BiggerPockets Real Estate Podcast - How to Scale Your Real Estate Portfolio So You Build Wealth, NOT Burn Out

Episode Date: September 11, 2024

Scale smarter with Kathy and Rich’s new book, Scaling Smart! Own real estate? Feeling burnt out? Then you need to listen to this. You've wondered how to scale your real estate portfolio so you can make more money and finally reach financial freedom. And then, at some point, you realize you own rentals and are making money but have zero time. Now, you’re burnt out, wondering where that “financial freedom” went and how you can get back to it. But you’ve got an entire business riding on your back. You can’t stop, so what do you do? Don’t worry—we have the secret.  Kathy and Rich Fettke felt like this a decade ago. Kathy was so stressed that she had zero interest in growing her business any bigger than it was. It was already taking so much out of her, and the stress was only rising. She turned to her husband, Rich, to help coach her into a better position to scale the business instead of blindly growing it. Now, in 2024, Kathy and Rich have amassed a sizable real estate portfolio, run an investor-centered business, and are doing more in less time with less stress. If you want what Kathy and Rich have, stick around and pick up their new book, Scaling Smart, where they teach you how to scale your business the right way, outsource to free up time, and STOP chasing “more” when it’s coming at the cost of your family or time freedom. Want to scale the right way and build a business, not burnout? Don’t miss this episode. In This Episode We Cover: How to scale your real estate portfolio (or real estate business) the right way  Why “growing” isn’t always the right move and could lead you to stress, burnout, and unhappiness  Making your first hire and how to design the perfect structure for your portfolio  Why you need to STOP doing the things you hate and get someone on your team who loves to do them instead  The two major hurdles most real estate investors face when scaling (and how to overcome them) Knowing your “why” and how to have time freedom instead of mindlessly amassing wealth  And So Much More! Links from the Show Invest in Turnkey Properties with REI Nation Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Grab Rich and Kathy’s New Book “Scaling Smart” Property Manager Finder See Dave, Kathy, and Rich at BPCON2024 in Cancun! How to Build a Real Estate Portfolio & Quickly Scale Your Investments Connect with Kathy Connect with Rich Connect with Dave (00:00) Intro (02:13) Stop Growing, Start Doing This (06:31) Choose Life Over Business (12:57) How to Start Scaling (21:02) Do More in LESS Time (24:42) Making Your First Hire (29:13) When Is It "Enough"? (36:38) Grab "Scaling Smart"!   Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1016 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Almost everyone who starts a business does it because they're good at something, whether that's baking bread or fixing cars or IT consulting. But if your business grows, there's eventually going to come a point where you're no longer spending most of your time using that original skill or passion that got you started. Instead, you'll be managing a team and focused on strategy. And in this respect, real estate is just like any other business. Even if your superpower is analyzing deals or renovating houses or dealing with tenants, you're eventually going to need to learn an entirely different skill set if you want to keep expanding your portfolio. In today's Deep Dish episode, we're talking about scaling, and we have two experts on hand to

help us out. It's Kathy and Rich Fecky. You may know Kathy as a co-host of the On the Market podcast. She's often also on this podcast, and her and her husband, Rich, who's a great guy, as you'll see, are serial entrepreneurs and real estate investors who run a successful business together. And from their experience is running that business, they have a new book out called Scaling Smart. You can find it at biggerpockets.com slash scaling smart. And I'm super excited for this conversation because as a real estate investor myself, this question of how to scale is something I think about almost constantly. And it's really come up a lot recently for me.

So I am going to be a little bit selfish and ask Kathy and Rich for a little bit of coaching myself. But really, I think I'm going to ask some questions that I think apply to a lot of us listening who have gotten started investing in real estate but don't know exactly what to do next. Specifically, the things I want to learn is the difference between growing and scaling. Some of the most common mistakes investors make as they expand and how I can learn management skills when my. original expertise was real estate and analytics, and I need to grow a bit beyond that. So I think this is going to be really fun. I'm excited for this episode. Let's bring on Rich and Kathy and Kathy Fecky. Welcome to the show. Thanks for being here. Thanks for having us. Yeah, great to be here. It feels like a party. This is so fun. I get to talk to Kathy all the time, but Rich, it's great to have

you on the show. Have you been on the Bigger Pockets podcast before? Yeah, I was on before, I guess it was about two years ago, which was a blast with Dave and Rob, and had a good time, but really looking forward to the Dave Meyer host. Yeah, well, I'm happy to have you guys here. This is going to be a lot of fun. So we are going to talk about scaling, and you both just wrote a new book called Scaling Smart. Congratulations, by the way. And one of the key tenets of this book is the distinction between growing and scaling. Can you explain what the difference is in your eyes? So the difference between growth and scaling, I think it's a really important difference. Growth is important. You know, it's the big buzzword in business, but growth is when you're pouring more

resources into growing your business, more money, more people, all that. And scaling is when you get to a level where you have some growth, but scaling is where you do it more economically with taking something and multiplying. For example, a great way to look at it be like you could go and give a talk to 10 people or scaling an easy way to use technology would be doing a webinar to a thousand people. So that's a way to just one example of scaling overgrowth where you can, you don't have to use as much resources, but you can grow your business and your outreach exponentially.

Yeah, another example we've seen so many times because at Real Wealth, we work with 15 different property managers, property teams across the country. And we've watched them implode over the years. Over the 20 years, we've been doing this, growing too fast. And as they would grow their property management, for example, they would bring in more employees and more overhead and more costs, but the income wasn't keeping up with that. And pretty soon you'd see them start to take money out of the deposit reserves and, you know, and then they're just getting over their skis until they would implode. We've seen it over and over again. So that hopefully tells the difference of growing, just growing for what, you know, to grow yourself broke. Yeah. So would it be fair to say it's,

it's about sort of efficiency and operations where you're saying taking what you got and making it run smoother rather than putting more capital into your investing portfolio, for example. That's a big part of it. Yeah. It's really about leverage. It's about leveraging your team, leveraging your greatest strengths. So I think that's the key to scaling smart. You know, you can scale a business for sure. We called our book Scaling Smart because it's just a different way. It's where it's just like a smart home where it's customized to your preferences or

smart car or any of that. Same thing with the business. You can scale a business the smart way where it's designed around you. You design it around your lifestyle. You design your business around your life instead of your life around your business, which so many people do it backwards. and they don't create any time for themselves, and they don't create true financial freedom or freedom of time.

Yeah, I mean, another example. We just did our first book signing last night in Dallas. We're here at the Olympics Expo. And somebody who came to the event is a property manager, also an investor owns commercial and residential and has a family. And we asked, what's your goal? And you said, a $100 million company. And the first thing Rich said is, why?

For the sake of what? For the sake of what? Yeah. Like, what do you want? And, you know, at the end, it was at the end, he's like, well, what I want is more time with my family. I want, I want this for my family. And I asked him, have you, have you asked your family if they want a hundred million

dollar business? Have you asked them what they want? Because a lot of times they don't. This isn't a conversation that people maybe have together. So we wrote the book, the first two chapters are about you. What is it that you really want? And how do you design your business to sort of? support that versus what happens too often is the business becomes this beast and you're supporting

it and it takes over your life. We want to flip that so that you know where you're going and the business takes you there. Well, this sounds great, but it's a lot easier said than done. And I'm just curious why do you think that is? Because when you say it, it sounds so obvious. It's like, of course you come up with a goal and build backwards. But myself included, so many people do it the exact opposite way, why do you, why do you think most people get this wrong? Oh man, Rich wrote a great chapter on it. Yeah, back in the day, back in the 80s, I was a competitive bodybuilder, of course, right? With my flaming red mullet and my baggy pants and fanny pack. Oh, I've seen the videos. Back then, it was really interesting because I had what so many of my fellow gym rats had was

bigorexia. We call it bigorexia back in the day. It's like the anorexia's brother in a way. And it's like, no matter how big you get, the smaller you think you are, it's this weird condition. In a way, it's a mental condition. It's body dysmorphia, so you think you're not big enough. And we see the same thing in real estate. We see the same thing in business. So many of our friends come to us saying, I'm not big enough. You know, I want this many doors, or I want a hundred million dollar portfolio or a hundred million dollar business.

And it's this weird addiction. So it does get hard. When you're trying to 10x your business in a year, life can be really hard and business can be really hard. It's taken us 21 years to 10x our business a couple times, but we've done it over 21 years. So it's more of a smart approach to it, slowing down a little bit. But coming back to that, it's not easy. We're not saying it's easy. It takes focus. It takes determination. Being an entrepreneur, it takes a lot of that. But if you truly want to be an entrepreneur, then you need to look at how you can scale your business and how you can have talented people working for you, doing the jobs that you're

not great at so you can focus on what you're really good at and what you love to do. And if you don't have that, if you haven't designed your business that way, you're not creating freedom for yourself. Yeah. I mean, in our relationship, I would say I'm the one who suffers more from bigorexia than rich business-wise. I just, it's always, I'm the visionary. I have new ideas. I want to do big things. And I'm the one that grew our company. bigger than it was able to handle. We didn't have the systems to support it. In 2008, I had a different business partner. I was, 2008 was a hard time for anyone, but we did not have the systems in place to be able to handle growth like that. So that kind of fell apart. And I

asked Rich, Rich, who's a business coach and has a business degree and have been coaching executives in big corporations for years. And I just said, can you, can you coach me? Do you think that would destroy our marriage? Can you be my partner and put all that expertise into what we're doing? And then he did. He brought in systems. And as a visionary, I fought, I kicked and fought the whole way through that.

But, you know, it really started with the visioning. And, you know, we talk about this. We hear about this. But, you know, what do we collectively want as a company? where is this company going? Collectively, meaning us and the employees. Yeah, he sat us all down. He made us turn off the phones.

The phones are ringing off the hook. I was like, we don't have time for this, Rich. We got work to do. He's like, no, no, no, we need to get very clear on what this company's about. What are our values? Where we're headed, where we want to be in three to 10 years, and what that's going to look like? What's the structure? What's the org chart?

And so we took the day off and did it. And that was a game changer. Yeah, so it's like Kathy said, let's start with you as that first section. And it's looking at you as the business owner or the portfolio owner, however you want to look at it, starting with you about what's important to you. What do you see in the future if everything turns out just right? And then you apply that to your business. Then you say you go into the second part and it's what's my business about. What do I want this business to look like? What is our purpose of the business? How are we making a difference? What kind of impact is this business making? So starting with a purpose. From there, you get it very clear on your mission for the business. Like, okay, if that's our purpose, like for us, it's helping people create real wealth, which we defined is having money and freedom to live life on your own terms. That was since day one, 21 years ago, we put that flag in the ground. But then you go into the mission. So you say, okay, for the next three to five years, what's the measurable specific mission that we want to accomplish as a team? And that drives your

team. It gives motivation. It creates better teamwork. And then from there, you go on and you get the clarity of the vision with the whole team. All those things I think need to happen first about what's the business about the why, how do you want to design it? Then you can go into creating your processes and your systems and hiring your A team and your organizational structure. Well, let me first say that you're a very brave, Kathy, to invite your spouse to coach you. I don't know if I would do the same thing, to be perfectly honest, but it's clearly worked out for both of you. But more importantly, I love what you're saying. I think this is probably a situation that plagues most entrepreneurs, but it seems very prevalent in real estate investing.

I don't know if it's because of social media and you're constantly comparing yourself to other people or, you know, I think a lot of people wind up chasing money and door count because it's easily quantifiable. and it is not easy to count how much, how many great days you have or how much time you spend with your family. You know, that's sort of a fuzzier thing to try and measure. And so when you ask someone what their goal is or what they want, they're just like, oh, $100 million. And I think that sounds great. But to your point, it's not always beneficial to you.

And it can actually lead you down a path that gets you further from what you're actually trying to do. Yeah. We do have to take a quick break, but as a reminder, if you're enjoying the show, you can hear Kathy co-hosting the On the Market podcast from Bigger Pockets with me on YouTube and on all the podcast platforms twice a week. So go check it out. Running your real estate business doesn't have to feel like juggling five different tools, and the tools are blades or flaming torches. With ReSimple, you can pull motivated seller lists, skip trace them instantly, for free, and reach out with calls or texts, all from one streamlined platform.

The real magic? AI agents that answer inbound calls, follow up with prospects, and even grade your conversations so you know where you stand. That means less time on busy work and more time closing deals. Start your free trial and lock in 50% off your first month at ReSimple. slash bigger pockets. That's R-E-S-I-P-L-I dot com slash bigger pockets. Here's why savvy real estate investors are obsessed with bonus depreciation. It lets you take that rental property or commercial building you own and depreciate most of the cost against your income.

Legally, 100% IRS compliant. That's instant cash flow improvement. Cost segregation guys is the number one firm nationwide, specializing and identifying these faster depreciating assets in your They've completed tens of thousands of studies across all 50 states from remote cabins to apartment complexes. So if you own investment property, this is a no-brainer. So visit costsegregationguise.com slash BP for your free proposal and find out how much you could save this tax season. What if I told you you could forget everything you know about investment property loans? Because host financial is rewriting the rulebook, tossing out those pesky DTI restrictions. They focus on your property's income potential.

No tax returns or personal income statements needed. Simple, efficient, and tailored for investors like you. Imagine a lender that sees the gold mine in your property, not just the numbers on your paycheck. That's the host financial difference. And they're approved in 47 different states, so your next big deal could be just around the corner. Ready to unlock your property's true potential? Visit hostfinancial.com. Don't let old school lending hold you back another day.

That's hostfinancial.com. Thinking about wholesaling or flipping your first problem. property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists, such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution. That means you can not only find motivated sellers, but you can also reach. out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comms that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M.com

slash BP. Don't just dream about real estate. Make it happen with PropStreme. Welcome back. We're talking with Rich and Kathy Fecki about how to scale a business. Maybe you guys can give us some examples here. I'm curious what type of investor, what type of, let's just say real estate investor benefits most from implementing these types of systems. I mean, if anyone who wants to treat it like a business, which I think you should treat your real estate business like a business, right? So that would mean a business has employees and it has people and it has a team. So anyone who has a team or wants to have a team and wants to grow that team, it really, it comes down to the people. You can't have a self-managing business without self-managing teams running your business.

And you can't have self-managing teams if you don't have a self-managed leader overseeing those teams to free you up as the portfolio owner or the business owner, wouldn't you say? Yeah. Yeah. I mean, just an example would be, is there anything, Dave, you've got to be a busy guy. You're doing so many things and also managing a real estate portfolio. Is there anything within your real estate business portfolio that you're doing that you don't really love doing? Pretty much all of it. All of it.

What is it that you love about it? There's got to be something that you're going to. No, I'm just kidding. I love like the acquisition part. And I love the portfolio management piece is actually. my favorite. I like playing with what I have, seeing if what investments are most optimized for me, selling the ones that aren't working, reallocating capital. I really dislike operations, to be honest. I don't like running the day-to-day stuff. I don't like doing taxes. I don't like any of that.

I never really, I did self-manage for 10 years, but I never really love that. So there's probably some stuff I could stand to outsource. But just out of curiosity, would you count me? Like, would I be a good candidate for this? Because I don't have a team. I, you know, I have, I guess in the nomenclature of bigger pockets, I have a team, I have an agent, I have a property manager, but they don't work for me full time. So does this stuff apply to me? I really think it does. I mean, the book is really written for someone who already has a small business and they're losing their mind because maybe they're employed, they've lost control basically of their employees or of the business. Oh, they're overwhelmed.

They're overwhelmed. But that, you know, you can feel that as an investor. So the first chapter, again, just comes down to what are you doing it for? Like, what is the ultimate goal and not forgetting that? It's very easy to forget why we're doing something. And it's like you may have way overshot your original goal and then not even realized it. And just, again, have that problem. I need more.

I need more. I need more. When you're already there. So the first step is really like, what, what am I trying? Am I trying to create more free time? I'm trying to replace my current income? What is that personal goal? And then how is the business going to support you in that?

So once you've gotten clear on that, then you can look at all the functions of your business, this business that you've built to support your personal dreams, look at all the functions of it, and then create that org chart, even if that org chart is just your face on every position, right? You know, now you know that you've got an acquisitions person, you've got an asset manager, or you've got the finance person, right? Right now, that might be all day. But once you have figured out all the jobs you're doing and put it on an organizational chart,

then you can look at the ones, the things that you really don't like doing, and you're really not that good at, that you know someone could do it better than you. And now you've freed up your time. So to me, the goal would be how much time, this is what I want to calculate, have I freed up to do the things that I love

and I'm really good at, you know, and that, that's the booster. That's the superpower that takes everything to the next level, including your joy. It is a terrifying idea to try and put a name to every role that you have to play as a, as an individual investor. It's got to be like 20 different things, right? Yeah. But I imagine that just spelling it out and having, you know, 20 of my own face staring back at me would be pretty telling.

Like, of course there are things that I can't do well if I'm doing all 20 of those things. And, you know, I totally subscribe to this belief. I personally, I think I've said this to you, Kathy, on other shows is that I have a limit. I only spend 20 hours a month on my real estate portfolio. That's just like the max I'll do. But I'm still trying to do 20 jobs at those 20 hours. So that's probably not a super efficient way to do it. So maybe it was just used me as an example.

like what would I do next? So let's say I lay it out there and I see that I am doing, you know, acquisitions. I'm doing analysis. I don't do property managers, but I manage the property manager. You know, I manage all these other people. Like, where would I go from there to try and figure out how to make my business more efficient? Because this is, just to be honest, this is a super relevant question for me because I've set this limit of 20 hours a month. But I do want to grow my portfolio. And so the only way to do that is become more efficient, so help me. Yeah, you got to think ahead. You got to look to the future too.

But the actual tactical part of it is doing exactly what Kathy said. Where are you right now? Lay out that org chart, if you will, of your business and the different roles. And then what you want to do is look forward three years from today and then build another org chart, an organizational chart for that portfolio, your business. Again, it is your business, whether you're a flipper or. or a self-storage operator or a syndicator, or you own a service business, it doesn't matter.

You lay that organizational chart out three years in the future, and you say, okay, if this business was designed perfectly, the way I would design it right now, who's in this role, who's in this role? Not the people, but what are the roles? What are the titles? And then you start coming from today, you look at your org chart today, and you say, okay, what's my next hire? And you choose one of those positions,

and you say, okay, my next position here is going to be Q4, This year, I'm going to hire this position. And then you go seeking out. And that's so we go into a lot into that, like how to recruit, how to hire, how to hire, how to onboard the perfect person for that position. And we put a whole section kind of called nerding out. What is it? Let's get nerdy.

Yeah. So what's different today than when we started is technology. So you can scale so much faster today because of technology. You can fill these positions with. people that are just working part-time for you. You know, you can, there are, like, you can get a finance person, a bookkeeper. We use a company called Belay, where we just hire a bookkeeper who manages our entire portfolio and they're trained on it.

They're specifically trained on being great bookkeepers, and we only have to bring them in for a few hours a week. So there are so many more resources out there for people so you don't have to go out and find a full-time anything. You know, you could get a part-time CFO, a part-time marketing person. There's lots of ways for you to fill in those boxes with people who already know how to do it and, in fact, know how to do it way better than you. Yeah, we hired a whole legal team of outsourced legal specialists, which is amazing. We have a PEO for our company now, a professional employment organization that handles all of our payroll and HR and all that stuff that we don't want to do and don't have the knowledge to, you know, labor laws and all that stuff.

So yeah, there's so many resources today that are easy to find. That's a great thing for everyone listening to to take home right now. It's that it doesn't have to be a full-time employee. Maybe depending on your vision and what you're trying to accomplish, maybe hiring full-time employees is in the cards for you. But it sounds like even if you just need some help or want to take something off your plate, you could still use this system to try and make your life a bit more efficient. That's the thing.

And so many people that we talk to complain about all the jobs they need to do and how they don't have enough time and how it's like they don't want to grow their business because it's going to create more stress and overwhelm. And so that's it. You need a system where you can start taking step one, step two, step three to actually scale that. But it takes some time. You know, to really implement it, it's going to take you a solid year to really to really create that self-managing business. Yeah, I mean, 10 years ago, you know, when when we were. growing. We do annual meetings where we look at where we're going to be in 10 years and three years and the team wanted to really grow. And I burst out into tears. I was like, I'm already

busy. I'm already overwhelmed. The last thing I want to do is grow. And yet 10 years later, here I am and I'm doing less. And yet we are growing faster. So why? How on earth did that happen? because the vision of it in my mind was hell. You know, no. That's 10x more hours of my time I don't have. And I'm not getting younger. So this was the key. And it really was what Rich brought to the table is bringing in leaders who are as aligned

with the vision as you are. And how do you do that? How do you get people so excited they can't wait to get to work? Well, generally it's not because they want to do. just make you rich and have you live your dreams. That's not usually how it works. They've got to be bought in too. And so the way that we figured out how to do that, we used to have kind of a commission based thing because, you know, as you know, we help people build real estate portfolios nationwide. So we have three investment counselors on our staff. And they would, it would be kind of a

round robin of leads. And one person might get a really high net worth client. And the next round robin person gets someone who has no money and can't do anything. So there was like competitiveness and people trying to grab. It was this icky. And then we're like, okay, let's change it to where everybody benefits, everybody benefits through this profit sharing. And so if you got the million dollar client and I didn't, I'm still going to fill in for you. If you're on vacation or whatever, I'm going to help you with this client because guess what? We're all going to benefit. So Rich put together, working with some professionals on how to do that profit sharing. program and it's unbelievable. Every employee feels like it's their company. Like they're,

it's an entrepreneurial spirit because they, the entire team wins when we win. Not just, not just the owners. This is so true in any business, but incentive alignment is, I've talked about this. I just, I just always rant about this. But I think incentive alignment is like one of the most important things in any business. Like, you have to make sure that everyone is, mutually gaining when you gain. Otherwise, it just creates tension between people. This is someone on your team, like you're suggesting or even with a contractor or even with a tenant, honestly, like you want to create these situations where everyone can win together so you're not opposing each other. It's just so much, everything just goes so much smoother and

is so much easier. So I love that example. I think it is such a better way to have a sustainable business that grows profitably. It's also just a more fun work in environment, to be honest, when you're working with people who you feel like have your back and that you can go to for help and you can be, you know, vulnerable around and ask, you know, be honest with rather than feeling competitive with. Right. Drawing on my own experience, I struggled with this to be perfectly honest when I was first trying to figure out how to get myself out of the business.

And I, you know, have a bunch of people that I work with no full-time employees. But for me, there was two major hurdles that I would love your advice on for anyone listening. The first is just giving up control was really hard. You know, like you think, or at least I thought I knew everything and that no one would be able to do things as well as I did. That was obviously incorrect. But that's what I felt at some point. And then the second part was it was just hard to start paying people.

I think, you know, I sort of got in this mindset that I would do everything myself because it was super efficient. So one, is that a comment? I imagine they're common hurdles, but do you see that often? And two, like, what advice do you have for people to get around some of those mental blocks? About paying people? I think it's just about scaling in general. It's like you have to give up some of your revenue.

You have to give up some control. And at least for me, that was pretty daunting. Right. Yeah, no, it's tough. It's tough for us, too. Yeah. I mean, we've definitely been through it, still go through it. When you look at some of these, you know, bringing on executives in our company now, it's like that it's a pretty big annual salary.

But if you flip that over too, there's also looking at that old thing about what's your time worth. So you really got to look at Dave. It's like, you know, what's your time worth? If you look at what is your annual revenue that you bring in or your salary and how much you're making per hour, then it's like you start to look and you say, wow, I can hire this person for $35 an hour compared to what it costs me an hour. that's going to free me up to focus more on what I'm good at, what I do best, and that's going to bring more money into the company or to the portfolio. I think it's like, it's simple math, really. Yeah. Part of the book, we just interviewed lots of really successful business people. This isn't all about us and our company Real Wealth. It's about many, many business owners and their stories.

And one was Jillian Hellman of Realty Mogul. She started her business at 22 and had no idea what she was doing like many of us. And in the beginning, oftentimes the mistake people make is they'll hire somebody cheap, you know, this family or friends or somebody who needs a job. And it's like, oh, I don't have to pay them very much. But also that person maybe doesn't know what they're doing. So then you've actually paid a lot because often you have to clean up the mistakes or do a lot of training. And that's just kind of how new businesses start. Everybody just tries to figure it out and wears different hats. The turning point to really scaling, and Jillian explains this really well, is the moment that you decide, we're going to go for it and get bringing a specialist,

someone who really, really knows how to do this and has done it before, and we're going to splurge. But they would only do a three-month contract. So you're not hiring someone full-time. We do it still today. It's just a three-month contract. Let's see if we work together. Let's see if you got what it takes. here's the metrics, here's what we need you to do. And generally, if that person can either be in, if they're in sales and can bring in more income, maybe it's an acquisitions person, you're not going to do any deals if you don't have anything, you know, if you don't have any deals. So whatever it is, like if you're a salesperson, you might need more to bring in your

first person is the structure person because you need to be outselling and you can't deal with structure. That was for me when I was a mortgage broker. I could bring in the deals. but I did not have the time to do all the paperwork. So great first hire for me. But what if I'm the systems person and I'm not good at sales, you need that money person to get out there and bring in the business.

Do what your best out and bring in other people that are the best at what they do. And only put them on a three-month contract so it's not going to be difficult to let them go with really clear metrics. Yeah, as an independent contractor at 1099. And then if they pass the test and they're a true A player, then you grab them as an employee and put them on an incentive plan and everything. That's great practical advice, just a way to mitigate risk and, again, create mutual alignment. Like if they can contribute to your business and they like working there and you like them just the same, it just works out forever. That's great.

We do have to take one quick break to hear from our sponsors, but we'll be right back. 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, and contact your lead. by caller text without bouncing between apps. Then it's AI agents takeover, answering calls, following up automatically, even grading your conversations so you can focus on the deals that matter. Everything's under one roof designed to simplify your day and scale your business. Start your free trial today and lock in 50% off your first month at reSimple.com slash bigger pockets.

That's R-E-S-I-M-P-L-I dot com slash bigger pockets. Thinking about wholesaling or flipping your first property, but not sure where to start? The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20 pre-built lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to find motivated sellers fast. And now PropStream has integrated batch leads and batch dialer to provide you with a complete all-in-one solution.

That means you can not only find motivated sellers, but you can also reach out right away. Skip trace phone numbers free on select plans, then send postcards, emails, or call sellers directly. Don't worry if you're new. PropStream also gives you AI-powered insights and comms that are over 99% accurate. So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M dot com slash BP.

Don't just dream about real estate. Make it happen with PropStream. All right, rental property investors, listen up. Our friends at Dominion Financial already have some of the best DSCR rates in the industry. Now, they're the fastest, too.

They just launched 10-day DSCR closing. That's right, 10 days. And they're still the only lender with the DSCR price-beat guarantee. That means faster closing. The best terms. Zero guesswork. That's Dominion Financial.

Check them out at biggerpockets.com slash Dominion. Again, that's BiggerPockets. If you think property management is expensive, try mismanaging a vacancy or an eviction or a maintenance issue that turns into a five-figure problem because no one caught it early. That's expensive. A good property manager isn't overhead. Their protection against small mistakes turning into big losses.

And that matters more than ever in this economy. That's why I like Mind. Unlike other property managers, Mind manages your property like an investment. they obsessively measure the things that matter for your bottom line. Things like occupancy, delinquency, and net promoter score, and they have the results to prove it. Go to mine.co slash show me to see how mine performs and get your first month free, which is much cheaper than learning the hard way. You just realized your business needed to hire someone yesterday.

How can you find amazing candidates fast? Easy. Just use Indeed. When it comes to hiring, Indeed is all you need. That means you can stop struggling to get your job notice on other. job sites. Indeed, sponsored job posts help you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45% more applications than non-sponsored post.

The best part, no monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed worldwide. There's no need to wait any longer. Speed up your hiring. right now with Indeed. And listeners of the show will get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash rookie. Just go to indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. Welcome back to this week's deep dish episode. I'm curious in your work, Rich.

as a coach, and Kathy, both have talked to so many investors. I'm curious if there are any themes that you've seen among what people's goals are, or their vision is, or what their why is? What are some of the common things

that real estate entrepreneurs are looking to achieve? Well, it's really funny. I did write a chapter on this, and I'm super guilty of it myself, is we usually go into real estate because we want freedom.

And we want more time with our family and we want more time for the things that things that we love to do and the people that we would love to be with. That's why we want to leave our careers and start our own businesses generally to be in control. And then somewhere along the line, we forget that. And the business takes over our lives and we don't even remember why we did it. And we end up working more than we were when we had normal jobs. We are the worst possible bosses we could ever have to ourselves because it can just be so, so busy and completely lose track of why we did it. But almost every person we talked to says they do it for their family.

And that's when we say, really, did your family want this? I sat with a very, very high net worth fund manager with her family, her kids were there. She had just sold a fund, made millions of dollars. It was more than anyone needed. They were happy. They had enough money. And she was just sitting there saying, I think I'm going to start another fund. And her kid looks at her and goes, no.

No. And she goes, why not? I want to. And he's like, no. We have the money now to do the things to travel to be. And she just didn't listen to him. And she did it. She did it anyway. Do you know what I'm saying? Oh, 100%. My wife had to stop me from writing a third book this summer. I don't even know how I was going to do it. I just like put a second one out. I just sat down and just started typing. And she was like, what the hell are you doing? Why are you doing this? Yeah. I thought you just said that was the hardest undertaking. Yeah, yeah, exactly. Success is very exciting and it can play into ego. And so that is a section we wrote on checking your ego. Why am I doing this? And trust me, this is something I have to do on a regular basis. That's why people say to meditate, to get back to your center on a daily basis and to spend time together, look each other in the eyes and come up with plans together.

Every year sit with your family and look at, are we on track to what we really? really want or not because it's easy to get distracted and it's easy to let the ego run the show. I will be at events like I am at right now and I feel like, oh, shoot, there's people here way more successful than me. I'm not doing enough. I need to do more. And then, you know, thankfully I've got this guy who's like, his constant question is, why? Why?

For what? You want? Is that what you want? Or do you want to go to Europe with me? Europe. It sounds like that. It's all, the bottom line is it's all about sustainable growth. You know, you can have growth or you can have sustainable growth and sustainable growth. You can keep going. Here we are 21 years later with our business and we have sustainable growth where things aren't melting down. You're not having infighting. You're not having employees quit. You know, we've had employees for 15 years and, you know, at our business.

So that's the bottom line. That's super cool. And that's something to be very proud of, not just the bottom line, but, you know, the relationship you've ached and the lives that you are impacting in terms of your employees who clearly love working for you, which is super cool. But this is to me just such a breath of fresh air. I find that with people in our industry and not necessarily, you know, regular investors, I'm talking about the real estate education industry here for just a second. So what we all do, which is talk about real estate, that there is like sort of an epidemic of people not knowing when is enough, you know, or what they're even. doing. And I think that gets portrayed on social media all the time. And it, I think,

unfortunately, sometimes gets passed through the rest of the industry for people who are just starting or people like the people who will benefit from your book who are starting to scale up. They see some of these examples of people who just keep going and going and going and going. And don't get me wrong, there are some people whose true goal is to become a tycoon, to become a mogul. And if that's your goal, you should go for it. I totally support that. I think, the problem is when people start doing that because they don't know what else to do at their time. Yeah. I mean, again, there's nothing wrong with growing and scaling. And when you have learned that, then it's not overwhelming. Then what you're doing is empowering. You're creating leaders.

You're like you said, you're building people up and creating jobs. It's just if you don't have that in place and you don't have the vision and the mission and values. And, you're just chasing money, like you said, then that's when you can get overwhelmed and that's when things go down. We were seeing it everywhere. I'm doing a presentation at a multifamily event and I thought I do a little research. So I went on Real Deal and typed in foreclosure and the list goes on and on and on and on and on and on and on is for pages of multifamily projects that have gone into foreclosure through syndications.

And those people are, you know, they went on this, this wrong. thinking, isn't this exciting, we're going to have a billion dollar company or a two billion dollar company. And sure, they did. And now they don't. So, right? And it's, it's everywhere. It's huge. When we're in that exuberance phase of the market, you know, we talk about market cycles all the time, right? There's this exuberant phase where people start doing things that they know they shouldn't. But everybody else is. So it's like, okay, we'll just skimp a little on the underwriting because that group did. And that group did. And there was very few of us who held steady who were like, I'm not doing it. I know we have our values, so to speak. We know our

underwriting. This doesn't make sense. We're not doing it. And we sat it out. And I can't tell you every day I was like, why can't I find a deal? Why can't I do this? Why is it not working? With jealousy and envy. And why is everybody else doing a deal? So it's the exuberance phase requires a tremendous amount of self-discipline for sure. Yeah. Totally. FOMO is a real thing in this industry. Because people do really cool stuff. And especially in those exuberant times, it can be really overwhelming. I remember in like 2021, I'd just be reading about these like 21-year-olds who bought 87 units. I'm like, wow, I suck.

You say that. So many times, like, what's wrong with our team? Why can't they ever? Totally. But now I actually. I've been reflecting on that a lot recently is like I did stay the course and I think I was pretty disciplined. And I don't know if those people went belly up.

I have no idea. But I'm just happy because I don't have any stress right now. Like I'm not worried about my portfolio personally because I stuck to what I knew was sort of in line with my long term vision. And it sounds like your book is going to help all sorts of people stay on course for their long term vision. So thank you guys both for writing. it. And thank you for joining me today. I guess before we get out of here, do you have any

last advice on how for our audience about scaling smart? Yeah, I just, I want to follow up with what we just said that, you know, the only reason I had discipline this time around is I didn't the last time. So in 2008, we got, we, we went through a terrible, terrible time with foreclosures and short sales. And it was difficult. So for those of you out there who are in it, right now who are in the tumbler, you know, just like trying to figure out how to get out of this situation. It's not easy. But I tell you what, you will be a much better investor next time. Don't give up. Don't give up. Just learn from it and keep on moving because we didn't give up. Learn from these old people.

Learn from. Yep. Now I know why. Now I know why it's important to stick to these underwriting guidelines or whatever. Don't give up. get through it, it'll be okay. And read Scaling Smart. That will help for the next phase. Well, those lessons are incredibly valuable and why they're so important for people and entrepreneurs to be a part of community and have a network so you can learn from people who have succeeded, but also made mistakes in the past.

It's equally important to learn from both of those types of lessons. Well, Rich and Kathy, congratulations again on the book. The book is Scaling Smart. It is, of course, available on the Bigger Pockets Bookstore or on Amazon. We will put links to all that below. We'll put links to all of Kathy and Rich's information below as well. Thanks again for being here to both of you. Thanks so much for having us on.

It's great. And thank you all so much for listening for Bigger Pockets. I'm Dave Marr. We'll see you next time. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday.

I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicoke, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.w.w.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing.

You should only risk capital you can afford to lose. past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.