BiggerPockets Real Estate Podcast - 76: Growing Your Real Estate Company Into a $30 Million Dollar Business with Brian Burke

Episode Date: June 26, 2014

Today on the BiggerPockets Podcast we are excited to welcome back Brian Burke, who we last talked to back in episode number 3. Brian is the owner of a large, successful real estate company headquartered in Santa Rosa, CA. Last time we sat down with Brian, he showed us how he got started investing in real estate, walking us through his first steps. On today’s show Brian goes deeper, sharing the details of how he scaled his real estate business from a one-man operation to fully staffed multi-million dollar company! This show goes into incredible detail (and offering highly actionable steps) on how to bootstrap your business, how to vet employees, how to gauge your market and much much more! If you are looking to turn your investing company into more than just a hobby… this show is for you! In This Show, We Cover: How to grow your business from a 1-man business to a full scale operation How to prepare for legal issues as an investor When is the right time to grow your team? How do you find good players for your team? When is it time to use property management? The importance of growing organically… and we’re not talking about vegetables! How to track your deal history in order to raise money What bootstrapping your real estate business really looks like How to find a mentor What BiggerPockets has to offer experienced real estate investors (Brian made over $400K netfrom using BP!) and much, much more! Links Mentioned BiggerPockets Podcast 003: Getting Started in Real Estate and Raising Money with Brian Burke How to Build a Shed in 7 Simple Steps (Yes, That’s Me – On the Roof!) Investment Calculators Books Mentioned in the Show One Minute Manager by Kenneth H. Blanchard The Art of the Deal by Donald Trump BiggerPockets Forums Tweetable Topics “If you haven’t been sued, you haven’t been in business long enough.” (Tweet This!) “You say the early bird get’s the worm, I say the 2nd mouse get’s the cheese… ” (Tweet This!) “You can never cross the ocean unless you have the courage to lose sight of the shore.” (Tweet This!) Connect with Brian Brian’s BiggerPockets Profile Brian’s Website: http://www.praxcap.com/ Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 76. 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 Dorkin. Host to the Bigger Pockets podcast here with my co-host, the man in the spectacles, Mr. Brandon Turner. What's up, Brandon?

Hey, what's up? Yeah, most people probably don't know I wear glasses because my profile picture doesn't have me with glasses, but I do. Well, you're physically weak. Funny guy. Hey, Superman wears glasses. Come on. No, Clark Kent wears glasses. Okay, well, whatever.

All right, I don't subscribe to that nerdy magazine comic book world that you do. Okay. What's going on, man? How are you? What's been doing? I'm good. I'll tell you something interesting. We recorded this interview with our guest earlier today, and we're just doing our introduction now. And one of the things on the show actually encouraged me, I made a call to my local property management company today and I have a meeting with them set. So, yeah, there's some good stuff in the show. I think that, I mean, it rocked me to go and actually make a phone call and hopefully going to transition, make some big changes here in the next

couple weeks. Oh, so nice. Well, that's great. And that's great. Listen, if we can spark action for you, hopefully we could spark action for the other tens of thousands of listeners per show that we have. So that's fabulous, man. Very exciting. Very exciting. Well, we do have an awesome show.

Before we get into it, let's do today's quick tip. Quick tip. All right. So today's quick tip, guys, is make sure you have some kind of professional photograph of yourself. I'm not talking about going down to the studio. I'm talking about having somebody take a nice professional headshot that you can use on Bigger Pockets, Facebook, LinkedIn, your social networks. You know, when people are looking you up, first of all, you want to use the same picture

across all your network. So it's easier for folks to better recognize you. But especially as it pertains to bigger pockets, when you're networking, when you're out on the forums interacting, people really tend to look up. other folks who have a profile way before they're going to look up somebody who doesn't have a profile pick. And, you know, beyond that, we actually also have stuff in our algorithms where if you've got a profile, you're going to probably profile picture. You're going to come up sooner and higher than somebody who does not. So having a profile pick is definitely advantageous, and it just

helps people to better relate to you. So we definitely encourage you to do that. If you got a picture of a skyscraper, a dog, you kissing a goat, whatever it is that you've got, you know, get rid of it, put up a picture of your face, even if you look like Brandon. I think that applies even, I mean, like, if you're talking Facebook, Gplus, LinkedIn, whatever. I mean, yeah, it's a picture of you like drinking, like, I don't know, like doing a keg stand. And I don't know, there's just like a professionalism thing that the more you can portray yourself as somebody who's serious and in business, the better it is, more people are going to be attracted to giving you funding or deals.

I mean, don't think that people don't check you out. Like, we check our tenants out on Facebook. you can be assured that anybody considering you as a partner or a lender or to fund you or whatever, they're going to check out your social media. So make sure it reflects that. There you go. And that is today's quick tip. Brought to you by Josh and Brandon. There you go. Yeah, yeah.

By the way, this is show 76 of the Bigger Pockets podcast. If you have not yet done so, please, please, please, jump on iTunes and look us up. Actually, we got a link on the BiggerPockets podcast at biggerpockets.com slash podcast. which will point you right to our iTunes page. And if you haven't already, please leave us a review, leave us some ratings, a rating and a review. Let people know what you think. It definitely helps us spread the word.

We do appreciate it very much. Today's show. It's with Brian Burke. If you think that name's familiar, well, it's because you probably listen to show number three of the Bigger Pockets podcast. Brian is our third repeat guest on the podcast now, and he's an extremely successful house flipper

and real estate investor from Northern California, who's got really a great story, a zero to hero type of story, and he's got an outstanding business model. Since we already know a lot about how we got to start from show three, we're going to cover something totally different today. We're going to really dig into how he scales his business. And so there's really a lot of great tips here for everybody.

This show is designed for sophisticated investors who've been around the block, and those people who are just getting started. So I strongly encourage everybody to focus and pay attention. And that's really all I got. Got anything you want to add? Yeah, Brian is like my hero. So you guys are going to love this episode.

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Check them out at biggerpockets.com slash Dominion. That's biggerpockets.com slash dominion. All right. Well, this is going to be an awesome show. Let's get him on here. Brian Burke, welcome to the show, man. Good to have you. Hey, man. Great to be back. I appreciate it. It's been a while. Thanks, guys. It has been a while. Yeah, I think it was over a year ago. I think you were, what, number two or three on the show. So I'm sure a lot of things have changed, and that's what we, why don't we actually start with that? Well, you know, I actually was number three

on the show. And, you know, that kind of, that brings something to mind. You know, You guys kind of start, you know, throwing questions out. But before we get started with all that, I actually have a bone to pick with you guys. So I have a question. I want to know, what's your obsession with me and the number three? How so? How so? So I was on podcast number three.

And now I'm your third full-length repeat guest. I'm never second, never first. I'm always third. So I just, I can't forgets out. So Ben Labovich was the first repeat guest. Now, on the BP blogs, Ben has publicly declared that Brandon is his girlfriend. So that means that that one was just blatant. I don't know what's going on there.

That's just some weirdness between the two of them. I don't know what's going on there. I don't know what's going on there. Ben's a character. Ben is a character. Well, okay. So then second repeat podcast is Jay Scott. Now, I have no problem getting beat by Jay Scott and taking second place to Jay Scott.

You guys got like 15 million posts on the forum. probably going to name an award after him. But here I am. I'm number three again. And like most real estate investors, I'm a... Maybe we'll create the third award after you. Well, yeah, see, that's exactly what's going to happen. But see, I'm a competitive guy.

So here's what my thought is for today. Since I'm really competitive, and I'm too big of a weakling to be competitive in any sport, so real estate's the only game I can win. So I want to make this an epic podcast because I want to be the first guest to be a three-peat. Ooh. So what do you think? You get to keep the obsession with number three, and I get to be the first place. It's a win-win, guys.

Well, here's what it comes down to. If people turn out and actually care about what you have to say, then maybe, maybe we'll think about putting you second instead of third. How does that happen? I'm not caring about what I have to say. Well, so much for that. It was fun while it lasted. Oh, come on, man. We love you.

Hey, well, I do appreciate you guys having me back. It was fun last time and hopefully it'll be half as fun this time. Cool. Well, Brian has right now on Brian's show, just so you guys know, Brian's got well over 30,000 listens to his first show. And hopefully with this show, we can double that. So listen up and we'll see what we can do. So now that you've got all that off your chest and, you know, we now know that you've got some kind of inferiority complex. complex with being... I do. And now that you've told me 30,000 people are listening, great. Thanks a lot. Yeah. More than that. More than that now. Oh, yeah. Oh, yeah. All right. So let's talk about what is it that you do in real estate? And really quick, for those people listening to check out Brian's show. Just go to BiggerPockets.com slash show three. And then you can listen to the previous show if you haven't yet heard it. So, yeah, what do you do in real estate today? What's your primary function focus? You name it.

My primary focus is to just make money. There it is. I'm one of these guys. I don't really care how that happens. You know, it could be from buying and flipping single-family houses. It could be flipping multifamily apartment complexes. It could be buying rentals to hold for appreciation. It could be development.

I've done all of those different things. Of course, my favorite thing to do is to buy foreclosed houses, fix them up and resell. And I've been doing that for 25 years. I don't know that I'll ever stop. I think it's somewhat of an addiction, but it's been a good business to me. I got into doing multifamily about 14 years ago and really enjoyed doing that. It's a great way to make much larger profits with, I think, considerably less effort than what you put in for flipping houses. But those things are my primary things.

Gotcha. And for those people listening, I mean, you literally started from nothing. You were a firefighter, right? Yeah, I was a police officer and firefighter at the same time for a public safety department, and I had nothing. You know, I was eating macaroni and cheese and living off of my checking accounts overdraft protection and when I bought my first house using credit cards. So kind of came from zero and, you know, and just went to a number with a zero behind it.

Nice, nice. And the goal of this show, you know, we don't really want to rehash the stuff that we've talked about. What we want to do here is get into how you. you've really started to build this company and scaled it and gone from, you know, the guy who's kind of single-handedly doing a few deals a year to a guy who's got a sophisticated operation, who's got a team and who's really making things happen. So let's talk about that. How big is your operation today? Well, team-wise, about 15 people in core staff, and that's employees and independent contractors that work for us on a regular basis.

In addition to that, of course, you have rehab teams, which are fully independent, and those cycle through all the time. So not counting the rehab teams, we've grown that large. We were as large as 25 at what I call the peak of my market, which is inverse to the peak of the real estate market. When the market was at its worst, my business is at its best. And at that point, we got pretty large. had to scale down as the opportunity scaled down. And, you know, we went from doing about 120

houses a year down to about 60 houses a year. So from a dollar volume wise, though, our business has stayed about the same. We're doing more expensive houses and fewer cheaper houses. So, you know, we've got that going for us at least. And hiring now and again when if somebody turns over, but other than that, we aren't really expanding at this point. Okay. Well, I think that's an interesting thing. And I never heard anybody phrase it like that before that your market is the inverse of the real estate market. It's kind of a cool way of looking at it. So I think you actually mentioned that to me a while ago, I don't know, a week or two ago when we were kind of planning this was you said at the peak

of the market, I was doing X number of deals. And I was thinking 2006. And then you clarified with, no, the peak of the market for me was the bottom. So yeah, kind of a neat way of looking at it. And I want to maybe touch on that later in the show. We'll talk about like how to invest in that kind of a market. Like as things are getting worse for you as a business wise, how are you adapting to that? But we'll try to touch on that later. And really quick on that, but you know, I know we'll get into it later, but really quick, you know, it's interesting because I get approached by a lot of people who are always like, you know, so what's going on with bigger pockets? How are things growing? You know, what's happening, you know, in the investment market? You know, things are really hot

in the consumer market. So what's going on for investors? And they're like, you know, how bad did you guys get nailed during the crash? And I say, listen, you know, savvy investors are going to make money, whether the market's good, you know, or bad, according to the media, right? The market's always good if you're a smart investor. There's always an opportunity. And so, you know, I just wanted to kind of press upon that to folks listening because I think it's important that, you know, stop worrying about chasing markets, worry about learning

the skills and strategies to learn how to make money in, you know, any market. There is. You're exactly right. There's always an opportunity. And you nailed it, Josh. You can make money in any market, but what you have to do is you have to figure out the strategy that works in the market that you're given. And real estate investing, I've said this a number of times, is like a stream that meanders through a relatively flat meadow. And the stream bends left and right. And if you're rowing down that stream and you row in a straight line, you're guaranteed you're going to run aground. You have to be ready to. to steer along with the meandering of the stream. And the real estate investment market's the

same way. You've got to look at what's going on in the market and determine what the best strategy is and the best location to implement that strategy given the market cycle. Yeah. I really, really like that analogy a lot. But I do have one question on that. How do you differentiate between that and chasing the shiny objects, right? Like you get into real estate and you're like, well, flipping's really popular right now, so I'm going to go flip houses. And then this is really popular. I'm going to go do that. How do you separate what's popular and what's good for your business to be able to navigate those turns. That's an awesome question, by the way.

Well, you're describing the deal addict. Yeah, right. Pat him on the back, why don't you? Yay. I want him to feel good about himself. Yeah, exactly. Do you know where he lives? You want to stick around for a while.

Yeah. Yeah, it's, you're talking about the deal addicts, right? And there's deal addicts out there that will say, you know, I want to buy a deal just because I want to buy something. And I used to be like that. I used to be the guy when I was starting out that if there was a deal to somehow be had, I wanted to have it. And after a while, you learn why some deals are really worth passing up. You get your hand slapped a couple times, and you'll quickly find out that just getting an idea in your head that I'm going to do X, Y, or Z, despite what the market is telling you you should or shouldn't be doing, and you just go and do it, that's how you get.

get yourself into trouble. That makes sense. How do I know the market's bending? I mean, how do I know that I shouldn't be flipping now or I should be whatever? How do I know I should turn my business to something a little bit differently? You've got to look at what the market is telling you. And you've got to be able to read the signs. And one thing that I think I've been good at is interpreting what the subtle signals are that are telling you what direction you should take. For example, in 2004, the subtle signals were telling me that the market in California was due to have some kind of catacalismic collapse. And I didn't predict that it was going to be as deep as it was. But I knew that something wasn't right.

And it's intuitive. And you just have to be able to read the signals and just pay attention to what's going on around you. For example, if guys that are in, you know, like mid-level jobs or even low-wage jobs are, out buying million dollar houses using loans that have negative amortization, floating interest rates, and, you know, and, yeah, no income qualification. And you start seeing this happen. You know that there's a risk of collapse coming. And when you see it happen in mass, you know that risk is even greater.

When you start to see the bubble mentality, look at stocks in 2000. What happened in 2000 with tech stocks? All of the inexperienced people who had no idea what they were doing were dumping their money into tech stocks in 2000. As soon as they stopped doing that, you have market collapse. Same thing with real estate. Inexperienced people who weren't reading the market were jumping in left and right and saying, I've got to buy a rental house. I know that the rents are 1,500 a month and the purchase price is 500, but I've got to buy one or I'll never get another chance. And you start to just, in the back of your mind, you think this isn't right. And that's the first

warning sign. Other things to look for is the actual statistics and demographic information that's out there like job growth, income growth, vacancy rates, new home construction. You have to look at all of these different things and couple that with what your intuition is telling you and know that sometimes you just have to follow your gut and but you use the data to help guide your gut. Well, so what is your, maybe I'm kind of putting you on the spot here, but what does your gut tell you about today's market? What are you anticipating?

Aren't markets local, Brandon? Yeah, I was just going to, I was just going to say, what market. out of here, you know. No, you're right. So, okay, so what is the market telling you about Northern California right now? That's where you're at, right? North of San Francisco always. Yeah, I'm in the North Bay in San Francisco. And what my market is telling me right now is that there is a shortage of housing. There is significant restrictions to new home development, both economically and governmental that make it hard to add to the housing stock at today's price levels, meaning that even though home affordability is on the decline, inventory is low and

prices are rising and are likely to continue to rise, despite the fact that incomes don't have the same forecast. I don't know that income growth is going to keep pace, but we have the Silicon Valley where you have pressure from very high-wage jobs that are forcing a ripple effect of home prices and rent increases coming from that region. So that's our market specifically. Your market, Brandon, and yours, Josh, and everybody else who's listening, those markets are all impacted by different forces, and it's hard to say what's going on in the market, because there really isn't a the market for real estate. Every real estate market stands on its own. what you have to look at is if you're going to look at in your own backyard, look at your own

demographics, look at what's going on, read the newspaper. If you're looking at somebody else's backyard, go learn about it and find out. So, you know, as a real estate investor in Northern California who wanted to buy multifamily apartments four years ago, I said that strategy isn't going to work here, but it works in Texas since I started buying in Texas. It's just a matter of looking where you need to find, where you're going to find opportunity. Good stuff. Yeah, that's cool. Right on.

Well, let's bring it back to you a little bit, you know, instead of the prognostication type questions here. So when you first started out as a company, how many people did you have? Obviously, you had you, but how did you build it? Who were the first people that you brought on? I mean, were they working out of your house? How did you kind of kick up the operation, so to speak? At first, I was the chief cook and bottle washer. I did everything. The one thing I never did do was pound nails. I'm not good at construction. If you give me some power tools, I can certainly make a mess. But I can't do anything constructive. I'm not Brandon. I can't get on the side of the house and fix the siding. Or Ben built a shed last week. Ben built a shed. Yeah. I'm still blowing my mind. Yeah, I don't know. When the first gust of wind comes along, I want to see if that shed is.

still standing, but... Oh, by the way, for those people who don't know what I'm talking about, I will link to that post where Ben talks about him building a shed. We'll put that in the show notes at Biggerpockets.com slash show 76. But anyway... Yeah, but anyway, I would never even try to build a shed because I know it would fall down in the first gust to win. So I did everything myself.

I did my own research. I wrote my own software for my business. I went out to the auctions and bought houses. I conducted the evictions. I used to file my own eviction. I sold my houses myself. I did absolutely everything. The first employee I hired was a bookkeeper because I couldn't keep up with the check writing and everything else I had to do. So started giving up the check writing part. Then I started giving up the data research part. My second

employee was one, her job was simply to start inputting data that we retrieved for foreclosure auctions. And all of this at first took place in a home office. after about 10 or 15 years and working out of a home office, finally moved up to the bigger time and got a real legit office, hired another person for accounts payable, and then 2008 happened. And when 2008 happened and foreclosure volumes went absolutely through the roof, I partnered up with a home builder in my area here to take,

to take advantage of the real foreclosure opportunity of just huge, massive opportunity of houses. And that's when we started hiring in scale, started hiring property inspectors, project managers, superintendents, more accounting people. Then we started buying rental houses and needed to hire an asset manager to manage the property managers. And it just, you know, one thing starts growing into another. And next thing you know, you're hiring people all the time. Well, let's talk about the property manager. You said asset manager to manage the property manager.

I mean, at what point did you, and maybe you never did, and maybe you never managed, but what point did you switch from managing the rentals yourself or did you never? And then how did you kind of transition, I guess, into property management? Great question. Great question. I was always a buy, fix, and resale guy. So I didn't have a lot of rental properties. I started off with a couple.

I managed them myself. That was really early on very quickly. I learned that tenant management wasn't all that enjoyable, and quite frankly, I wasn't very good at it. So I just realized that it was better left to the professionals. So I sold the few rental properties that I had, did a 1031 exchange into an apartment building where it was at least large enough that I could have third-party property management better than I could with single family and got out of the tenant management business. Brian, really quick. How many units was that? That was a 16 unit. It was 16 units. A small deal. Can we actually talk about that real quick?

I know just because we're here that. We're there. Me and Ben Leibovich talk about, this is like the Ben gossip show, but me and Ben talk a lot about because both of us are looking to get into, you know, much larger apartment buildings, you know, 100 unit plus and he's a little bit more active than I am in pursuing that. But he talks a lot about that you need to have a large building to support a third party management. Like he really, he's looking for large because he doesn't want a small property manager. He

wants one of the national ones, whatever. What are your thoughts on that? I mean, you did a 16 unit with a, with a property manager. Is that, I mean, how do you scale that? Is that eight unit too small? Is a fourplex too small for property management? Is that okay? How do you look at that? The way I look at it is it just depends on your situation. If, if you're trying to break into this business and you're trying to build a portfolio, nothing is too small. I mean, you've got to just do something. If you find a deal that works, I mean, don't go out there and buy something that doesn't work, but if you buy something where the numbers work, no deal is too small. Now, that being said, the larger the deal, the easier they are to run. I have a couple of 140 unit

apartment complexes. They take less of my personal time than my 16 unit or an 11 unit or even some of my four units. It seems like the smaller the unit count, the more of my time ends up getting spent on them. Now, is that because of the staff? Is that because of who's involved and who works towards those specific buildings? Or is it the tenants? Is it the location? What exactly would you say accounts for that?

Primarily, it's in the larger properties. They're a business unto themselves. So if you have 140-unit apartment complex, that apartment complex has employees. So when you guys asked earlier, how many employees do you have and how big is your business? Well, that's kind of a loaded question because I didn't even include those people. If you look at our apartment complex where we have three or four employees full-time at our apartment complex, that doesn't even count in my core business's employee count. So by virtue of having a staff, that means less time from me.

I don't have to oversee it versus a four-unit property where you have a property manager that any time there's a repair over $100, they have to call you. have to tell them what you want done or not done in an apartment complex as part of the course of running the business, that stuff just gets taken care of. And your job is just to watch over the whole thing from a higher level. Yeah. Yeah. You know, it's interesting. I'm going through a lot of what you went through with bigger pockets right now where, you know, we're finding that we've got holes, right? You know, we've, you know, this thing used to be me slaving away and doing every single job. Then we brought on another guy and another guy and another guy. And, you know, it seems like

every, every couple months now, we're in the process of hiring. And it's interesting. You know, it's, I couldn't have planned it because it's kind of organic. It's, you know, we figure out where there's a need, where maybe whether it's, you know, hey, I don't want to do property management. Hey, I don't want to do this task. I'm not great at this. So let me get somebody to to fill in the holes. So that's kind of how we've done things. And it sounds like that's been the plan for you as well, just kind of figuring out where you might need somebody to kind of take some load off and just go with it. Is that a fair assessment? It's absolutely true. I mean, that's the best way to grow a business is to grow it organically. Some people try to force growth.

And I think that forced growth results more often than not in either challenges and or failure. organic growth to me is you grow as the need progresses and I think that it's more sustainable. And had you taken bigger pockets, for example, and said, I'm going to start this website, I'm going to hire 15 employees and try to figure out what to have them all do, you might be in a different position now than had you grown it organically. Yeah, no, I agree because, you know, at least in the startup world, I see so many different companies who, you know, maybe they got half a million, a million, two million. $2 million, $5 million, $1,000,000, they go and they hire 17 people. And the next thing you know, six months later, they've burned through all their cash and they're out of business.

And I think organically building up, whether it's a startup business or a real estate business, and I think most of our listeners probably aren't going to be raising some round of cash to build a large investment business. I do think everybody's going to pretty much organically be growing their businesses. I think it gives you the opportunity to learn different facets of the business. and figure out, again, where your skill sets are, where your strengths and weaknesses are, and then fill in the holes. You know, to add to that, one thing, you know, a lot of people might not be worried about hiring

15 people, but one thing that I see a lot of newbies doing is focusing really heavily on building their team, right? I mean, building a team is good, but they have that kind of same approach of, I need a team of 15 people right now, and they have never even, you know, looked at a step foot inside of a property. And so it's just like, well, I need to have a team because I read this book that said, I need to have a team, and this is what my team needs to look like. I generally like to advocate, you know, build your team organically the same way you would

your employee organically, right? If you need a realtor, then go find a realtor. If you need a CPA, go find a CPA. You don't need to have, you know, 15 people on your team and, you know, matching suits or something like that to start a real estate company. So that's my... No, because what happens is you get too caught up in the details of the team and you never actually start getting out there and buying real estate.

And that's what trips people up. It's just like this paralysis of analysis. You hear about that all the time of people that don't buy a deal because they spend so much time running the numbers. The other thing that trips people up is they get so caught up in the mechanics of the business, setting up a team, forming LLCs and doing all these other things that all of those tasks distract them from what's really important, which is buying real estate. Because without buying real estate, you don't have a real estate investment business. Yeah, yeah, I agree. Absolutely. So what was your, I mean, when you first started out,

We talked about you or you kind of grew organically. I mean, what did you envision for yourself? You know, we all kind of look at what our future is going to be someday and we all kind of plan. Well, I want to have, I don't know, my business be worth this much money. I want to make this much cash flow. What was that like for you when you first got started? For me, I started off with a goal that I thought, if I could just buy one rental house

a year, I would be set for retirement. You know, that was how I first, you know, started out getting serious about it. I mean, at first it was I liked real estate. It was fun. I wanted to buy and flip houses, and I did a couple of those, and that was great. But when it finally came to a point where I said, look, I've got to come up with a plan because otherwise I'm just going to be working for the man forever. So for me to come up with a plan, I've got to have something that's going to provide income for me.

So that's when I went on this Buy a House a Year program. I quickly discovered that being a landlord wasn't the greatest thing for me to do on that sort of a scale. And that's why I traded up into multifamily and discovered that. that that's much more what I'm suited to. But as I started growing, it was to me about how to stop working and get out of the full-time job. And I knew that if I wanted to get off the island, I had to burn the boats. You know, that's a Tony Robbins quote. And you quit your job, and now you have to make it.

So I put myself in that position where I had to make it. Well, let's touch on that. When should a person, I mean, is that good idea for everyone? When should a person quit their job? I mean, are you telling our listeners? Everyone go and burn your boats right now and, you know, let's see what happens. Uh-oh. Yeah, absolutely.

Do it right now. No, no. Okay. Here's Josh stepping in. Please do not listen to Brian Burke. Yeah, exactly. Do not quit your jobs today because this guy says so. Please.

Don't even listen to that quote. No, you know what? Again, that's an organic process. just like building your business. You don't want to give up the security of your income until you've gotten your business to the point where you know that it's sustainable. So for me, what I did was I looked at my track record.

I had developed a track record while I was working of having bought, fixed up, and resold a few dozen houses, and that's a few dozen, not one or two and quit. So after having done that and seeing that, number one, I could do it consistently, Number two, I could do it profitably. And number three, I could show other people what I was doing and that I was successful at it so that they would want to jump on board and give me additional funding to grow it. That's when I knew.

I got to a point where I realized that my job would cost me more money to keep than I would earn from actually keeping it because of the opportunity that I would lose by not becoming a full-time real estate investor. And that's when I knew it was time to burn the boats. And that was the only way that I could solidify my position of doing it full time. Nice. Well, here's my theory in when to quit your job. This is what I've kind of not really lived by because I just quit my job really early and probably too early. But this is my current theory is that, I mean, you have 168 hours in a week, right?

24 hours a day times seven days a week. 168, you work a job usually for 40 of those hours, which means you've got quite a few hours left in the week to other things. So my thinking is this, spend 40 hours a week at your job like normal. Spend 40 hours a week on real estate. If you can make that 40 hours on real estate equal than your job, then I think go ahead and quit then your job and do it. But if you can, if you're saying, well, I don't have time to do my real estate investments. I don't know. I think that's an excuse that people use. Like if you can build your business, work side hustle, do it in the evenings, do it in the weekends, whatever you need to. Make your business, make you enough money to quit your job,

then quit your job and then pursue it. So that's how I approach it. Yeah, absolutely. I was working late into the night and, you know, in all kinds of hours. It was crazy. I mean, I was basically, it felt like I was working three jobs. And you have to do that. You can't just say, well, I want to go do this real estate thing. I've never bought a house in my life, but I'm going to quit my job and go out and go do this. It's, it's likely to fail, you know, wind up back to work again. Nice. Nice. Awesome. Well, so, you know, we're talking about building and growing and bootstrapping. So many investors have the need to bootstrap their way through the growth of their business, as we've kind of talked about. I guess my question is, what kind of tips do you have

for folks in real estate who are trying to bootstrap their business? How do you kind of do it? How do you kick the ball off, so to speak? You have to start with a plan that has some shot at success. So don't say I've never bought real estate before. So now I'm going to go out and go buy a hundred unit department complex. I'm going to raise money from investors and I'm going to go buy this thing even though I have none of my own. I mean, be realistic about what you can accomplish given the resources that you have at hand. So I think that's the first thing. The second thing is you have to be willing to take some risk and you have to be willing to fail and fall flat on your face. And that's a very uncomfortable thing. And the only way that you can expand your comfort zone is to test

its boundaries and I tested my comfort zones boundaries plenty of times and in some cases I paid the price for it and in other cases I was able to build upon small successes and make them larger successes. So I think that you have to take action. I think that you can't make excuses. You have to prioritize. You have to not get lost in the procrastination, not get lost, in the minute details where, you know, a lot of people will be like, yeah, I'm working on my real estate business today. I spent all day, you know, going through all my emails. That's not buying you a house. I mean, you know, getting out there and looking at property, looking at what strategies might work, going out and meeting people, networking, getting involved with bigger

pockets on the forums, finding out what's going on out there and what strategies are successful, and what kind of melds well with your skill set. I'm not that great at tenant management, so I wouldn't want to be a small-scale landlord. It just doesn't fit for me. So you have to find a fit. Yeah. Yeah. Hey, you know, you raised something. And I was thinking about this, you're an active guy in bigger pockets. You know, you clearly don't need to be. You know, you've got a very successful business. You've been doing it for 25 years. Yeah, I was going to ask this at the end, but you just brought it up. So I was just curious, you know, why do you do that? What does it bring to you? What kind of value, a guy who's been around the block many, many times and who's killing it?

What does this site actually do for you? Well, it does a lot for me, actually. I first joined Bigger Pockets because I thought I could give back, answer some questions, maybe provide some advice on something. I really didn't know what I was going to do. but what I ultimately found was, even though I have been doing this for a long time, and I think I've done just about every kind of deal under the sun, I've done 700 real estate deals, and that's actually properties that I've actually purchased and either kept or resold. It's over, I don't even know now, like $200 million worth of real estate. So I thought, you know, I'm not going to learn anything from this site, obviously.

I'm just here to give advice or share my knowledge. And what I found was quite the opposite. I found that there's a lot to learn out there. No matter how much you think you know, there's stuff out there that you don't know. And that's the beauty of this business. You know, I'm a licensed pilot, and I like to go flying. And, you know, I went through flight training when I was in high school. And, you know, you learn how to fly an airplane, you know, but you don't know it all.

You spend the rest of your life learning things about flying an airplane and about better ways to land and just different things. And same goes with real estate. There's so many nuances that you can learn. And then beyond that, you know, I started making connections, making friendships. You know, I got to go out to dinner with Brandon Turner. I mean, who gets to do that? Wow, you didn't go out to dinner with me. No, I just drove you back to the hotel and dropped you off.

Yeah. Jeez. That was a good dinner. That was a good dinner. That was a good dinner. Went back there the other day, actually. Did you? Yeah, what was that at Santa Rosa?

It was in Santa Rosa. Yeah, I went back there the other day and thought about you. And yeah, you know, it's just all the things that, you know, expanding my network, meeting new people and actually, get this, this is probably the best part about it, making even more money. And I said in the beginning of this podcast, you asked me, what's my favorite thing to do in real estate? And making money is my answer. And bigger pockets even does that for me. And, you know, I get, I've gotten deals from people I've met on bigger pockets. I've met partners on bigger pockets. I'm working with Ben Labovich on his multifamily project.

I'm working with Sam Craven from Podcast 33. There's that damn three again. We're looking at doing a fund to buy rental houses in Houston, Texas. I mean, I never would have met those two guys had I not come to Bigger Pockets. I've gotten investors from Bigger Pockets. I can just go on all day about what it's done for me and my business, but this isn't an ad for Bigger Pockets. It's just true.

I mean, this is what happens when you're involved with a community. And for me, it's grown my business substantially. And that wasn't a loaded question. It was legitimately, you know, I know that you get value from it. And I thought it was important for, you know, newer folks and any of the guys who might be listening who are at your level, who are sitting back and saying, you know, I'm good. What do I need to dig in and get involved for? Well, you know, there you go.

There's your answer. There's your answer. I mean, you were talking about growing a business into a larger business. Well, one of the components of doing that is putting yourself out there and getting involved. You don't grow a large business on your own. I didn't grow my business larger until I got a partner to partner up with to help me grow it. You've got to get out there and build your network to build your business. Do you have any good tips for people listening on what is like one or two or three things that they can actually do, like maybe on bigger pockets to do what you're doing?

I mean, how are you doing this? I mean, I haven't gotten tons of funding, I actually have gotten funding, but I haven't gotten like as much as you have. So what should I be doing? What should other people be doing that you're doing that's working well for you? Well, you know what? What's working well for me is just talking about what, either talking about what I'm doing or helping other people sort out what they're trying to do. And this is what's interesting about bigger pockets. There's people on there that read the forums that you'll never hear from. They'll never post. They'll never interact with you online, but they're reading. And they see how you approach real estate as a business and form an

opinion about you. So everything that you say on the forums is getting read by a potential partner of yours. It might be someone that might invest with you. It might be someone that will sell you a property or will buy a property from you. But whether or not they do business with you depends a lot on how what you say resonates with them. So I think if you contribute on the forums by giving sound advice or helping people, other people reading that, see that and say, wow, there's a guy I want to do business with because he knows what he's talking about. And people who know what they're talking about are successful.

So if you approach it from that angle, I think you'll get business. Yeah, that's cool. You know, to add on to that, just to, like you said, there's a lot of people who just read, just give some numbers to that. I mean, we get, what, a thousand, a little over a thousand forum posts every day, which is a lot of, I mean, we're one of the most active forums on the web, period. But we get, I don't know, 10 times more traffic than we do a forum post at least. I mean, probably far more than that. So there's a whole, like you said, there's a whole ton of people that are reading bigger pockets every single day who aren't posting. And obviously, I want to encourage them people to post.

but at the same time, if you are posting, like you said, just understand there's 10 times more people reading than are even interacting. Yeah, that's great. That's great. Well, again, sorry everybody for the segue, but yeah, I just came to mind and there we are. What if your CRM actually did the hard work for you? I know, crazy. ReSimply lets you pull seller lists, skip trace them at no cost,

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A 100% success rate and that's over 10,000 studies. Go to costsegregation.com and use code tax deadline to get 10% off your first report. Don't overpay the IRS. Head to cost segregation.com before April 15th. Well, let's jump back to you. So you're growing. What about the guy who's like, all right, you know, I'm in a position where I can't pay for somebody.

I can't pay to bring on that employee, but I'm so stretched. What do I do? How do you build your team if you can't afford to pay the salary of somebody? How do you get it going? Well, what I'm wondering is what are you stretched with? If you're so stretched that you don't have time to run your business, what are you doing in your business that it's not making you enough money to be able to afford a team? Yep. So it sounds to me like you're just misallocating your time and you're putting your resources in the wrong place.

So this is where people start getting into that loop that I was talking about before, about, well, I spent the whole day checking my emails or addressing postcards or whatever it is. It's like maybe you need to shift your priorities into doing something that actually brings you money. Kind of like when you're fixing up a house, you want to make sure that if you're going to put $1,000 into that house, you get $2,000 back in the resale value. You're not just fixing up the house just to make it pretty and say, oh, I'm going to spend $10,000 on the kitchen because I think the kitchen would look better with dark cabinets versus white cabinets, but it's not going to change the ultimate sales price.

You're wasting your money. Well, people do the same thing in their business. Instead of putting their efforts into their business in the areas that produce profit, they put it into areas that just create work and therefore not generating revenue. And if you're creating work without revenue, of course you're busy and can't afford a team. I got to tell you, I am probably one of the most guilty of that people on the planet. Yes, you are. And I did it for a very, very, very, very long time.

And, yeah, I mean, I think it's a really easy trap to fall into for folks who are bootstrapping is, you know, getting bogged down by the details, going on the roof of your house and putting a shingle on or, you know, hammering nails. Fixing your siding. Fixing your siding. Yeah, yeah, yeah. You know, I mean, putting up your own shed. what you know at some Ben so it's hard it's hard to get that mindset again I I am extremely guilty of this I've been running bigger pockets for almost 10 years now and for three quarters of that at least I was focused on the details I was focused in the business versus on the business and you know I think there was a lot of value to it but I also you know looking back say oh my goodness you know What if I had, you know, stopped and brought some folks on and kind of started to scale it sooner? That said, you know, there is this fear that people, and I think it's a rational fear that people face,

which is, you know, it's not going to get done the way I want it to get done. I'm, you know, I'm going to get stretched. We've got all these fears, right? Of course, I won't get done the way you wanted to get done because, you know, that's the classic mentality of the self-employed person is, I'm the only one that can do this if I want to get it done right. And look, Josh, I was in the same boat as you. I've been investing in real estate for 25 years. We've already said that.

But you want to know how much money I made in my first 10 years in this business? Zero. I made nothing. I mean, I might have accumulated a little bit of property. I got up to doing a mall to family or whatever. But I made nothing. And the reason I made nothing is because I was so bogged down in the details of doing absolutely everything, like I was writing my own software.

I was going out and doing everything. I was looking at all the houses. I was doing all these things. And I was really kind of getting nowhere. So at a certain point, I realized I've got to offload some of the non-revenue stuff. But you have to have revenue to be able to offload it. So I shifted my focus into activities that made money. That brought money in that allowed me to afford to hire somebody to do the stuff that wasn't making me money,

which made even more money. So it was all a part of making a thing. foundation for the business. So that stuff you went through, Josh, it's necessary to build the foundation of the business that later allows you to scale it up. Yeah, I agree. And I think looking back, what you said, you said it twice now is something that really resonates. If you're bootstrapping, if you're scaling your business, find those keys that are going to make you money. Now, it may not directly be something that makes you money, but it's something that indirectly affects you that makes money. To Brian's example about a licking envelopes, you know,

if you're sitting around licking envelopes, you know, for three hours a day, instead of spending X amount of dollars for service, and we've got, you know, we got all these vendors on bigger pockets who do this stuff, right? So instead of hiring one of these companies that does it, you're licking the envelopes to save, you know, 50, 100 bucks. If you had spent your time working on activities that produce more than 100 bucks over those three, four hours, then you're really should be spending your time doing those things and not licking envelopes. Well, and I say that because I've been there. I've been licking envelopes. I've addressed envelopes. I've done that. You're absolutely right. But, you know, the people get into the

thing where they say, I don't even know what else to do to get the phone to ring or do. So I lick envelopes because if I'm not licking envelopes, what else am I going to do? We have this kind of running joke on bigger pockets about me, right, working on the siding and the rain because there's a picture of me on the forums I took of me working on the siding and the rain. So, you Here's my argument, though, and I want to know what your thoughts are. I mean, my argument was this. That night I had a choice. I could pay $200 for a contractor to go and fix a siding, or I could go and just take care of it in an hour or two because I knew how to do it, right? So I just like, okay, well, I have a choice. I'm going to, I could be sitting here watching Lost on TV or, you know, reruns of Lost, or I could go and put this up in the rain and save myself $200. Where does a newbie, somebody who's trying to grow their business? Where does that come into play? I mean, I wasn't going to go find a new property that night to go by. Obviously, my strength isn't putting together. deals. That is what my strength is. But I wasn't put it together a deal that night. What are your thoughts on that? My thoughts are, you know, we kid a little bit here about how we're allocating our resources and licking envelopes or putting siding on houses, right? But we also have to go

back to my comment of saying that all of those things are a necessary component of growing your business. Having actually done that yourself is kind of just part of the process. What you have to do is you have to evolve away from it. So you're growing your business organically. So, you know, this time you went and hung the siding, you know, a year from now, you might be in a different position where you're saying, look, my main focus is on acquisitions. And it also depends on your goals. You know, if you're, you know, Brandon, you're a self-made gazillionaire now with all the properties that you own. So your, your objective now is just to sit on the sidelines and collect your rents and minimize your expenses. If that's your position, there's nothing wrong with going out

and fixing the siding on your building to save yourself $200. Yeah. Yeah. I look at it like mowing the lawn. For years and year, yeah, I got a decent lawn. I take pride in my lawn. And I hate mowing the lawn. Absolutely loat it.

It takes an hour or so to do it. And, you know, forever I was just cheap about it. I was like, you know what? I'm going to do this. I got to get it done, you know, so and so forth. And one day I was like, you know what? That's an hour out of my day that either is better spent with my kids, I value an hour with my kids more than the 26 bucks that I pay the guy to mow my

lawn. And I value my time at work is worth much more than that. So, you know, one day I was like, all right, I'm done. I'm giving it up. I'm not mowing the lawn anymore. I'm going to pay somebody. And it's hard. You look at the bills. You're like, okay, this is adding up. I just spent, you know, this much on mowing the lawn. But you got to do the math. You got to do the math on the time value of your money and your availability to do other things and, you know, do the equation and see where it fits for you. Yeah. You know, to add one more thing and then we can, you know, probably move on from this, but I want to talk about my biggest mistake in all of real estate investing. And that was when I started buying property, I didn't account for having to hire a contractor to pay him $50 an hour.

I didn't account for a property manager to charge me 10% a month to manage the properties. Because I said, well, I only have one or two. Why does it matter? That's why I was out on the roof and the rain fixing siding. That's why once in a while, I mean, I hardly do those things anymore. But that's why for years, and I still manage my own properties. Because if I were today going to transfer my properties over to property management, I would lose $3,000, $4,000 a month. I mean, I would lose almost all my cash flow overnight because all of a sudden I switched

to property management. Because when I started, I didn't plan for that. And so I think a good way to scale, a good way and just lesson I've learned is a good way to scale is to make sure when you're doing the math, when you're doing the numbers, account for those things that you eventually will have to have in order to scale. Otherwise, you get put in this box that I feel like I'm in where I can't really go, I can't really do anything but manage myself because that's how I set it up from the beginning. Well, here's what a lot of new real estate investors underestimate and even somewhat experienced investors make the same mistake, is they

underestimate the importance of the acquisition as it relates to. the successful outcome of that investment. The success or failure of that entire deal is decided when you buy it. If you buy wrong, you're doomed. If you buy right, you have a much better chance of a successful outcome. And then there's variations in between, Brandon. I'm not saying you bought wrong. I'm just saying you bought at a level that worked for you based on the information that you had at the time and the expenses that you estimated at the time. Now, now that you're you know what you know, if you were to buy that same property again, you would probably still buy it, but you would probably pay less because you would say, you know, if I pay 20,000

less for this property, then the price to rent ratio and cash flow, et cetera, are going to allow me to afford to pay a property manager or allow me to afford to pay someone else to make that repair, and I don't have to do it on my own. Yep. And another side of that, too, is, I mean, I don't regret the decisions that I made to do that. Because, for example, the thing that takes the most of my time is the apartment complex. It's a 24 unit. Though I bought it with no money down. I mean, zero dollars down. Now, I could have put 20% down, taken $100,000. I didn't have $100,000. But if I would have put $100,000 down, my mortgage would have been significantly less. I would have had significantly more cash flow. That would have paid

for all the management that I could need on that property. I mean, essentially, so what I made a choice. I mean, I traded what I did have, and that was time and that was the ability to fix things. And I traded that and I quit my job the day about the apartment complex, so a few months before. But, I mean, I knew I was getting it. So that's why I quit my job the second time around was to do that because I knew I could trade my creativity and use my skills in place of a cash down payment. So again, I hustled and it worked. But now I'm in a whole new place now. So now I can look back and say, well, now this is what I'm going to do from here on forward and hopefully help other people who are in that place to be able to be able to be able to.

that's all of that's what Brian was talking about in the beginning of the show about crossing the river and that meandering that's happening you know I mean where you are today isn't going to be where you are tomorrow and you have to be ready and willing to shift if you have to I mean and let

let me just flip this on you Brandon I know this isn't the Brandon show but I'm sure the listeners will appreciate it so you know given that you bought it at the price you bought it at and given that you bringing in property management would kind of damage you, right? It'd put a dent in your cash flow. At some point,

I'm assuming you're either going to have to suck it up or you're going to have to unload these things. Is that kind of where you're out then? Yeah, well, I mean, a lot of it's mental. It's a mental game, right? So I'm going to go from making three to four to five thousand a month in cash flow on the apartment complex to making a thousand a month on cash flow. That hurts my, a lot. I'm like, oh, that just hurts because that's money in my pocket every month and I like having it. However, a thousand a month in cash flow off a zero dollar down investment is still an amazing investment, right? I mean, it just mentally, it hurts to give that up. And so yeah, I mean, that's the choice I have to make is, am I okay receiving a thousand or maybe nothing

in a bad month if we had a bunch of vacancies and evictions? Am I okay with that? But that was all part of the growth process, though, too. So when we talk about how businesses go through a growth cycle, people go through a growth cycle. So, you know, when you you're young, you can go out there and you can do all these things and manage the properties and fix a siding and do all that kind of stuff. And as you age, your investments begin to mature. Your cycle and your life begins to change and your focus differs from I'm going to do everything to now I just want to receive the profits from doing everything. You know, it's kind of like you reach a certain age in life where you no longer have to help people move, right? You know,

so I mean, it's the same thing in real estate. You reach a certain point in your business. where you no longer have to go out and fix siding. I mean, all of these things just evolved. But you still have to experience that for yourself because going back to your acquisition, Brandon, and talking about how, well, you know, maybe I would have bought it differently if I knew now what I knew then, why I know now. I mean, it's all part of experience, right? And, I mean, experience, good judgment comes from experience, and experience comes from bad judgment

because we don't know what we don't know. We make mistakes. We learn from those mistakes. And we say, okay, next time, I would do it this way. And so that next time comes along and you do it that way and then your business grows and then you do it and then it grows and then it grows. Yeah. And I think that's a really good, I mean, that's really, really good. And to emphasize one more thing that I've seen in your life. I mean, you mentioned earlier that you're working with Ben. So Ben calls me, you know, or I'll call him from time to talk about the large multifamily he's pursuing. And this is how the conversation goes. It's the first call is, hey, Brandon, I found this really good. I should do the Ben accent. I think I can. Hey, Brandon. I find beautiful property.

You can try it out. He'll say, I got this amazing property. 170 unit. It's amazing deal. Amazing property. I'm going to get it. I'm like, wow, that sounds awesome. Did you talk to Brian yet?

I've been talk to him later. Next day he calls me back. Yeah, that was a terrible deal. And so what that does, I mean, like, honestly, like, he's piggybacking off your experience. And so, like, like, he's gaining. that the same thing that he could get by failing, by messing up, by buying a property that was too expensive, he's get it by piggybacking on you and on your experiences and your failures. And that's just one thing I want to emphasize that if you're trying to get into real estate, like,

it's okay to piggyback on someone else. Like it doesn't mean you have to partner with them, but you could, I mean, just become friends with them, talk to them, get in a call with them, get in the forums with them, whatever. That is huge, huge. It's piggyback on somebody else's successes or failures. it is. That's called a true mentorship. I mean, that in my mind is, you know, forget these guys who are charging whatever they charge. That's what a mentor is. You know, he's got Brian as a mentor, right? So, you know, whether or not it's formalized, it doesn't have to be. You know, he looks up to Brian. Brian's got wisdom. Brian's got experience. And he's turning to him. So, you know, every day somebody contacts me and every day 20 people go on the site and say, hey, I don't. I get a mentor. That's how you get a mentor. Find a guy who's experienced, who's local, or not even local. Use bigger pockets and become friends with them. You don't force it and you don't ask, ask, ask, ask. You got to provide some value, but that's what's going to help you. Well, let me ask you,

Brian then. What is it that attracted, I mean, when Ben got in touch with you, obviously, Ben saw that you were doing what he wanted to do. That's why Ben wanted to talk to you to do more, because that's where he wanted to. He sees himself where you are, right? So what attracted you to him, I mean, to be able to, yeah, I want to, I want to work with him. Same with Sam Craven. You said you were working with him. What made you want to work with them? I mean, because you're probably going to like a thousand people to email you after this. Yeah, I know, right? Yeah, but like, just don't give your email address. But why? Yeah, what is it, though, that made like when people, I don't know, for people who want to mentor somebody like you, what is that

made you jump on to that bandway? I'll go right back to what I was saying earlier about how bigger pockets works and how it works for people and how it works for me. You know, it, you read what people write, you hear what people have to say, and you form an opinion in your own mind about how that person works and how they think. And it either resonates with you or it doesn't. So, you know, I read Ben's posts and I think, okay, here's a guy who really knows what he's talking about. I mean, you know, he's smart, he's analytical, he thinks it all the way through. I saw the same thing in Sam, you know, when I listened to Sam's podcast about the success that he had in podcast 33, with all the threes, you know, about why, you know, he was able to turn his business into what he did. And, you know, I'm attracted to that. I'm attracted to people who have that sense of success and who have made something for themselves out of nothing and think it all the way through. So for the same reason that people contact me and say, hey, I want to partner. with you or I want to fund one of your deals or I want to invest in one of your one of your private

offerings and that sort of thing. The same thing goes in reverse. I see people out there and think, gosh, here's a guy who's really got it together. There's guys out there that you read what they have to say and you just go, wow, you know, that's the way to think. You know, Jay Scott's one of those guys. You know, he writes these great books and all this stuff and you say, well, here's a guy that really knows what he's talking about. Yeah. All right. So how do you transition that, you know, we're talking about mentors, but how do you then transition that to find somebody similar to add to your team? I'm talking about an employee, staff, contractor, whatever it is. You know, you don't have the ability to use, say, bigger pockets for them to gain their knowledge.

When you're hiring, what's your process of vetting somebody? It's the same conventional thing of going through the interview process. And, you know, my interviews are a lot different than most people's interviews. You know, and, you know, it's not tell me about yourself and, you know, and what are your strengths and weaknesses. I mean, my interview process is centered around getting into someone's head. I want to know how they think. I want to know what makes them tick.

I want to know what they've done and why they've done it. And then it's going to either, it's either going to resonate and gel where I see, okay, there's a fit here, or it's not, and I realize there isn't a fit. And, you know, I'm not hiring necessarily off a skill. I can train skill. I'm hiring off of aptitude and attitude and a willingness to be part of the team and learn. And, you know, I think those are the most important components in an employee. They're important components in a partnership.

And they're important components in me as a leader of a team as well. So we all have to be on the same page. Cool. That's good. So if you, you know, you've got somebody who comes. you and says, hey, listen, you know, I'm doing, you know, 20 houses a year. Things are going well. I want to be in your shoes. What one piece of advice, I guess, would you give to them when it comes to scaling their business? First piece of advice and probably the most important is document

your track record. If you've done two dozen deals and now you want to grow, you're not likely to grow without raising outside capital in some form. And you're not. not likely to raise outside capital in any form without demonstrating to the holder of the gold, so to speak, that you're worthy of the money. And so there was a post not long ago in the last week or so on BP that I had answered and the questions surrounded raising money from investors and why is it so hard. It's hard because people have to trust you to part with their money. So if you want to grow, you got to have the funds. If you want to have the funds, you've got to be trusted.

If you want to be trusted, you have to be able to show, number one, you know what you're talking about. And number two, that you have a track record of success. So document that. I have a sheet that goes all the way back, you know, 700 deals. Every one of them is on there. I mean, people can see exactly what I've done, whether it was successful or not, and make their determination of whether or not they think that I would be a good risk for them to invest their capital. And we've raised about, geez, I mean, we're a $30 million company now that came out of nowhere.

And that happened in a very short period of time. In the last five years, most of that growth. And it was all because we were able to demonstrate a track record. So if that's your position, show your track record, and then the growth will come. You know, I really love that advice. And, you know, mentioned Jay Scott a couple times on the show. I think Jay was the first guy I'd ever seen publicly document his track record. Right.

He created his blog, one, two, three flip, and on it, he literally was creating these meticulous records of each property that he went and flipped. And it's an enormous tool for folks to learn how to flip houses. You see how this guy went through from his first one, you know, how successful he was, what he did right, what he did wrong. You know, and I encourage people to do that. I mean, you know, for him, it kept him, you know, it keeps him accountable. He still records stuff. He's now got a website for a new. his home, his home, which he's building, you know, from scratch, basically. And so I guess I'd

recommend whether, you know, whether you're doing it on paper or if you want an extra layer of, you know, I need to keep myself accountable, go out there and create a blog, yeah, and document it. And, you know, it's also a great way to find partners and find people because now you're publicly sharing your experiences and your successes and failures. And that's actually why we have our success story, a forum on bigger pockets. We want people to share, what they're doing. We want them to show what deals they've done, what they're accomplishing, because as you do that, other people are going to see it, and they're going to say, you know, wow, that's great. This guy just closed his 17th deal, his 34th, his 34th, and these numbers look

fantastic. That's the kind of guy I want to work with. That's why it exists. If you aren't using the success form on our site, it's just another tool. Yeah, my first track record, really, was a spreadsheet that showed purchase date, address, purchase price, reseal price, you know, that sort of thing with this vital statistics. I was the worst guy ever about actually showing pictorial representations of what I was doing before and after pictures and that sort of thing. I had very little documentation. I realized that was a big mistake and a big area of improvement for our business.

So we've been on a campaign recently to get better photographic documentation of our rehabs just to show people a more tangible thing than the not. numbers because I think that's important. So I just did my first post in the BP Success Forum for a kind of like a flip diary. I flip number 653 and it's my first one that I've actually put on bigger pockets. Because it was like the worst house I've ever done. It's going to be the most amazing visual transformation. Is that the cat? This is the hoarder house. The harder. Yeah, the cat litter. The cat litter flip. Let's talk about that real quick. Like, because people By the way, this is a deplorable property.

Like, visually, I saw this and I vomited in my mouth. It was awful. Imagine walking through the front door. Oh, my goodness. My poor wife, she went to the front door with me. I opened the front door. She turned right around and got back in the car. Nice.

Nice. And we will link to the forum. I'll link to that in the show notes as well. So everybody, make sure you check out. I mean, you will not believe these pictures. I mean, I don't believe them when I've seen them. So, yeah, check it out. I know this isn't really about scaling your business, but maybe just real quickly.

How did you get this property? And, I mean, what's your plans with it? It was funny. I've never done direct mail. I've always bought most of my properties at the courthouse steps. And so I was trying to get into the direct mail side of the business. And I was reaching out to people on bigger pockets who I thought were good at direct mail and would be able to provide some advice.

And through the course of those discussions, I ended up in a conversation with a guy that said, hey, you know, while I've got you, I've got this property that came into me as a lead. And it all started from there. And, you know, it was a guy I met through BP and we took a look at the house. I sent my acquisitions guy down there. He came back to the office and he said, this is the worst property I've ever gone to look at. I said, come on, man. You've looked at a thousand houses for me. How bad could it be? Well, you judge for yourself. Yeah, it's bad. It's bad. Yeah, it is. But it, wait till you see it. We're almost done with the rehab. and I'll keep posting pictures on it and you'll be able to see the progress all the way through

and fast forward, so to speak. It's pretty amazing. But finally, I'm getting to the point where I'm showing people a little bit more about what it is in a format that resonates with people on an emotional level versus just numerically. Yeah, yeah, for sure. You know, one other place that people can, you know, go to do that is on BiggerPockets, there's a place called the member blogs. A lot of people don't know about this area of the site, but if you go to BiggerPockets.com slash blogs, there's a number of people who are doing exactly that. They're just writing their day-to-day or their week-to-week or month-to-month, struggles, successes, whatever, as an investor.

So that's kind of cool, too, so people should check that out. And if you want to start a member blog, it's totally free and you can add photos and all sorts of cool stuff. So anyway, yeah, that's cool. You can do it on the forums, too. I know like Wendell, who we interviewed on the show a few months back, he's doing that as well. So on Life of an Investor, I think it's called. Yeah, I saw that. That's what inspired me to do this.

So thanks, Wendell. Yeah, yeah, that's a cool thread. just kind of every day like what he does to. Yeah, but now here's the thing, right? So you now know Wendell, right, Brian? I mean, you may not know him, but you're like, oh, wow, this Wendell guy, he's out there, he's rocking it. I like how he's doing it. I like his approach. And maybe, maybe at some point, you say, okay, this is the type of guy I want to work with. Yeah, that's exactly how it happens. Yeah, that's exactly how it happens. Yeah. Hey, cool. I'm curious. I know we're

slowly start wrapping this up, but I want to talk a little bit about when you, when you get bigger and when you start to grow, you endanger yourself of getting sued. more often, right? I mean, like, has that happened to you? And how do you prevent that? How do you get away from ever being sued? Yeah, it does happen. And it has happened to me. And you know, the thing about, you know, being in business, if you haven't been sued yet, you just probably haven't been doing it long enough because it's inevitable. A topic right there you go. Yeah, exactly. There's one for your show notes. Yeah. It happens to everyone. Even when you, you know, I like to think that I do everything right. I try to be fair with people, honest, and just do everything on the up and up.

And even despite all that, once in a while, something's going to come along. And I've had a few of them. I've probably been sued a half a dozen times. And most of the time it's related to foreclosure actions where I was the purchaser at the foreclosure auction. And this kind of goes back to, I see people on the forums all the time say, I've never bought a property before, but I'm thinking of going to the auction and buying one at the courthouse step. And scary. I mean, if you, you know, take a look at my flip that we were just talking about on the, on the forums, that's a house that from the street, which is all you get to see on an auction house, didn't really look that bad. You never would have imagined what you saw on the inside, and you wouldn't have found out until it was too late. But there's also other things that come up when you're buying at the courthouse steps. And, you know, sometimes you'll get an owner that thinks they were wronged and, you know, they sue their lender. And in the course of suing the lender, they also have to sue the purchaser. I'm involved in one of those right now. I've spent a hundred and forty something thousand dollars in legal fees.

Oh my gosh. Trying to clean my title. We've already won the lawsuit, but I still don't have clean title, and we're still paying money in legal fees to get clean title. And I don't even know how long it's going to take. I've had others that have cost 20 to 30,000 just to defend our position. Oddly enough, every lawsuit I've ever been involved in, I've won. and, you know, that goes back to always be sure that you do the right thing, but you never

prevent it. So people talk all the time like, well, I'm going to, I'm going to set up an LLC. Yep. I was just going to ask you that. Isn't an LLC the cure? I knew you're going to ask me that. See, I read your mind. I'm going to set up an LLC so that I can, you know, prevent lawsuits or I can insulate myself from lawsuits. And if you're, if you're not out there, you know, doing the wrong thing, the likelihood of you getting a judgment rendered against, she's fairly low. And if you do, you have insurance, hopefully to cover that. But what isn't covered in every case is your legal costs. And that's really where the expense comes in. So, you know, I don't know. I think LLCs are great if they're necessary. I don't think you need one. And, you know, if you have a partner and the two of you

are going to buy a house together, having an LLC, you know, gives you a vehicle to take title without having the intermingling of his personal debts get involved with the deal or whatever. But for lawsuit protection, I just think they have limited value. It's just one of those, it's going to happen things. I mean, it's like losing money on a deal. I mean, if you haven't lost money on a deal, you haven't done enough deals yet. I mean, that's just as you grow your business, things will happen. They will happen.

You can't prevent it. It's just part of growing. And hopefully you learn from it. and get past it, and hopefully it doesn't happen too earlier in your business where it wipes you out and doesn't give you the ability to come back. Yeah, right on, right on. All right on. Well, what about balance? You know, in the beginning of the show, you talked about leaving your job, your full-time job. And obviously, you now have a full-time job again, don't you? Yeah, that's for sure. But, you know, at some point, there's this work and life balance that has to happen.

I'll talk about me personally. I set some boundaries saying, you know, I'm not going to get up at 630 and jump on and do work anymore, I'm going to wait until I, you know, eat breakfast, spend time with the kids. And the same goes for, you know, the end of the day. You know, I set this time period for, you know, five to eight, eight 30 where I don't look at work. I don't, you know, I don't look at anything unless it's a 911, right? So what do you do? And what do you recommend that people do to kind of maintain some kind of balance, particularly when they're working and trying to build that business? Yeah, it's really tough when you're working and building your business. And I know that I was particularly bad at that balance. So I'm probably not the best guy to give advice on how to balance that when you're doing it. Because I worked a lot and it was just part of the process. And I looked at it like this. I'm paying my dues now so that later on I get the payoff of not having to work a job and do real estate investments and working for myself and having more flexibility.

that outcome comes at a price. And the price for me was I didn't have a very good balance when I was in my 20s or even my 30s for that matter. But over the course of the last few years, I've gotten a lot better at that balance now that I've got more employees. I've got more systems. I've grown larger. I can start to step back a little bit since I'm not involved in every decision. I like to take vacations. And when I'm on vacation, it's like I'll check my email in the morning.

maybe again at night and the rest of the day I'm off work. Yeah. I like to spend time on the weekends with my wife and just do things. We like to go for walks where, you know, I don't have a, you know, an email in my hand or anything like that. You know, we just kind of reconnect at the end of the day and, you know, during dinner and just kind of setting that time aside as your own personal time. It's not easy, but you've got to do it.

Yeah. Yeah. And, you know, that's one of the things that one of my big pet peeves about, kind of society in 2014, you know, you go out to a restaurant and you see, you know, the family, the kids are on the pads and the wife and wife and husband are clicking away and type in a way and, you know, they're not sitting down at the table together or if they are, everybody's on a device. I think it's really, really important, you know, not just for a balance, but frankly, I think it's important for the future of our society, really, and relationships

between people and humanity that we create some kind of separation and distinction with when we're at work and when we're not at work. And the device is putting them down for a couple minutes or hours and set pretty dedicated time for yourselves. When you have a chance to clear your head, you recharge your brain. And when you recharge your brain, you think better and clearer and you get more done. And it helps to grow your business when you can be creative and think. And like you, I'm not the guy that gets up at 5 a.m. And a lot of people might think, well, have you built a big real estate business, you know, you must be the first guy up because everybody knows that the early bird gets the worm.

Well, you know, I use a different one. Brandon, I'll give you one of your tweetable moments while everybody else says that the early bird gets the worm. My philosophy is that the second mouse gets the cheese. There you go. So I say, I'll get up later. I'll let you go buy that property. and I'll buy it when you lose it in foreclosure. Wow.

It was all flowers until then. That competitive side came back. There it goes, yeah. Number three, number three, number three. It's how I treat my business, too. You know, I wait for the right thing to come along. And sometimes waiting means that you're not just busy, busy, busy. You're just standing back and observing and watching to see what's happening. And then you leap when it's when it's, when it's.

time. Yeah. Yeah. It's all like it really wraps back to what you said earlier. It's all in your purchase. If you're just trying to buy everything you possibly can, you're going to make mistakes. If you wait for the right deal and wait for the perfect thing, I think you're going to do a lot better. Yeah, Ben, they're done that.

It's not fun. Yeah. Very cool. All right. Well, hey, do you guys hear that siren? It's time for the fire round. Is that the fire round? That is the fire round.

This is the fire round. There you go. So angry, why is he so angry, Brandon? I don't know. He's an angry guy. All right, the fire round. These questions come straight out of the bigger pockets forum. So you may have seen them because I know you're in there a lot.

Number one, I really like this question. It's very actionable. What is your system for handling and following up with business cards that you get through networking? I put up in a stack and put a rubber banner around them and never get to them again. That's my strategy. What are you talking about? Yeah. I mean, it's funny in this business, you get so many of them.

And, no, so it depends. I mean, I use a CRM called ZOho that I started out as like a free service. And I think I have a paid thing. And so if it's an investment contact, I put them into Zoho and then they're on our mailing list. So if we put out a newsletter or information on what we're doing here at the company, they get to hear about it. So I organize them that way. aside from that, not too much. All right on.

What's the most critical component of the due diligence process for fixing and flipping houses? Oh, that's a good question. Well, the biggest areas where people get tripped up is they overestimate the ARV, which is the after-repared value, the value of the home after it's fixed up, or they underestimate the rehab budget, or they underestimate the rehab budget, or they underestimate the other ancillary costs that are involved. So the most important part of due diligence is to nail down those three components. Number one, make sure you're running good comparable sales that actually compare to the property that you're selling,

and don't use that one outlier comp as your ARV. So if everybody's selling it $350,000 but one guy got $400, your ARV is not $400. It's probably $350. Yeah. Nailing down that rehab budget, that comes either from experience or contractors' quotes or a combination of the two that's really important to get that right. Because if you don't get it right, you'll feel the pain midway through the project when you realize you've reached your budget and you still have half a house to fix up. Yep. And then finally, the third component of the ancillary costs is, you know, talk to the title company and other vendors that are involved in acquiring and reselling property to nasselry costs. figure out what those costs are and don't forget that they're there. This isn't a television flip show where you sell the house for 350 and you spent 100 to buy it up and 50,000 to fix it,

which means that you made 200,000. There's other costs in between those two numbers that need to get subtracted as well. Don't get tripped up by missing that. Cool. Cool. And I have to plug it here. If people want to go to biggerpockes.com slash kelk. You can check out the house flipping calculator that we made. So check it out. Yeah, it'll help you with that. So, next question of the fire round. What college degree

would best prepare you for, or best prepare me, for a career in real estate investing? That was the question. You asked the wrong guy with a high school diploma. Really? Surprised? Yeah, I am. I am. I think that's, I mean, I think that's

awesome. It just shows that you don't need to have a college degree to do well in real estate. Yeah, I don't think so. I mean, I think that I love people with college degrees because they make great employees. Not to say that you can't be an entrepreneur. I don't want to offend anybody that hasn't spent a lot of time and money on a college degree because it's, you know, I don't think you have to have a college degree to do this business. Now, I will say this.

I do have a degree, and I have a Ph.D. in the School of Hard Knocks. And I think that my tuition for said degree is probably fairly similar, if not even more, than the tuition that most would pay for a scholastic PhD. So I think that having real estate education and a finance and investment education is probably very helpful and would have kept me out of a lot of trouble. There was a point in time where I took some big hits, fortunately not with any deals that I had with investors, but in my own personal portfolio, because I always try to do a new strategy on my own before I bring investors in on it. And if I don't know what I'm doing, because that's when

you're going to make your biggest mistakes. So I made my mistakes on the way to that PhD in the School of Hard Knocks, and those mistakes cost me millions. And so I think a finance education and an investment education might have prevented me from having to cough that up. By the way, I love that idea. You know, if you're going to experiment, don't experiment on someone else's dime. Do it on your own. Yeah. No, I mean, it goes back to what I said earlier about investors.

Investors want to invest with you because you have a track record. And so just because you have a track record of flipping houses doesn't mean that you can go raise money to buy apartment buildings. You know, guys want to know that you're good at doing apartment buildings too. So anytime I'm in a new strategy, I'll try it on my own before I go out and raise money for it. And if I'm good at it, I'll go raise money. And if I'm not good at it, I move on. So don't expect to find me doing any more hotel development.

I've been there, done that, got the T-shirt, lost my money, and I won't do it again. I'll stick to what I'm good at. There you go. There you go. Do you think a written business plan is needed to be successful? I do. I do. Now, that's kind of a loaded question, Josh, because a written business plan is thought of in a lot of different ways by people.

I mean, you know, there's the simple one where you say you've written down your 20 goals and you pace it on the fridge and, you know, you read them every morning. There's that kind of a, that could be called a business plan. But you have to have some kind of, so let me look at one of my investment funds, for example. If I'm going to go out and start a private offering to raise money to go buy an apartment building or a portfolio of rental homes or whatever the case may be. And Josh, I come to you and I say, we're going to go buy this apartment building at 1, 2, 3, Main Street. and we'll probably make, you know, 200 grand or whatever it is, would you, you want to invest in it? What are you going to tell me?

Yeah, you're going to say, well, geez, you know, you got to show me something. You know, let me see what that means. So I have to show you a written business plan that shows this is what the income is going to look like and everything else. So without some kind of a plan to set the course, you've really got no tool to use to sell yourself or your investment. Yeah, good stuff, good stuff.

I like it. All right, let's move on to the end of the show, a section we like to call lovingly the Famous Four. All right, the Famous Four. These are questions we ask every week to guests, and we want to know your opinion on them. And I think we've asked you these before, probably, but maybe they've changed, so we're going to do it again. Number one, what is your favorite real estate book? Favorite real estate book?

You know, I still think it's probably the art of the deal. It's old Trump book from way back in the day. I don't have a lot of time to read. books. I don't even have a newer one because I just haven't had that much time to jump back into the reading bandwagon. That book, by the way, was probably one of the books that inspired me to get into real estate as well. So definitely a good one. Yeah, for sure. Cool. What about business books? What's your out and any, I know you're not reading these days. So, you know, are there any business books? Business audio, business websites, business something. Yeah.

Yeah, well, you know, most of the reading, quite honestly, most of the reading I do lately is on bigger pockets in the forums. You know, I read a lot there. At the expense of anything else, I want to read that kind of stacks up and I look over at it and go, oh, man, I've got to get caught up on, you know, all these other economic reports here because I've been reading too much bigger pockets. Never or never too much. Yeah, yeah, right, exactly, never too much. Yeah, you know, it's been so long. I can't even think of the last great business book I read. Well, there was one that was kind of interesting.

It was called the One Minute Manager. That was pretty good. But that's probably the last one I read. Right on, right on. What about hobbies? We know you fly. Love to spend time with your wife. What else do you do?

Anything interesting that you've picked up in the last year? Any exciting new hobbies? Nah, same old, same old. I just, you know, I like traveling. Oh, really. Yeah, you know, that's about it. Yeah, pretty boring. You know, it's one thing I've got on my radar that, you know, I've been working on getting my helicopter pilots license. So I started that and had to take a break from it because I got busy.

I can't wait to get back on that bandwagon and finish that up. And the other thing I want to do that I've been really excited about is I want to go down to the, there's a Sean Tucker School of Aerobatics. The guy's an aerobatic air show pilot and go down there and learn how to, do loops rolls, snap rolls, and lazy eights and, you know, all that kind of fun stuff and fly upside down. That's cool. Yeah. Yeah.

Let us know when you do it, man. Yeah. We want video. Josh won't ride with. Not a chance in hell, dude. Yeah, come on. You could do it. You got to get a GoPro for that one.

Yeah. Yeah, actually not a bad idea. All right. But that's not happening. I'm not going. No, you wouldn't. Right. My final question.

What do you believe sets apart successful business? owners and real estate investors as they're trying to scale their business from those who never scale, they stay small. Oh, wow. You know, I think a lot of it is just, it's the way that people think and their own internal barriers. I mean, you know, I've said before that you can never cross the ocean unless you have the courage to lose sight of the shore.

And, you know, and that means that you have to, you have to. Did you make that up? Or did you steal that from somebody? I steal everything, Josh. Come on. That's pretty good, man. This is the real estate business. Everything is plagiarism.

Come on now. But I think what that means to me is that, you know, you have to be able to expand your comfort zone if you're going to grow your comfort zone. And most people aren't willing to expand their comfort zone. You know, I think that sometimes the world, worst things that happen to you, which the reason people fear expanding the comfort zone is something bad will happen. I think everything happens for a reason. The worst thing that happens to you is setting you up for a teachable moment that propels you to be higher than you ever imagined.

I really believe that. I've been knocked down and every time that's happened, I've gotten back up stronger and more successful than before. It's all part of that growth process and that cycle we talked about earlier about going through that, doing it all yourself, all the way to growing a large business. All that is all part and parcel with that. And you have to be willing to accept that risk if you're going to become successful. Yeah. Fabulous.

That's great. Fabulous. Awesome, man. Well, listen, I think your follow-up was well worth it. I really do. Where can people learn more about you? Probably the best place is either on the Bigger Pockets forums or, or, you. through my website, which is Praxis Capital.

It's PraxCAP.com, P-R-A-X-C-A-P-C-A-P.com. There's information on there about what our company does and what I do in background and all that good stuff. Nice. Cool. Cool. Very cool. Brian, listen, man, thank you so, so much for coming back. And maybe, just maybe.

we'll be in touch in a year or two for for number three. Well, can we, maybe we should just skip number three and we'll have you for four. I don't know how we can do that because you hate three so much. You hate three so much. Yeah, no, I don't know if that works. Or you know, you could also maybe have me come speak at a bigger pocket summit. That would be a good idea. All right.

I wonder about something like that maybe. I could be the first one. I don't know. I like that. All right, man. Well, listen, it's been a pleasure. It really has. We really do appreciate it. You guys can find Brian at the website. You mentioned, if you've got questions for him at all, hit him up on the site, or you can ask on the show notes at biggerpockets.com slash show 76. And another reminder, you can find Brian's previous show at biggerpockets.com slash show three. That's all I got for you. You know, if you're not out there making things happen, make sure to do that.

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