BiggerPockets Real Estate Podcast - 88: Investing with Your Spouse, Managing Financials, and Growing Your Team with Matt and Liz Faircloth

Episode Date: September 18, 2014

Today we’re thrilled to chat with New Jersey real estate investors Matt and Liz Faircloth on The BiggerPockets Podcast, covering everything from the challenges of working with a spouse to purchasing a 10,000 square foot office space! Matt and Liz have been hooked on real estate since buying their first single family home in 2002. After years of self education, their fair share of learning pains and a healthy dose of hard work, the couple now owns over 100 units and has accomplished around 15 fix and flips. Employing a team of 11, their mission statement is to “revitalize Urban America” and to “transform lives through real estate.” Pick up some great tips on building an empire from the bottom up, choosing the best kinds of financing and earning that all-important track record of success. It’s all here, so don’t miss out! In This Show We Cover: How Liz and Matt got their start in real estate as an engaged couple The pros and cons of working with your spouse How to successfully get organized The importance of making a business plan from the get-go The ins and outs of bookkeeping in a home business (program recommendations included!) What you stand to gain from a tax deferred exchange The thrills — and challenges — of buying a 10,000 sq. ft. office space The all-important skill of flexibility (or “learning to pivot“) How to gain wealth through commercial real estate The intricacies of private equity, private lending, forming LLCs & LLPs (and more!) Proof that you CAN see 20-40% returns with no money down How to add value to a real estate investment team without putting money up The definitive guide to finding great employees for your business Why modular homes may be your safest bet The worst rehabbing nightmare ever (involving lawsuits, water damage — and a total lack of foundation) And so much more! Books Mentioned in the Show The Lean Startup by Eric Reis Rich Dad’s Cashflow Quadrant by Robert Kiyosaki Real Estate Riches: How to Become Rich Using Your Banker’s Money by Dolf de Roos The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael E. Gerber Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth by T. Harv Eker Tweetable Topics “So if the game plan goes wrong, have a B, have a C, have a D.” (Tweet This!) “Do things that you’re good at and that you enjoy…bringing your real passions to a task is key.” (Tweet This!) “Single family home, multi family home — whatever your plan is, get really good at it.” (Tweet This!) Connect with Matt & Liz Matt & Liz’ Company Website Matt’s BiggerPockets Profile Learn more about your ad choices. Visit megaphone.fm/adchoices

This is the Bigger Pockets podcast, show 88. 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 height, 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 of the Bigger Pockets podcast here with my co-host, Brandon Turner. What's up, Brandon?

Not much, Josh. How are you this wonderful week? I'm actually sick right now. Oh, you're always sick. You're not always sick. Scott here in the office was coughing all over my desk and got me sick. So I don't know. Yeah, I think it's just a life of parents. Parents are always sick because their kids are gross. Yeah, this is true too. Although my kids are not yours. But yeah, the kids are always sick, though. They're like at school, touching doorknobs and stuff that everyone... My cats are so much cleaner than kids. It's amazing. Oh, I doubt it. I doubt it. Anyway.

Yeah, my kids don't crawl into the little cat kitty litter and then stand on my kitchen counter where I cook dinner. Doesn't happen. That's just nasty. Yeah, yeah, yeah. Well, cool. But anyway. We got a great, great show today. Definitely an awesome interview with a couple, an actual married couple who's investing together. So that'll be cool. An actual, I know they're actually married and they're investing in real estate. Wow. Wow.

Yeah, yeah, it is. It's a good show. And we're going to get to that right after our day's quick tip. All right. So today's quick tip is maybe something obvious, but I want to just emphasize that today is if you have a question about your real estate business of something, don't try to like, I don't know, sit there and try to figure it out on your own. Like, I've been doing that forever.

I've been wondering, like, how do I get ACH transactions on my website? I've been wondering that for months and months and months. All of them yesterday it occurred to me. Brandon, just go put a Bigger Pockets forum question. How do I get ACH transactions on my website? And so I put it up there and I got eight replies yesterday alone and some really good stuff in there. So anyway, if you have a question that you're right now in your business, you're wondering about, go today and go make a forum question, ask it in the forums and see what people say. That's my quick tip.

That's great. Biggerpockets.com slash forums. And there is no such thing as a stupid question. I mean, you know, we all look at Brandon here. Well, let me use a different example. Thanks. that was a great question no I think it's a good question

and you know it just shows like listen I mean Brandon's been around he's talked to a million people he knows he knows more than probably 99% of people out there and yet he doesn't know anything I mean we none of us know anything we're all learning we're all trying to figure this out

so there are no stupid questions go ahead and ask it and I guarantee you there are other people who may be thinking the same thing and not be not asking the same question so that's today's quick tip Oh, and it's free. You don't have to have like a pro membership to make a forum post.

So people just go ask a question. It's free. Do it today. Biggerpockets.com slash forums. But speaking of pro, our pro benefit of the week this week I want to talk about real quick, is something that we have talked about before, but I just wanted to emphasize bigger pockets perks. It's biggerpockets.com slash perks. You get discounts, promotions, stuff like that.

You can save a ton of money. So if you are a pro member and not taking advantage of that, head over today, see what you can get discounts on and you'll probably save a ton of money. And we're adding new companies. and if you're a company that has a perk, get in touch with us, biggerpockets.com slash contact. There you go. All right. So let's get to our interview today. You want to introduce our guests? Yeah, awesome, awesome. All right. So today we've got Matt and Liz Faircloth. These guys have been hooked on real estate since reading Rich Dad, Poor Dad, back in 2002. They have been building their business up little by little to eventually come up to over 100 units.

now. They've done over 15, around 15 fix and flips. They live south of Trent, New Jersey. They've got commercial properties. They've done development. They've done pretty much everything. They've been really busy and they've got a lot of great information to share with us today. Their mission statement is to revitalize urban America and to transform lives through real estate. Okay, we're going to shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck doing everything ourselves and the cost of sweat equity. The key question is simple. Is my time better spent elsewhere?

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landlord insurance. Steadily, landlord insurance designed for the modern investor. Let's go bring these guys on board. All right, Matt and Liz, Liz and Matt, welcome to the show, guys. It's great to have you. Thank you. It's great to be here. Thank you so much. It's great to be here. Yeah. Well, thank you for being here. We're going to talk about a lot of stuff today, including rental properties. We're talking about flips. We're going to talk probably about

raising money and all this stuff. But before we do, let's just start very, very early on. How did you get into this game of real estate? That's a great, it's an interesting story. We got started when we were dating back in 2002. Liz and I sat down with a few friends and played Robert Kiyosaki's cash flow board game. Nice. And at the time, I was working as a traveling salesman. And just our minds were blown by this game. And it just really showed us the possibility of financial independence, passive income,

and being able to lead a life that we really wanted to through real estate as a vehicle. And first purchase was a single family home that I lived in, which you guys would call the house hack. Right. I bought a three-bedroom, one bath, had a couple of. couple of my buddies moved in with me. And I was making 60 bucks a month and I was living there for free. And it just completely just really set it into stone with the possibility of real estate was for us. And we started getting educated. We took probably about a year and took seminars, read books, networked before we made our next investment purchase. And then from there,

we bought a duplex. I was living in Philadelphia at the time. And so we bought a duplex in That was our first rental deal. We bought that one while we were dating as well. We started buying properties before we were married, which was a bit of a risk, but it was cool. And you guys bought the properties together, both names on it? That's right. Okay. Yeah.

It was a big step for us because we actually purchased it. You know, we had our first private money loan from my father. But, you know, it was a big risk. We were engaged, but we weren't married. So we both had to, you know, take the step and make it happen, you know. This feels like when Harry Met Sally. It does kind of good. So, I mean, let's, I think the first thing I want to really get into is working together in real estate.

And we've had a couple couples, you know, over the 80, what is this, 80 shows. And it's always interesting to get that perspective. I think because, you know, it really is so important to be in line with your spouse. You know, if you're not on the same page, things could go horribly wrong just in terms of you're going to be fighting at each other's throats. So let's kind of start there. What does it take? What does it take to work together? And frankly, what does it take to work together?

I mean, you guys jumped in without even being together, right? I mean, you were together, but you weren't together. So can you guys talk about that? Absolutely. I think that's a great question. It's something that we've talked a lot about, you know, because we've shared that with other couples. But we sat down in 2004 when we bought our first duplex and we developed a plan together. We developed our, you know, I call it our why statement, you know, digging really deep to get really clear on why are we even investing in real estate.

I mean, we both like the vehicle of real estate, but getting really connected with what we're doing and why we're doing it. When we first started dating, we had such similar values about entrepreneurship, eventually wanting to, you know, work for ourselves and build a business. And we both had the same, you know, spiritual values as well. So we believed in, you know, having faith and just persistence and what have you. So we developed a business plan together back in the day. We actually just found it because it was literally 10 years ago. And what was really neat was we were looking at this plan that we wrote when we knew nothing. And I have to tell you, I say eight out of the ten things we wrote down.

We're not that far off. So it was 10 years ago. So it was really, really neat. You know about goal setting, but then when you see it in black and white. So I would say that's one thing. Number two, I've had various roles over the years. Matt has always kind of been our kind of president leader of the business. but I've always been either a strategic kind of advisor.

I've been actually in full time working with him, part-time. I mean, I've literally worn every hat. And I can say that the key is to really, you know, just know your roles and keep things separate. And just communication, open, honest, really clear communication. Yeah. Interesting. You know, I used to work with my wife. She ran a school.

She was my boss. This was before we got married. Yeah. I thought it was fine. I don't have a problem, but people would always come up to me and say, Josh, how the hell do you do it? I mean, you're with her all day at work. You go home, you're with her. You know, aren't you guys sick and tired of each other? I said, eh, you know, it works great. We're not tired of each other at all. But I do think it can be challenging for some folks to do that. So how do you guys separate the work and play? How do you separate business from personal? Is there a

separation for you or is it all just kind of combined? Well, as Liz said, we did it once in 2009, Liz actually quit her job and worked with me full time. And that did not work out too well. Okay. Yeah, yeah, because we were kind of on top of each other. We were, you know, our roles were very intertwined. We didn't have clarity of roles. And so we ended up kind of running interference on each other a lot. And it caused a lot of strife, to be honest, in our marriage and our business and everything. Sure. And so she went back to work in 2010. And now I think that the differences, we work very well together and the differences that we have a bit of separation. in that Liz has certain projects she's working on. I have certain projects I'm working on.

And there's certain things that we interact on. And I also respect, we really understand and respect each other's skills. So Liz really understands people. I mean, she just knows how to communicate with people and what really drives people. And so when I'm having a personnel issue, she's the first person I go to. And she also has other skill sets that I really look for when I need a certain thing in the business and it's vice versa as well. So I think we have a bit of that, you know, separation so we can kind of do our own things. We're not like breathing down each other's neck because that didn't work the last time we did it. Yeah, you don't seem to have very good people skills, Matt. No. Awful. I spit on people is what I do. So I communicate, you know. So I mean, you guys

eventually found those roles, right? I mean, this wasn't something, obviously this wasn't something that you guys just started with, right? I mean, it took time to figure that out. Do you have any recommendations for people, you know, if we've got, you know, a spouse's listening together or individually, do you have recommendations on how folks can work together? You know, what has helped you beyond the, I guess, figuring out what your skill sets are and kind of making sure that you're not kind of overlapping or second-guessing one another? Yeah, I would say two things. Do things that you're good at and that you enjoy.

When I started working with him in 2008, I took on the bookkeeping of our business. And again, that's something that I'm not good at. and I didn't enjoy. Right. So, and I just, I just screwed things up all the time. I forgot to,

I forgot to pay mortgages. I mean, it was horrible. That's not good. Yeah. Not good. But I just, I didn't have a handle on it.

I'm not a numbers person. And so, anyway, I just, I think being good at something and enjoying it and bringing your real passion to a task is key.

Now, now that we're on that subject, I want to kind of drift towards what you just said about accounting. And I know this was, I probably was going to bring this up way later,

but you mentioned it now. You first, you did the accounting, like the bookkeeping, then you find you didn't like it because this is the exact same situation that my wife and I are in right now. She does the accounting for us, the bookkeeping. She doesn't like it. She's good at it, but she just hates doing it, I feel like. How do you guys do it now? Matt, do you take over that part of things or do you outsource that? How does that look? Now, for me, I put my focus on building the business. So I focus all my time on raising money and finding new properties to get into. But I have a full-time office manager that works for us now that, that does. There's a lot of that. But before I even got, I'm not just saying that, you know, if you don't like financials, hire a full-time employee to do it for you. But what we started with was just hiring a bookkeeper. And we were able to find one at a very reasonable rate. And that's, that was her skill set. She was great at it. In the beginning, we were paying her like 10 hours a week for managing something like 35 properties is what we had at the time. And she did a great job with it. And we've since expanded her role to where now she's now my office manager. But that's we started with a bookkeeper. And there's even bookkeeping companies that, that will run books for you and that kind of stuff. What exactly do they do? I mean, we'll talk about your business model a little bit, but your business model and mine are pretty similar.

And so, you know, obviously I use these podcasts selfishly, so I'm going to ask you. Yeah, I was going to say, this is how I go. And then once it's being totally. So it must be nice. Yeah. So I want to know, I want to know what does the bookkeeper do? And what I mean by that is, so obviously, I mean, you know how it is like when you're doing a rehab on a property, whatever, you get a ton of receipts going in and out.

You get a ton of things. At the end of the month, we sit down, and I don't know if I do this the same way as everyone else does, but the end of the month, we sit down and we look back on our bank statement and we try to reconcile what every single item was, and we're not always sure, and we're like, why do we spend $37.50 at Home Depot that day? I can't find a receipt for it. And then it's just like, is that what a bookkeeper does? Like, I mean, do they call Home Depot and try to figure out what was going on? It sounds like you're doing hindsight bookkeeping, you know, like, you're looking back on the month on the 30th and saying like, okay, this is what happened.

Yeah. We do, you got, so I would recommend that a bookkeeper can get into a position where you're doing proactive bookkeeping, where you're looking ahead. And when a check needs to be cut, it gets entered into the system immediately. And the system is whatever software you're using. We use Rent Manager. You can use QuickBooks. You kind of have to trick QuickBooks into working around real estate, but there's other software's out there too. So as soon as I have an expense, it gets entered into my accounting software and it gets coded. So it's, okay, what is this? Is this framing? Is this handyman work? Is this plumbing? You know, whatever is it. It's a real estate commission, whatever it may be, you get it in the system, and then I don't have to look at it

again until I run a report at the end of the month to see how we were financially, to run my profitability statement. That's the only time I look back. Most of the time, you know, the expenses, as soon as these expenses hit, they're in the system. And so that's what a bookkeeper can do for you. And they're coding things, and so you can run financial reports and that kind of stuff. These softwares will actually let you print checks. So as soon as you put the expense in, you hit the print button and it prints the checkouts. You don't even have to handwrite. the check anymore, you just sign it. That's cool.

Yeah, yeah. I need to do that. I mean, like, I've talked about it for years. Like, and I tried for a while, you know, I got Buildium and then I got at folio and I, and I never really took the time to learn either. I don't know, like, we like would start one and then never really jump in the full way. I tried quick books for a while. And yeah, in the end, like, I've still like, I mean, it's kind of like embarrassing to

say, but I still use Excel for all of my bookkeeping. And it drives us absolutely insane every month. Like, it's just crazy. Here's, here's an easy way to deal with that, Brandon. If you don't want to hire a bookkeeper, what you can do. And I used to do this until I pawned off to my wife who is not pleased about this either. But, you know, I used, I mean, for years and years, I literally, you know, if I would spend money, I'd come home, I'd have a receipt in my hand. I'd go into quick, quick, enter quick books.

And I'd just enter it in every night. I would literally spend five minutes a night to just enter any receipts I had into QuickBooks. That's it. I mean, that's all it takes is the discipline. Your problem is going to be that you have all this backlog of stuff. right. So what you do is you enter all the backlog in at the end of the month. Okay, get caught up, say the end of this month. And then on the second, well, the end of the day on the first, if you've gone out, you've bought anything, you just put those receipts in.

And the second you put the receipts in, again, you just make it part of your life. You train yourself, hey, every day, every time we spend money, we immediately put it in and then it's handled. Yeah. I bet you there's an app. Or just hire a bookkeeper. Or hire a bookkeeper. And I think there's a company called bench. I think they're called. I've been looking into a lot. I don't know if anybody listen to podcast has used them. I'd love to get a recommendation or what you thought of them. But yeah, they're like, it's like Uber for accounting. And so you can like hire one online. Like, it's all through the cloud. I don't know. So that's an option as well I'm going to look into.

But it's a reason it's like 150 bucks a month or something like that. It's cheap, which makes me nervous about it. But anyway, anyway, so yeah, I definitely think accounting is an issue that a lot of landlords and a lot of housefulpers and a lot of just real estate investors in general really struggle with because the way I mean the mistake I made is I didn't set it up right at the beginning and then I never really focused on it. So I'm still running it the same way that I ran it, you know, seven, eight years ago. I mean, it's a hassle at the end of every month. I mean, it takes us a long time. My wife spends hours and hours and hours every week on, you know, that. So anyway, if I can just say something quick about that, too, since we do property management

and we also do flipping of property, we use two different software. So rent manager is great, but you almost have to trick it to enter in the data around rehab for flips. So QuickBooks, I know. Yeah, we use QuickBooks for flips and the rent manager for rentals. And the last thing I would say is that you could probably, you know, limp by on what you're doing with using Excel and that kind of thing for doing expenses. But the next time you buy a new property, properly entering that into a good accounting software or something a bookkeeper could do for you because you want to put in something for land value, something that you can depreciate and some, you know, something for fixtures and that kind of stuff, which an accountant could tell you. more about and that kind of thing. But bookkeepers can do all that. I mean, it was very complicated to do that if you don't have the skill set. Yeah. So that's one of the things that's stopping me

now is that I look back and I have to, you know, I have all these properties now that I have to go and back enter in years of information to try to, or at least the year of information to try to like, so like it's almost like not worth it. Every time I just get overwhelmed, I'm like, oh, this is so much to do. And I just, I stop and I'll do it next year. I'm actually glad that you bring this up, Brandon because you, you know, you are probably 95% of our listeners, maybe even more. I mean, I'm guessing most people who are listening to the show are probably not as organized as they should be. If you're one of them, honk your horn. But yeah, so, you know, I think it's really important to hear that, listen, this guy, Brandon, oh my God, it's Brandon Turner. And he's telling me he's

totally disorganized. Oh, great, it makes me feel good. I'm sure it probably does. So, you know, take take this time guys if you're listening and you are like brandon and you're disorganized get it together i mean really this is a good opportunity this is kind of you know if you do one thing if the show does anything for you you know get out there get organized get you know get quick and get quick books get something and start to to put it together because you know you do not want to be Brandon in this case you know in other cases you might but in this case you don't no yeah you don't what i would add on to that what i would the final thing to add on to that Josh is that there's only so much time in a day. And if you free up yourself from doing those financials and

running the books and that kind of thing, there's so many other profitable adventures you can get yourself into to grow your business. And that's when our business really took off was when I started delegating and giving activity I was doing, including the books and that kind of thing that I was able to get into other things. I could say the same thing about mine. Yeah. Yeah. I could say the exact same. I mean, you know, I hired that guy, Brandon. And he started taking some stuff. And now we've got, I don't know how many full-time people, you know, things are great. And I can actually focus on what we have to focus on, which is awesome. So, yeah, that's really, really, really good advice.

Well, cool. I mean, lots of great stuff on working together and delegation. Well, you guys started this thing with a house hack, followed by duplex, right? Yes. Okay. So what came next? And what kind of deals do you guys do generally? So what came next was our first 1031 exchange, which I don't know if you wanted

put a pin in that and explain what that is or not? Yeah, why don't you? Just in case. Sure. We sold the duplex in Philly, and instead of paying capital gains tax, which we would have to pay if we just took the money and put it in our pocket, we rolled it into another property. So it's a tax deferred exchange where you get to not have to pay income tax, but you got to take all the proceeds you make on the property and roll it into another investment.

There's a lot of rules around it, around time and around money. But bottom line is the new investment needs to be at or above. what you sold the prior property for and you got to roll all your proceeds into it. And you got to do it within, I think it's 180 days. We sold the property in Philly, the duplex, and we rolled it into a pair of four families in Ewing, New Jersey, which is not too far from where we live. So we've since acquired more of those four families in that, in that block that they're on and that we've expanded our business to the point where we were probably about 80% residential for our portfolio. We also own, we bought an office building and we converted it into a small business center. So we've got

18 different companies that occupy the building. We're actually sitting here talking to you from it now. So we occupy it ourselves. But we have all these different companies that occupy the space. And it's this really cool networking and social environment as well that's full of mostly young entrepreneurs that are all doing everything from law firms to not for profits to other real estate investment companies that occupy the space. So that's a touch on our portfolio. So it's like a co-working space. Yes.

Yes. But it's not an open platform, though. So you're not sitting next to the guy that's running the law firm. We will have private offices in every country. But if I can mention about that, you know, in 2008, I think we purchased it. Yeah. And it's a 10,000 square foot building. And an organization at the time had the space.

So they ended moving out. And we ran the, you know, profit and loss. And Matt showed me that with this, you know, one tenant in this building, we'd be, you know, cash flown. We were both excited, you know, this would be the biggest purchase. Awesome, awesome. Well, we ended up just sitting on the property for a while. And lo and behold, in 2008 and even now, not many people and not many companies are looking

for a 10,000 square foot building in Trenton, New Jersey. Yeah, that was a big mistake. It was probably one of our biggest mistakes when we first got started is we looked at the current snapshot of the market and assumed that that would be the market for several years out. And so to give numbers, we bought the building for $50 a square foot, which is a really cheap number for New Jersey. And another good rental number is around $12 a square foot. And if you run the numbers for rent, it would be $12 a foot per year. And that works out to be a really great cash flow for the property. And I showed it to Liz. And she's like, that sounds great. Let's do it. And then 2009 came

along, you know, and we put the market did. And so we kind of got tired of sitting on this vacant building that nobody wanted to come and rent from us at $12 a foot. And we had to drop back and punt and change our plan. And really broke up the building into small office. out of a need. But, you know, it was just one of those examples of many times that you, you know, you think one thing around this is the right investment, this is the right path, and you kind of learn a new way and you have to figure it out and quickly. That's awesome. That's awesome. You know, I think it's so important to talk about that the ability to be flexible. Yeah. The ability to adapt your plan. And, you know, I think that's

hard for new investors. It really is, you know, coming in, you say, oh, listen, this is my plan, this is what I'm going to do. And if it goes wrong, oh my God, the world is going to blow up, right? So, you know, that's why we really try to talk a lot about this, which is, yeah, and I think we have the whole last chapter of our ultimate beginners guide. By the way, BiggerPockets.com slash UBG is the ultimate beginners guide. It's a free guide, teaches you all the basics of real estate investing. I believe the last chapter we kind of talk about, you know, having a need and having the ability to adapt and having multiple game plans. So if game plan A goes wrong, have a B, have a C, have a D, just so you can pivot quickly.

Yeah. I like that phrase pivot. I think that's what Eric Reese from the lean startup uses that all the time, like the word pivot. At times you have to change your investment strategy a little bit. Just like a basketball player would pivot and move a little bit different direction. So I like that. That's cool.

So when you said you divided this 10,000, I mean, I have a couple of questions. I want to jump back to the 1031 thing too, but while we're on this, you divided them up into office building. Did you actually like, you know, build walls in there and put it into different? offices. Is that what you guys did to constructed it? Or was it already like that? No, well, so yes and no, some spaces were cut up and there's this big huge space in the back of the building that we turned into a seminar room. We put in a projector and a bunch of chairs and that kind of thing so that, you know, people could come and do small, you know, presentations and that

kind of stuff. But some of the rooms were already delineated and we just put separate locks on them so that the tenants can, you know, you get into the building with a key fob. There's a bunch of common area in the building and you can walk into your privately locked office space. And we put in some walls to add some, you know, to add a few more offices and everything like that here and there. Are you doing better than you would have, like, than your projections were with the one tenant? Like, do you feel like as a multi-use place, are you getting better returns than you were at hoped? Or are you getting a little bit less? Well, it's interesting because you get, you know, it's a double-edged sword in cutting up a space like this because we didn't put private utility, you know, separate utilities in.

It's kind of, it would be hard to put like 18 different of everything in each space. So, you know, we bill out CAM, C-A-M, which is a percentage of the utility bill and a percentage of the maintenance to tenants. We try and pass as much of that along to our tenants as we can. And we get better rent per square foot of the offices. So I might get, you know, $25 a foot versus 12. But it's of like this little tiny office space that might be, you know, like a 10 by 10 office that's rent for $2.50 a month, you know. So buy the actual per square foot for what we have, we do better. but you have to factor in all this common area, all these hallways and all these things like that.

So have we leased the whole building, that would have all been a rentable space. It's not rentable space when you're just renting small offices. So you kind of take a haircut there. We ended up averaging out about the same. But, you know, so that's the short answer to your question. I work in a space like that. Our office here is in a similar type of space. And what they've done, which is, I think, really, really bright is they've taken those empty common areas, the hallways.

and they basically made those quote floating desks or just kind of individualized desks. So you can literally buy a desk in the hallway. And it doesn't come with, it literally is a desk. You bring your, you know, I think they'll upsell you. I'm not sure exactly how it is, but they'll upsell you like a locking file cabinet so you can put your stuff in there. But otherwise, the desk is bare. You know, people, they'll leave monitors and stuff. Nobody's stealing their monitors.

But it's another way to kind of get rent back on that space. And it's great. I mean, this place is completely full. And it's, I mean, I look at it. I'm like, man, I'm sitting here paying rent on it. I want to own this space. What does that cost? What are they getting for one of those floating desks in the hallway?

I think it depends somewhere, I believe, between $250 and $450 a month. That's great. Yeah. Yeah. So here's the nice thing. People don't, people who are, you know, upstarts, upstart companies. I don't want to deal with rent, utilities, all the headaches. I want to pay one bill.

I want to make my life really, really easy. You know, so that's what these types of things. Regis is the big national chain that does this stuff. But yeah, it makes it really easy. Listen, you guys can come in, you pay X amount of dollars, you pay one bill and you're done. Great, great. And these things are popping up like crazy in Denver. I mean, they're really, really popular here in town.

So I love it. I love that you guys are doing it. And I think it's a phenomenal, phenomenal model. Yeah. Would you guys recommend other people get into like, especially new But anyway, would you recommend getting into commercial or do you think that was a big step? Yeah. I wouldn't go to say all your newbies to go right out there and buying 10,000 square

for all this whole things per se. But, you know, I'd be okay with them taking the calculated risk because what it's allowed us to do is carry a presence for our business. When people come to visit us, you know, come to my office. So, you know, for the people that are working from home and that kind of thing, we were able to carry a bigger presence of a much larger company by people coming to see and sit in our conference room. and being able to do closings here in the building and everything like that has been really,

really cool. And it's been a great opportunity to network as well. The only thing I would say to anoubi is just be sure you run your numbers and that, you know, the most or all of your expenses are covered by your tenants and that you're, that you as a startup aren't putting yourself into a position where you're having to pay a bunch to be in this swanky office space because we are able to occupy it. It doesn't cost us anything. Yeah. Because of our tenants. It's like house hacking, but for commercial. It's cool. Right. So, but anyway, I want to go back to touch on real quick, before we move on, I want to touch on the 1031 you mentioned. And again, I'm a selfish person. I'm going to ask a question. I was actually talking with one of my business partners

the other day about one of our properties. And we have probably $30,000 to $40,000 of equity in this property after paying the real estate fees if we were to sell it. Like we'd clear about $30,000 to $40,000 in cash. They asked me, well, they said, well, I've heard something about this exchange you can do, 1031. Should we do that if we sell? And I said, I don't even know, like, how much is that cost? I mean, I know what they are, but I don't, how much do they cost to do? Is it worth it on a $30,000 profit? Let me ask you a couple questions. What would you sell the house for, the property for?

It's probably, we have about $190 into it and it's about $140,000 is what we could sell it for. Remember, he's not in Jersey, guys. Yeah, we're in, I'm in cheap area. Right. Yeah. It's probably like an eight unit or something like that. It's a triplex. I'm so jealous.

Yeah. So, okay, at 140, if you're making, you're making 40 on the sale or 30 on the sale? Between 30 and 40. I think we have about 90 into it. So, you know, if we got 140, there's 50 and then paying all the closing costs and stuff. It's 30 to 40 to 40. You and your partner would have to be prepared to bring a few bucks to closing. That's all, you know, to buy the new thing.

Because even if your new purchase was around 140, you would have to obtain a mortgage. And you'd probably, these days, I'm seeing seven. 70% LTV, maybe 75, and that kind of thing. And then you got a factor in closing costs and maybe some work you want to do and that kind of thing. So I would just prepare them for having to bring a few dollars to closing. When I did our last 1031 exchange, the fee to this, you know, custodian, I believe that's what they're called, that, that holds the proceeds for you, was somewhere in the neighborhood of $1,500. Okay, that's not bad. I was thinking if it was going to be, you know, $8,000 for that. And I could pay $8,000 taxes. It would be the same.

But that doesn't sound too terrible. No, it's not too, it's not too crazy. And you can parlay it into larger things. I just, it sounds like for that deal, you might just have be prepared to bring, you know, some dollars to closing depending on how big a property you want to get into. Makes sense. And we do have it. We have a, you know, we put a down payment on that pretty like a 30% down payment. So we actually have quite a bit like that. We could probably do it. Yeah. Maybe I'll do that. I don't know. I'll tell everyone in a few weeks if I decided to actually do it. So all right, let's move on. So you guys did the house hack, the duplex. You bought the commercial. How many total units do you have now at rental properties?

Now we have about 115 now. Wow. But that's, but that's, there's a whole big gap that I've, that we haven't gotten to. Yeah, let's, let's get there. They bought four, then they bought the hundred units. Right. The end. Right.

That's how we did it. Yeah, right. Now, we, uh, we actually kind of plateaued. We had bought the, uh, you know, the, the two to four families. We had, you know, bought the office building. We had bought a few single families here and there and everything like that. And we, I think we, uh, had leveled out at around 30 units. and we started getting into raising private equity of, you know, for which I'll explain

that whole thing, but people started coming in and investing through new LLCs we would set up in properties. And so we started out really, really small. We were buying, you know, our first deal with private equity was two single family homes. A guy gave us $50,000. We formed a new LLC. He was a, you know, a member of the LLC, willing to personally guarantee mortgages and that kind of thing, but not wanting to do any of the things that needed to be done. I did all that. I didn't front any actual cash. He did all, he fronted the money and I did all the things that needed to get done. It was a great partnership. And then he started getting some of his friends in. And we built it and built it and built it until where the last fund that we raised was about

a half a million bucks. And we're in the middle of raising a million dollar fund right now. And so through doing that, we've been able to buy bigger and bigger properties that I wouldn't have had access to with my own cash. Because honestly, Liz and I were. cap at about 2010. And we wanted to grow the portfolio. The only way to do that was by bringing in more capital. And I think that's where a lot of investors are at. I mean, that's where I'm at today, right? Like, you get to this point where you kind of plateau and you can't, you can't get larger because you'll never come up with the $500,000 down payment. I need to go buy a big apartment complex or whatever. And that's when you got to kind of start thinking, I guess, more creatively

in that. So maybe you can touch really, really quick on that. I mean, like for those of you you guys, listen, the big guys, like the biggest of the biggest of the biggest, this is how they do this. I mean, you know, a lot of, these guys are not just thrown, you know, thrown down, you know, hundreds of millions of dollars of their own cash to build these monster complexes and big skyscrapers. I mean, this is how, you know, larger portfolios are built by the big dog. So, you know, just putting that out there. Yeah, that's absolutely true. The rise of the tech savvy investors here. You don't need a huge team or tons of overhead to manage rental properties, just the right tools.

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the interest rates you have to pay because the money just starts to accrue over time for what you owe these folks and everything like that. And quite frankly, most of the private loans that I deal with are self-directed IRAs. So I want to give them their money back because then they're just going to give right back to me. And they can't keep the interest if that makes sense. So if I loan somebody $100,000, somebody who loans me $100,000, I pay them back $105 in, you know, five months or something like that. They have to, their $105 is now there in their account because it's an IRA. They can't touch it. So they're going to loan me back 105. And so I can take the 105, turn it into 112 for them. Then they have 112 to loan me. So my lending pool raises as I do deals with these guys. That's why I really love

doing private loans with self-directed IRAs. That's that. And the equity piece is a way longer investment. It's typically five years is what I tell people they're going to be in for. Okay. And so those are usually more for, you're going to buy something and fix it up, like a larger property, fix it up and then refinance it or sell it like a larger property? Yeah, what could be, we don't do sales for the private equity. We want them to be a, it's more of a cash flow type of thing. So we might go buy like a 10-unit apartment building. We just did a 10-unit apartment building with some private equity.

We bought it, did some work to it. But the beauty of it is we just got a mortgage going up front. We didn't have to refinance it. And now we just came in. We had enough private equity to purchase the property to make the repairs we needed to make and to go ahead and cash flow. And we just send our investors a quarterly dividend check. And they just own a percentage of the building.

And so if the building made a certain amount of money in a quarter, they get a percentage of that. And we just mail them a check. Well, I think that's the big difference between private lending and private equity. Equity, you're actually partners. And in the private lending side, right? You're in essence. You're the bank, right? Yeah.

Just a bank, right. Yeah. So how do you structure? Yeah. And I know this is going to go a little bit above our heads, possibly, the listeners' heads. And I don't necessarily want to get into too much detail. And let me take that back. We're not going over everybody's heads, but this can get kind of complicated.

So how are you guys generally structuring your private, what is it, your private equity deals? Sure. We use what's called a limited liability partnership. It's very similar to an LLC. It looks almost like an LLC except for it's called an LLP. And the difference is that there's these limited partners involved in this general partner, which is us. The limited partners just have to, their obligations to put their cash in. And the reason the word limited is in there is they are limited.

to the amount that they invest. So they can't lose any more than that than their investment. Nobody can, if the property ends up not making any money and the bank has to go and repo it, they're not going to come after that person's house. They're not going to come after any of that personal assets. They may come after my personal assets because I had to personally guarantee the loan and that kind of thing. But we are on the hook for the management of the property and the liability of the property, not the LPs. So they put up, they put up X amount of dollars each. Are you guys putting up cash as well on these deals? We typically don't because we add different value to the partnership in that we've got a track record.

I have a management team of 11 people that manage the property that work directly for my company, that are employees of my company that I can control and control the return on investment of the property. We're producing the leads. We need be personally guaranteeing any loans or mortgages that need to go on the property as well. So that's the value we're putting in. And so the structure is we will typically take anywhere between 12. 20 to 50% of the project, our LPs get, you know, the other half of that. And I break your percentages down really based on the return I want to see my LPs get.

And so the more ownership they get, the better return that they get. And so I kind of look at the numbers to say, okay, well, how can I make a good return for these guys? And, you know, what percentage would they be comfortable with to make, you know, to make the money they want to make on this? And the rest is for me. So what does that end up being typically for you? I mean, what percentage do you usually end up getting out of a deal? For me?

Yeah, you guys. Well, not you. I mean, I don't mean you. I mean you and Liz and Liz because I'm sure Liz is getting 50% of that deal, right? Yeah. I just want to make sure. 51. She better be getting 51.

We're a woman owned business, so it's 51%. Oh, that's what we are too. My wife and I, she's 51, yep. That's right. That's right. You never know, right? So we as the company, as in the partnership, the general partners, let's say, typically take, let's say we end up landing around between 20 and 40 percent, you know,

ownership of the project. For putting nothing down, it sounds pretty good. It's not bad. And I think what's key there is a lot of people think, you know, I want to go invest in a deal with no money down. Like, you know, that's the popular phrase. And I'm going to do it. I don't know.

The interesting thing is you may not be bringing money, but you are bringing something. And I think you said that great because, you know, you are bringing expertise. You're bringing the guarantee. You're bringing the deal probably. You're bringing all this stuff together. So the cash is the smallest piece of that. know, so you're still going to watch. The cash just makes the deal happen, but you still have to have a deal. You have to have management structure. You have to have a lot of things in place to make these things profitable.

I mean, the cash is just the vehicle to get it to get it to where you want it to go. Listen, go ahead. Really quick. Like, I'm sitting here. I'm running a full-time business, right? I'm working 80 hours, 100 hours a week on some weeks. I don't have time to go out and do portfolio, you know, to shop for property. I don't have time to do any of that stuff. That's where these types of deals come in. I'm not alone at this. There's millions of people just like me who are saying, you know, okay, I'm making 8% in the market. Maybe if I'm lucky, I'm making a quarter of a percent in a bank account. Where do I park my money? Let me find guys like you who know what you're doing, who've got the track record, who have experience and can take care of my money and help me out.

Now, that's said, for the newbies that are listening, you're not going to go and find a 50-unit apartment building and going to be able to raise this kind of money unless you know unless you're the best salesman on the planet you need to establish some kind of track record and demonstrate that you have the capacity and the understanding in real estate to be able to get people to entrust you with their cash and so I just want to make sure that we put that out there because we do see all these people who come on they're like I know nothing about real estate but I have no cash I got nothing I know nothing and I want to find a money partner Who's going to money partner with you?

I mean, like, let's be real here. I know the gurus are teaching that you can do this. It's a total BS. It's not going to happen. So, you know, that only happens over time. It really, really does. And so that happens with time with experience. So I want to make sure that I'm putting it out there to the folks who are listening.

That's the case. So I was just saying, Josh, that you're absolutely right. We were in business for five years before we even thought about asking for private money or anything like that from anybody. Because we wanted to show that we had a track record. or we wanted to learn what we need to learn because the last thing, I need to be able to sleep at night. I need to know that my investor's monies is in or in safe places and they're going to see good returns because I can't,

I wouldn't be able to live with myself knowing that I, you know, went and squandered somebody's cash. Yeah. And that. So that's something that I can know that we can do because we're in business for as long as we were. So what I would say to your listeners, if you have a newbie that's looking to get into this,

find someone to apprentice with that is doing this. And that, you know, work underneath them. Learn the ropes if you don't have your own cash. Learn the ropes from somebody who's raising private money, private equity, and give them some of your time, because it's another thing that's a value aside from cash. Give them some of your time to help them, you know, build their brand, and then you can learn how to do it, and then you've got a track record. Yeah. I think a lot of times reputation is kind of contagious, which if you don't have it yourself, if you don't have the experience, you can graft on maybe the word is like to somebody else's

experience by doing exactly what you're saying. So when they look at me, they don't seem me, they see me and the guy that I'm, you know, tight with that I've been working with deals, you know, for the last couple years. So I think that's a, I think it's awesome. And I, I'm going to harp on that again. Yeah, I think that's really, that's, that's just a phenomenal point. And the reason it's so good is this. I have people all the time who want to partner with me all the time in my business and they're like, Josh, I rarely will partner with folks because I realize that the second that I'm in bed with somebody, I'm now in bed with somebody. And, and, And when somebody, if somebody, you know, if that guy turns out that person, that company turns out

to be less than what I would want them to be, some standard that's less than what I think is the standard that should be set. That's your reputation that's taking a hit. So if you partner with a money guy who's a scumbag, you know, by the way, you're a scumbag now. So are you. Right. Yeah.

Yeah. Yeah. So, I mean, you know, be careful, folks. I mean, you are who you do business with. You really are. And, you know, I can't press a pound that enough from people to people. So just be aware because you don't want to get in bed with somebody shady. You got to do a lot of research.

You got to Google people. You got to ask for references. You got to ask for people they do business with. And, you know, we partner slowly as well because we partnered quickly in the past and it didn't pan out. Yeah. Can you talk about that process on our last show, show 87? We got into that. Yeah, Nathan Brooks.

He ended up in a really bad partnership that cost him. pretty dearly. And so I'd like to, I guess, talk about how do you vet folks? I mean, you said, you know, you do the Google searches and you do all this stuff, but, you know, and you kind of get into bed slowly. But maybe you can walk us through that process, especially for newer investors. How would you recommend they, you know, if somebody says, hey, I got money and you're like, oh, cool, well, I'm desperate for money. Great. You don't just jump into bed with them, right? I mean, what's the process that I should follow to start working with this person? What would you do? you know, trust is obviously critical.

Actually, the first money partner that we developed was somebody that I went to college with. And I met him for coffee. We were, you know, just kind of reconnecting, saying hello to each other and seeing how each other's doing. And he said, oh, what do you guys up to? And I think that's also for newbies, you know, just share what you're up to. That's always a great way to, you know, to, you know, who knows, get your next money partner. But I was sharing with him and he said, I want to also invest. I'd love to talk to you both.

So he came out to, you know, to Trenton and we both, you know, met with him. but it was a slow, it was a slow partnership. So number one, take it slow. Number two, really get a sense of who this person is, whether it's references or just going to networking meetings with them. I mean, I would just, I always, I'm from the employment world. So I always said, hire slowly, fire quickly. And that's the same thing with money partners.

You know, move slowly and then you can grow faster, but don't do it too fast, especially if somebody wants to give you money quickly. That's probably not a good money partner anyway. Yep. So number one, obviously, like I said, you know, you want to have that trust level. Number two, move slowly. Number three, I would say start out on a small deal together. You know, Matt and our money partner didn't buy an apartment building initially or anything.

We bought a single family home. It was a very small amount of money. Even new money partners that we're developing now, always want to give us a small amount and say, if this works well, we'll grow and grow together. And I think that's also a good sign of a money partner. If they want to give you a lot of money initially, they don't know you and they want to move fast. It smells funny. Yeah, something smells funny.

So you guys run background checks, by the way? On money. Well, people that are looking to invest with us, I wouldn't say that. But for people that we've done business with, you know, sometimes that I wish I would have done that. But, you know, we haven't done that in the past. But if there were a new partner that wasn't just putting cash in, I definitely would look into that. Like criminal and all that stuff, huh? Yeah, yeah.

We have access to that kind of thing now. I mean, it's interesting to know, right? I mean, to what their background is. I don't know what Liz said. I would just say that just simply like good people typically know good people. And so our, you know, one guy that was our first investor that Liz went to college with, you know, knew other good people. And so he had known these people for a long time and was able to give good references for them as well. So I tend to try and keep it within my network for the most part. You know, and if it's not in my network, then I take a long time to, you know, sniff them and vet them out and that kind of thing. So makes sense. That's cool. That's cool. Well, can we try to. transition a little bit. I know we're hitting on the 45 minute mark here pretty much, and there's a lot more I want to talk about, but employees and running a business, a company, right? You guys have multiple employees. I've heard. How many do you have right now? Okay. So I guess again, because I'm selfish, you know, I'm at this point in my business where I have to, right, I have to like scale up or scale down. And I've been saying this for, you know, months now. And, you know, I guess how do you know it's the right time to start hiring employees and who do you hire? And we're talking employees versus using other, like a company, like hiring your own property manager in-house versus hiring an outside management company or hiring your own bookkeeper in-house versus, you know, shopping out to an outside. So I think, is that more specifically what you're asking for, Brandon?

Sure, either way. I mean, yeah, I mean, that's all part of it, because I have to do something no matter what. So or just get rid of all my properties. Right. And then move to Denver, which is not a lot of the Denver and hang out at the coworking space with Josh. I've heard that before. So I believe it was on one of your podcasts, or maybe I heard it somewhere else. But I think that the magic number is around 30 units is where you can swing in-house,

an in-house, you know, employee or an in-house operator to help you run the business. in that. So I think that that's where it really shifted for us is once we got above 30, then we could swing to start doing things in-house. Before that, there really just wasn't enough revenue coming in to support another paycheck. Whether it's a W-2 paycheck or even at 1099 and whatever it is, we would just outsource everything that came in under 30 units. You've got to meet handymen and that kind of stuff. It can be your go-toes for things. And they hire the bookkeeper for as many hours as you need them and everything like that. Once we got above 30, we started bringing in-house employees and that. And that's when it started making sense. As we added more

units, it justifies hiring more people once we purchase more. So why do you, why do you think it's better, at least in your life, why did you decide to go with hiring your own in-house staff versus just a, you know, some third-party property manager? Why'd you go that route? Well, we have a certain vision for our company. We have a, you know, we're trying to create a culture among our employees and we're hoping that that rubs off on our tenants to a point and our investors as well. So we wanted to create more than just this thing that just made cash flow. We were trying to create a business with a culture. We have a mantra for our company, which is transforming lives through real estate.

And we really believe that. We have quarterly meetings with our employees and that. But the bottom line of your question is, I can control it and manage it if they're my people. And I can, you know, they're employees. I can kind of tell them what to do and give them the parameters to operate within and everything like that. And it's very easy. It's much easier to control a culture than it is for, you know, all independent contractors that work for somebody else of the next day.

Do you ever your own contractors in-house or do you outsource that? Like, your maintenance and repairs and stuff? We have, we have our own, we have mostly our own people in house that try and do as much maintenance and repairs as we can. But we also outsource things like, you know, major plumbing, electrical, licensed work and that kind of stuff. We're not licensed yet. We're working on getting our contractors license actually so we can pull our own permits and that kind of jazz. But we sub out the big stuff and we do the small stuff in-house. Cool.

All right. So you've got 11 employees. I want to find out who was the first hire. And who are the 11? Okay. Not underneath their names, but you can. We can bring them all in. Here's Maria. We'll get them all in the room.

You'll talk to them. Yeah, yeah, yeah. Yeah, you'll interview all of them. So, at first hire was our office manager. We started as our bookkeeper. And she has been fantastic. And she really started doing the books and then grew more into really running the property management division of the company. We also have, I call her my tenant relations manager.

So when tenants call in with a maintenance emergency or when we have to collect rents or when communications need to happen to tenants, it comes to the tenant relations manager. Least signings. Yeah, lease signings. There you go. Renewals. She creates leases. She also runs out and shows properties and that.

So she's really the point of contact between tenants and the business. So she's the go-to for anything they need. That's who they call. Then you've got the office manager who she reports to. You've got my head of construction. we have a, because we do, we do fix and flips. So I have a guy that runs all over fix and flips in an apartment, turns around, it goes into the construction department and those folks go and turn it around.

Now, in the construction department, there's a handful of employees that do everything from demolition to painting to sheetrock to minor plumbing and that kind of stuff. They do, a lot of their time is spent either on a fix and flip or turning an apartment. And it's, we're able to maintain that many people because we have a volume of either, you know, unfortunately vacancies or fix. and flips that we're in the middle of. How many guys is that? Or guys and gals.

How many people is that in construction? We have gals too, in construction, by the way. So that is, let's see, I got to do the numbers. I believe that's seven. Okay. Oh, so the bulk of your team is construction. Yeah, it is. Because that's, you know, for fix and flips, we found that we can manage the process

if we do as much of it in house as we can. Got it. I think that's wise. I think how you were trying to find good contractors is really tough. So we have bookkeeper. we have tenant relations, then we have the seven, so that's at nine. Who are the other two? I mean you?

Yeah, well, yeah, me and my business, my construction manager, Adam, who also has a percent ownership of the company as well. Gotcha, gotcha. So I'm counting myself in that 11 as well, because I pay myself. Oh, sure. As a W-2ed salary on top of passive income from the investments, I do take a W-2 at income too. Sure, sure.

No, that's great. And, you know, it seems like I guess your tenant relations manager really is your property manager slash slash slash slash then you have the whole construction team you get the office manager and then you're doing the the deal finding you're doing the fundraising and pretty much handling the money side of things and managing the different departments and you call me like a half of an employee I guess you're an employee and a half I'm not actually getting W2 it's really just an owner well I'm not getting W2 but like one of my major projects is helping the property management team kind of firm up our processes you know and really get a really strong process we

We have pieces of the puzzle, obviously, but we're at the point where I just need to kind of button that up more. So, you know, in essence, trying to take some things off their plate because we have a lean team in-house, so to speak. So that's one of my jobs. Okay, cool. Hey, how do you find good employees? That's a good question. I wish I knew. I mean, I love my employees.

Yeah, yeah, yeah. I do. There's so many ways to find good people. I think one of the key pieces actually is to identify and get really clear on your culture. and who it is that you're actually looking for, the type of person. And then specifically, get then clear on the job itself. So in essence, you know, writing a job description. One of the big things that Matt and I and our other partner, Adam, had done earlier in the year,

was literally write job descriptions for every single position. So if we hire a service technician, we're calling a maintenance person. We're hiring this tenant relations manager, what have you. You have a really clear job description. And then once you have a clear job description, in that job description, and get really clear on what skills this person needs. And beyond skills, because this is my expertise in the other work that I was involved in the consulting work, is what type of behaviors this person need to have?

You don't want a whole team of extroverts or introverts. You don't want a whole team of dominant people because, you know what? They're all going to want control. So how do you really create a diverse team, not just of skills and experience, but quite honestly, behavior? And, you know, you don't need people all trying to be followers when no one's leading the team. And we've talked about that multiple times about it. you know, running construction sites and how, you know, no one knew who was on first base type of thing.

No one knew who was in charge. Yeah. Different circumstances in our career. So getting clear on the job and then getting clear on the job ad and really writing a, you know, really helpful ad in where we're going through this right now. We're doing some hires. And I took what Matt and Adam came up with and kind of doctored it up to say not just the, you know, there's so many jobs available. You've got to make yours different and really make it specific around your culture and the kind of team that you're hiring. and that these people are going to be passionate about what they do.

They're not just going to get a job. We don't want people just taking a job for them. They want to be part of something bigger and getting clear on that vision of transforming lives. I mean, it's a big one. Yeah, interesting. Yeah. It's funny. I'd say for the last year, I've probably spent, I don't think there's been any point in which we haven't been hiring.

We're constantly hiring right now. And Brandon keeps saying to me, you know, this is the rest of our lives running this company is you're just going to constantly be hiring. hiring and it's fascinating. It really is a fascinating, challenging process. And I really appreciate what you guys talked about on collaborating on the descriptions and the tasks. And that's something that we've done as well with our description. But what we haven't done enough of is the last thing that you said, which is diversifying yourself, making yourself stand out more. How do you do it? You know, above and beyond. Like for us, hopefully we do it by saying you're working, you're part of this amazing company that's changing people's lives. Here's how we do it. And here's what our culture

is in that, but I think there's even more. And I think being able to know what your culture is and what your company does and how you stand out is really the key. And I, you know, I think a lot of folks who are in that process are struggle with that. You know, what do we stand for? What makes us different? What, you know, I got a boutique. I get a retail shop. You know, why are we any different than the other retail shops? Or, you know, obviously for this case, and building an investment company, what makes my investment company better than the next one? So something for folks to think about. and write down if you haven't written your goals, your vision, all that stuff. I mean, it's really important. It's got to be more than making money. That can't be the only reason why you want to

get into this business or what you want to create out of the business. I'd also just add, too, on the hiring parties, a lot of people, employers will say, well, you know, I'm hiring and hiring and people aren't staying in the positions. I would say that partially it could be a hiring problem, it also could be a managing problem and actually a motivating problem. So you often hear people don't leave companies, they leave people. And not that everyone that leaves is about the person, but how you managing people, how you motivating people, something that Matt instituted with his team and something that was a suggestion I had was to meet on a monthly basis with your team.

Take them out to lunch one-on-one. What's coming up for you? How are everything? And communication is everything. So, yeah, you can hire right, but then managing that and really keeping the team motivated and aligned is actually harder. It's easier to hire the right person, my opinion. It's harder to actually manage.

maintain because that's really where that's the, I think, the biggest challenges for any small employer or any big employer. Yeah. I know I'm terrible at managing employees. And that really is the thing that's prevented me from hiring more people and building up a team is because I just know that my weakness in life is telling people what to do. I'm really bad at it. And so until I figure that part out, maybe that's the only way to figure that out is by doing it.

But yeah, I mean, it took me like a year to get rid of my resident manager who was like a sexist pig that was like, I mean, he was terrible. And it took me a year to get rid of them because I'm just terrible at managing. So I don't know. That's what's presented me. People have different personalities and I'm definitely a peace maker and I have trouble. You're too nice. I'm a pushover.

Yeah, you're too nice. Yeah. All right. Well, I have one more question before we go before we kind of start to wrap things up. And that is what does your future look like? I mean, where are you guys headed? Where do you see your investment business going forward? Sure.

So we want to continue. We've been doing really well raising the practice. at equity. And we want to continue to do that. And we want to buy, you know, larger and larger properties. You know, our biggest one so far has been an 18 unit, but we'd like to do, you know, we've looked at a 22 unit. We're looking at even bigger stuff, you know, 30, 40, 50 units and that kind of thing on the investment side because we've gotten pretty good at raising money and we've a really good presentation and it makes sense for investors to come in with us and that. So that's definitely one direction we want to go. For the fix and flips, you know, we didn't

even get so much to this, but it's become very frustrating with fix and flips. in unexpected costs and how a fix and flip can really go upside down really fast. We did one property. We found out that one entire side of the house had been eaten alive by termites. It was all gone. It so it cost us an extra $8,000 we didn't budget for to reframe this whole side of the house. So what we're getting into is modular homes. We want to start doing, instead of fix and flips, buying a piece of land and building a modular home on the piece of land and putting it up for sale that way,

because it's a good way to, you know, create a home for sale. But most things are predictable in a modular versus a fix and a fix and flip. Interesting. And I'd say the third to third arm of our business, which I'm kind of heading up and leading, is creating some educational opportunities. You know, we have a lot of folks that come to us like, hey, you know, how did you do this? How did you do that? So we're kind of excited about, you know, my background's training and development.

So kind of creating some ways to be of help to people and educate. So that's the other kind of new area of our business. Do you guys know just really, really quickly? Have you ever heard of like this new thing now where they're printing houses? Have you seen this stuff? I just saw that online the other day, write an article about that. Is it with the 3D printer stuff? So now they have, now they have like, I think I saw it in China.

They've built these demo houses that are printed. They're literally printed like some kind of concrete and amalgam of something around. And literally you can blueprint the sucker. And these monster machines are huge. huge things, right? And they literally print a house. It's amazing. What a crazy world we live in. That's wild. That's so interesting. Yeah. It's fascinating. Cool. All right. Well, let's move on to the next part, which is the... It's time for the fire round.

All right, the fire round. These questions all come straight from the BiggerPockets forums, which you can go and engage on right now by going to biggerpockets.com slash forums. and you should. So first question is, am I crazy? Don't answer that yet, to start flipping a property when winter is about to begin. Hmm. Hmm. Yeah, you know, it's interesting. And it depends on how long construction is going to take. I think that if you create a product of really good value, I had one house that sold that went under contract between Thanksgiving and Christmas. And everybody says, oh, no, nobody wants to move and nobody wants to look at houses in that time of year and everything like that. So I don't think that you're crazy. I just think that you need to plan

for it and you need to, you know, create value in the property because people need to move all the time. There's always somebody looking for a house. You just got to have something that stands out and that is going to pop for, there are perhaps fewer population that's going to be looking for houses around that time. So you're not crazy. Yeah. Nice. Thank you. Nice. I don't know. I, you know, I'll wait for a doctor to verify. Yeah. What would you do if you were just starting out again with 25,000. You had 25,000 bucks. How would you build a business? I'll take that. I think before you hear a lot of folks, I've been trying to get more into the forms, answering questions and what have you, and just learning. It's a great place to learn and develop

your knowledge and skills. But, you know, a lot of things I've seen out there, a lot of newbies will say, what deals should I get into? I have exactly what you just said, Josh, I have this amount of money. What deals, what areas should I invest in? You know, before you go there, I think, you know, getting really clear on your why, you know, why are you investing in real estate. I think I wrote this in one of the blogs that we write. And I keep going back to it because you can look for deals and what have you and find the best strategy on real estate investing. But you're going to have challenges. We put a roof on a house that ended up having to get teared down when we first started. I mean, we made a lot of mistakes over the years. And you have to

come back to some sort of, what are we doing this for? And we both align. So becoming really clear and digging deep for newbies, I think, is something that I don't see a lot of people doing. And they they get challenges and then they move on. And I think real estate's such a wonderful way to invest that it's a shame that people move on and don't actually stick with it. So, and then developing a plan. And I'd also say with that $25,000 and developing a plan and then getting into whether it's a single family home or a multifamily or whatever your strategy is, become really good at it. I think one of the biggest challenges we had was that we got involved in a commercial property. We got involved with a residential property. Matt didn't share this earlier, but we also bought a

development, you know, property on a development piece of land. So we were all over the place. And that's probably one of our biggest challenges when we started. So become good at something and do over and over and over again until you have mastered it and then move on to something else. I wouldn't, so many people get involved with so many things initially. And I think that's one thing we would have done differently was really mastered the multifamily and just done it over and over and over again. It's not sexy, but it's predictable. And it's where your success comes from. So that's just another side side note. That's great. That's great. All right. Third question, do you have any suggestions for how to turn down a tenant with bad rental history? What do you normally tell them?

I just, you got to have protocol. I mean, there's procedures on that. You got to just write them a letter. I mean, you got to have a form letter on file that says, here's why we didn't accept you. And you check off a few boxes. You know, it depends on if they have an eviction or just, you know, whatever it may be. But you should, you know, first of all, I think that by law you have to have what your standards are for rental. In the lovely state of New Jersey you do in that. So we have rental standards here and in PA for our rentals in Pennsylvania as well. And so if we reject someone, it's simply because they didn't meet our rental standard. And so we have a form letter that has those things lined out and we just check off the boxes that it didn't match and we just

set them in the letter. Yeah. Cool. And that's, you know what, I think that's a great thing for folks who are living anywhere that may not have rental standards, you know, really standardizing it. It protects you from having people come after you for discrimination or whatever else. Here's our 20 different standards. Here's the things you have to live up to. You fail because you're missing on one, seven, and 12. Great. Done, done and done.

Yeah. Nice. Nice. Cool. Investing in low income areas. Is this a good way to make money or something that newer investors should avoid? It depends on management. If you don't have a thick enough skin to go and.

And sometimes there's people you have to deal with in lower income areas that you may not want to, if you're not prepared to go into those areas yourself and do a showing or whatever it is, if you're just getting started, odds are you may have to do a little bit of the doing in the beginning unless you've got a property manager that can do all that for you. If you've got a property manager that can handle everything soup to nuts and you're willing to pay them to do it, then, of course, we'll move forward with it. But if you don't, you should be prepared to do it yourself. But I don't have a problem with that per se for our business.

You know, we do that. You know, we invest in lower income areas, but there's plenty of good people that want to live in areas like that. They just happen to, you know, make lower income. Yeah. Yeah. But we've never never invested in an area where we're not comfortable going. Yes.

Maybe not comfortable going at midnight. I mean, you know, but that's a little different. Yeah. I've got to be able to go there. I mean, a lot of our investments are in Trenton and there's parts of Trenton that are dice, but we don't do work in that areas because not only do I want to go, do I not want to go there? I don't send my people.

I don't want to send my people there either. Isn't that where Chris Christie lives? I doubt he lives here. I doubt he lives here. I doubt he lives here. Yeah, it is. Funny. All right.

Last question from the fire round. What is your biggest horror story when it comes to rehabbing a property? Oh, man. That's softball. Where do you start? I think I put that on the forum so that you would ask me that question. So I'll be as concise as. as I can. We bought this property. It's actually in the town we lived in, and I kept driving past

it and saying, like, man, somebody's going to do something about that house because it was this old dilapidated property. And I just said, somebody's going to do something. So you know what? I'm going to do something about that house. I'm going to look into it. And I had a title company that was looking for some business from me. And so I gave him the address. They looked into it. And through a bunch of jumping around, it found out that the guy that owned it didn't know he owned it because he was the grandson of the owner of record. The guy lived all the way up in Picay. Gypsy New York, but the long story short, the owner of record of the property had actually died in 1964 and had allowed a cousin of his to live in this house until like 1985 and then a sister of

his moved in. So a lot of rigmarole on taking ownership of the property first and foremost. Then once we closed, we got sued by a tax lien holder and we had to go to court immediately after closing and had to pay something like another $10,000 after purchasing this property, right, to this tax lien holder who just had a bunch of these attorneys. on staff that just it cost them nothing to take me to court, but it cost me like, you know, two grand a day to go to court against these guys. So I just paid them to make them go away. Then we got into the property and started to fix it up. And we put, as Liz alluded to earlier, we put a new roof on it and everything like that and did all the gut work. And we realized,

wait a minute, this property is a bunch of water damage. And now we found out that like the back of the property was sitting on dirt. There was no foundation in this, in a lot of this house. And oh, yeah, you know, it's what they did back then, I guess, right? It's awesome. Awesome. So we ended up having to tear this property down to the ground and build a new house on this site. We had already gone about halfway through the rehab. And we ended up having to demo this pretty new roof that we had to put on the property. We had to take that off and all this framing that we had done and everything like that. Take it all down. And this is right when Matt quit his job, I said, what are you doing? That was right after I put my day job to do this full time. It was fantastic. We ended up building a brand new single family home and this beautiful house. on this site that we sold. We lost money on the deal on that sale,

but because what we learned, which is what I would tell the folks out there, is that we learned a bunch on that deal that I still apply today. So now I know how to stick for you in my house because I did it. And I know what not to do on a fix and flip because I pretty much did all the things

you're not supposed to do on my very first fix and flip. Wow. Get it out of the way. Yeah. Yeah, you know, do it all the mistakes of the first one. Nice. Well, you stuck it out, and now you guys are doing great. So there you have it. Awesome. Awesome. Cool. Well, that was fire round. Lots of good questions. Great stuff. Why don't we move on to the Famous Four? All right. The Famous Four, these questions, we ask every single guest. So you guys know what's coming, I'm sure. First question is, and we'll ask each of you separately, if you want to answer separately if you have different answers. But first one is, what is your favorite real estate book? Sure, I'll take that first. I would say the kind of the follow up from Rich Dad, Poor Dad, which was called,

Cash flow quadrant. And it was a wonderful book to get clear on not just cash flow, but what kind of person and what kind of business do we want to create? It basically puts, you know, employees and self-employed and becoming an investor. And it really gives you the ins and outs. And when we created our business, we kept thinking, are we an E? And we use those words to this day. And it goes into some specifics about real estate. But I would say just from a thinking about real estate, it was by far one of the best books. Nice. Great. Yeah. I would throw out a book, by Dolph DeRuse called Real Estate Riches. And he was one of rich dad advisors many, many, many years ago.

But he told some great stories in that book, and it really opened up me to the possibility of real estate investing as well. Right on, right on. What about business books, Liz? Yeah, I would say E-Mith by Michael Gerber is a great way to think about your business so you don't become one of those, they say, technicians who becomes the business. and we all want to get into real estate because we're, oh, it's hands off and we don't have to do anything.

Well, we all know that you do a lot of things. But bottom line is that you start to build something, processes, systems, et cetera, and that's exactly how we've thought about our business. You know, how do we build this so it doesn't need us? You know, we're not there yet. We're, you know, far from there, but we're getting closer and we're moving towards it, which is key. We're using that concept, though, to build it.

So a great book to read early on. Nice. What about your Matt? I would have to go for the secrets of the millionaire mind. T-Harves. Yeah, T-HARV. We did the Millionaire Mind Intensive Weekend as well, but that's just one of those, it's just one of those things about shifting your consciousness around the way that you view money.

And for Liz and I, just reading that book and just really examining what he calls your money blueprint and everything like that and just really taking a look at, you know, how money is in my consciousness. It was great. Right on. What about hobbies, guys? What do you guys do for fun? Nothing. No, we don't. Hang out, or nine-month-old. He's our new hobby. But I would say, you know, for me, I love playing tennis. You know, I love kind of training for races. I haven't done one in a while, but I, you know, I've done some marathons and things like that and triathlons and things. Those have gone down a little bit since having my little guy, but I want to drink for something in the spring. So that's for me.

What about you, Matt? Diddo for me. Yeah. I did my first triathlon this summer and that. Just spending time with my son and with my wife outside of work and not talking about work for a little while is a good enough hobby for now. Awesome. That's great. That's great. All right. Final question from me for the day. What do you believe sets apart successful real estate investors from those who give up, fail, or never get started? Yeah, I was thinking about this. There's so many ways to answer that. And at bottom line, it's perspective. Because there's so many times I can look over. the last 10 years that were so many reasons for us just to kind of say, what are we doing, why are we doing this, and just to kind of get back into the game and make it better. And Matt doesn't go, he doesn't go into, we don't go into properties now and we have to, we don't take roofs off and then have to, we don't make that mistake anymore.

So you really have to have perspective and a positive perspective and not just positive, but like a realistic perspective as well. And just keep making things better. That's critical. If you don't do that, I wouldn't get involved. invest in the real estate because we continue to make mistakes, but we continue to keep our perspective positive and, you know, solution oriented. Yeah.

Nice. Nice. No, that's great. That's great. Well, listen, guys, we really, really, really appreciate you guys coming on the show. We thank you so much for the time and, you know, lots of good, pretty high-level stuff here on the show. So it was, I really appreciate it. Thank you for having us.

It's a lot of fun. Yeah, where can folks find out more about you or find more about you? Do you have a website that you guys have for your business? Our business's website is derosa group.com. And we, Liz and I also have active profiles on bigger pockets as well. Cool. And we're also weekly bloggers for the site. So we'd love to hear from people.

Yeah, leave comments, man. You guys, these guys are putting out really good content. So definitely, definitely share your feedback with them on their posts. Well, thanks again, guys. We really do appreciate it. Thank you, Brandon. We'll see you back on the site. All right.

Thank you. All right, guys, that was show 88 of the Bigger Pockets podcast with Matt and Liz Faircloth. Big thanks to those guys again. Really, really cool show with some higher level knowledge shared and some really, really good advice. So we certainly appreciate it. I'm like totally motivated now to go get like a bookkeeper or something. Dude, 88 shows, man. I know.

I know. It's really bad. Yeah. You'll do it. You'll do it. Next show. You know, everybody's busting my chops about the book that I'm on page 175 of. That's like, that's a drop in the bucket compared to you not going and hiring out a bookkeeper or finding somebody to do this.

I'm going to go call that bench company today and just see what they can do. Do it. Do it. That's awesome, man. That's awesome. Well, anyway, guys, thanks again for listening. Show 88. If you're not a member yet of Bigger Pockets, we'd certainly urge you to do so.

You get to hang out with guys and gals like Matt and Liz who are spending time in the community, helping other investors out, linking up with partnering and doing business with other folks. So the more active you are, the more folks like these will get to see you, get to know you and want to work with you. So I definitely encourage that. Otherwise, as I always say, check us out on all the various social networks. And if you have not yet done, so please take a minute or two and jump over to iTunes, find the Bigger Pockets podcast, and leave us a rating or review. Those certainly come in handy and help us get more people listening and help us, you know,

get more people educated into real estate doing better deals. help us out if you can. That's all I got. How about you, Brandon? We're done. We're done. Let's get out of here. Close it down. I got a bookkeeper to call. Awesome. This is Josh Dorkin. Signing off. You're listening to Bigger Pockets Radio. Simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Be sure to join the millions of others who have benefited from BiggerPockets.com. Your home for real estate investing online. Thank you all for listening to the Bigger Pockets Real Estate podcast.

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