getting

the right people. But high Cs out there are like, wait a second. Now, here's a question. Do you know statistically what the investors are? No. What would you guess? Investors. I feel like it would be high Ds, but what do you think? David, you probably know. I would say it would be a D's and C is a combination of those two. C. Is it? Yeah, because it's a lot, it's a lot. It's a lot. It's a lot. It's just numbers. It's just numbers. So there's no emotions. The reason they're not D's is they're very impatient and they're more stock brokers,

stock traders because they want it to now, they want to control the situation. Cs are logical. They want to spreadsheets and data. So we just profile our customers. So we know statistically it's their C's. All right. Which when your salesperson, you got to know how to talk. You have to talk C language to a C.

Yeah. You can't be an I talking to a C. You're not going to get along. you and knowing the disc. Absolutely. It's just for yourself. It's when I'm talking to Steve or I'm talking to Brandon or I'm talking to Ryan, I have to do it differently based on how they like to interpret.

Absolutely. Which is why I just fell in love with it because it finally helped me understand why a lot of people thought I was just a jerk and I would run over people. That's how high IDs are. And I assumed everybody else wanted to be talked to that way too. That's funny. Okay. Let's move on here.

Next question. Steve, what are some of your hobbies? Hobbies. Well, I work a lot because I've got multiple jobs and businesses. I go to the gym. You clearly work out. I go to the gym, yeah. You know, I don't look at it as a hobby, though.

It's funny. I've been doing it since I was 11 years old. It's just what I do. I get up in the morning. I do my thing. It's like breathing to me. It's just what I do. Are you seven days a week, Jim?

I go about five, probably. I mean, the older I get, the less I could, you know. But, yeah, it's just what I do. I don't, I could not function if I don't go to the gym in the morning. And I would say probably riding motorcycles. I love riding motorcycles. That's cool. Yeah, those main things.

And apparently diving, you just got out of the water, didn't you? Yeah, no, I didn't go diving with them. Oh, you didn't? No, no. But I do dive, yeah. Yeah, yeah. All right. Last question for me.

What do you think sets apart successful real estate investors from those who give up, fail, or never get started? I would say very simple. It would be consistency and taking action. Not being right, not being perfect. I think the ones that fail, they fail to start. And I think if you're consistent and you just get out there and you're okay, making mistakes and you're okay failing, you're going to be more successful than anyone else out there, which I think is attributed to my success and everything that we've done because we failed

so hard and we're very open about it and we have no ego about it and we share it. And so I think consistency and basically getting out there and not waiting for the stars to align before you pull the trigger on something. Fantastic. Fantastic. All right. All right. All right.

The question of the day. Tell us, Steve, where can people find out more about you? Sure. I'm on social media. They can find me on Facebook, Steve Rosenberg, R-O-Z-E-N-B-E-R-G, my property management company, Empire Industries, U-W-W, Empire Industries, LLC.com, Rosenberg, Steve One on Instagram. I'm pretty much, if they Google my name, I wrote a book, they can pretty much find me. I'm all over the place. What's the book called? It's called Building an Empire, Failing Our Ways to Millions. There you go. And on my website, I probably have about 300 video blogs that I've done of educating people

on mistakes that landlords make, of finding the perfect tenant and all the stuff that, again, it's just our way of giving back. So I do a lot of blogs, a lot of video blogs just to help people. So if you want to learn some stuff, it's like bigger pockets, not like bigger pockets, but it's an educational thing for people that want to figure out what they're doing. And you've been doing more speaking and stuff too lately, right? I do a lot of speaking. I speak, yeah, around the country.

I do a lot for either property management. companies for investors as well as just for businesses as well. Very cool. Very cool. All right, dude. Well, this has been fantastic. It's been awesome, man. Thank you guys so much. Appreciate it. Yeah, thank you. All right, guys, that was at interview with Steve Rosenberg. Hope you enjoyed today's episode. Again, if you want to watch the video version, just go over to our YouTube page, YouTube.com, such bigger pockets. Check it out there. And if you like this video, make sure to share it with somebody. Go throw it on your Instagram or on your Facebook or whatever. Send it in an

email to somebody or write down the URL, put it an envelope, send it in the mail and tell him to go check it out. No one's going to do that. Anyway, Steve is a phenomenal guy, great investor. What do you think, David? I know you guys really hit it off as well. Well, you know, we have that thing in common with the same haircut. There's a lot that we have that you can never really understand. I couldn't. I couldn't understand that. Steve is very similar to me in the sense we both had full-time jobs. I was a cop. He was a pilot wall building our empire. And we both focus on systems. We're both very, very big into system. Everything that I learn, I want to systemize it right away. And I,

And I think, like, as Steve mentioned, any business, real estate's like any other business, you have to learn systems if you want to do it well. And any business can be systemized. And that's really the secret to scaling and success. Yeah, very, very true. And you know, one thing that we didn't really talk about in the interview, because Steve's, like, a super humble guy and doesn't, like, self-promote. But he actually has a, like, outsourcing company.

Like, he helps real estate investors find an outsourcing person, typically in Mexico for, like, a lot less than you pay in the U.S. for people to answer phone calls and whatever. So I'm actually working with Steve right now. and setting that up in my business. So anyway, be sure to check out links in the show notes. BiggerPockets.com. That's show 343 for more on that.

And that's all I got. So David Green, you want to, I don't know, should we get out of here? Absolutely. This is David Green for Brandon, the Megamind of Masterminds Turner. Signing off. 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,

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