July 15, 2018

JF1412: Building A Dream Team When Embarking On An Entrepreneurial Adventure #SkillSetSunday with Bobby Montagne


Mr. Montagne shared great advice with us once before on the show (find link below). Last time, we learned his real estate strategy, today we learn how he has been able to build his “dream team”. As real estate investors, we are entrepreneurs, and we need to have an excellent team that we can trust to have our backs. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Bobby Montagne Real Estate Background:

  • CEO of Walnut Street Finance
  • Real estate entrepreneur with three decades of experience in commercial and residential property development, finance and sales
  • Has successfully overseen $15 billion in career transactions
  • Among an elite class of private real estate lenders that has consistently delivered high-quality returns to partners and investors

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Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday where we’re gonna talk about a specific skill that will help you in your entrepreneurial endeavors as a real estate investor. That specific skill is building a dream team when embarking on an entrepreneurial business venture.

With us today to talk about that, Bobby Montagne. How are you doing, Bobby?

Bobby Montagne: I’m well, thank you, Joe. How are you?

Joe Fairless: I’m doing really well, and great to have you back. Best Ever listeners, you probably do recognize Bobby, because he’s been on the show before, episode 1222, titled “Pivoting from development into private money lending.” Bobby is the CEO of Walnut Street Finance and he is successfully overseeing 15 billion dollars (yeah, with a B) in career transactions. Based in Wash D.C.

With that being said, how about we start out, Bobby, with just a refresher on your background? Then we’ll get into the dream team.

Bobby Montagne: Sure thing. The short story on my background is after college and graduate school I worked for others for ten years in the real estate, finance and development space. That was the plan – to kind of work for a big company, a small company, and maybe one in between, and then start my own company, which I did in the late ’90s as an infill real estate developer.

What that means is we would go in and typically buy desirable locations, smaller sites, knock down or reposition whatever was on it into some kind of residential use, and develop and build either townhouses, rowhouses, condos… Something residential. I did that for 18 years, until 2016.

In 2016, after we put some capital together, we began lending that capital to our former competition and became a private lender, providing capital to worthy borrowers with worthy projects. That brings us to today.

Joe Fairless: You’re gonna be talking to us about how to build a dream team. I would certainly say that with all of that experience, you have a lot of connections along the way, and it helped you identify the right team members, so I’m gonna be curious to hear how you approach the dream team scenario, and especially if you don’t address it – which you probably will, but if you don’t address it from someone who doesn’t have your breadth of experience, how someone else can do something similar.

Bobby Montagne: Sure. The first step in assembling the team – and you want a dream team, because if you really think about it, if you just kind of step back and look at what you’re trying to build (any kind of business), you can’t do it by yourself. There’s no chance, no matter how smart, talented or how much money you have, you cannot do it by yourself… So you need to surround yourself with people first and foremost – and this is all in my opinion – that you can trust. I call them foxhole people. I just envision being in a foxhole, for example, in World War I. Who do I wanna be in that foxhole with? Who’s got my back? Those are people that  you trust, and that’s who you wanna begin to surround yourself with.

The second piece as you’re kind of sitting back and thinking about it is you need to really understand the process. I’m a real estate developer and private lender, so I really need to understand the process of real estate development, beginning with identifying an opportunity, all the way through getting that opportunity approved, zoned, site-planned, building permits… So if you understand the process, it’s kind of like an assembly line – what do you have to do first, and once that’s complete, what do you have to do next?

In each one of those pieces that you figure out along your assembly line, you need to identify a specialist that you trust, who can help you through that piece. At the end of the day, that’s kind of how I think about it – I break it down into bite-sized pieces.

Joe Fairless: That is very helpful, and that certainly can be applied to any entrepreneurial venture, real estate included. Can you give us now an example, maybe of your own company?

Bobby Montagne: Sure. For example, I’m a real estate developer and I identify an opportunity. That might be an opportunity that I’ve driven by for years, a vacant building that I think is in a decent spot, and I wanna pursue purchasing it… What do I need first? Well, I need a purchase contract, I need somebody to help me understand the title, I need an idea of the value, what should I offer for it… So the first person I need in that whole process is some sort of real estate lawyer who can draft a contract for me, who can track down the title for me, who can arrange a closing for me… So that’s the first person I wanna find in my analogy in that assembly line.

Then let’s say I get through that part, and while I’m going through that part  – concurrent with that part – I wanna understand the underlying zoning; what can I build there? What can reasonably get approved? How long will it take? What do I need in order to do that?

In order to build on that site, for example, a 25-unit condo building or a multifamily building, I need to understand “Does the underlying zoning allow that?” If it doesn’t, I need to rezone it. I need a picture of what I’m gonna build, so I need an architect. I need somebody to help me design what I have in my head on a piece of paper, so that I can then go in front of a planning commission or a town council or whoever I seek the approval from, so I can pitch my idea.

And to pitch that idea, I need a picture of that idea and an architect can help me draw that. An architect can help me understand the underlying zoning, what kind of density I might be able to get… So while I’m putting my contract together with my transactional or real estate lawyer, I put that in place, first part of my assembly line, and then I go to hunt for an architect that I can work with, that I trust, that can draw well, that can put my vision on a piece of paper so that I can go pitch that to the people that are required to approve it.

Back to the dream team – the first piece begins with… I need a lawyer, and now I need an architect, and if for example I need in that 25-unit condo building that I wanna build 50 parking spaces, and I need to attach that to water and sewer, and I need to build a sidewalk and a curb around it – well, for all that kind of stuff I need a civil engineer. I need someone who can site-plan it, who can work the land, who can look back on what’s approved and what’s viable there and help me understand that, and then take that and put it on a piece of paper so that I have a site-plan, I have a vision of what that piece of property is gonna look like when I’m done building it.

So all of a sudden, I have three people that  really need on my team: a real estate lawyer, an architect, and a civil engineer… And I haven’t even put a shovel in the ground yet.

Now I’ve got the first three pieces, the first phase of my team coming together.

Joe Fairless: So we’ve got the two steps – one, find foxhole people, trustworthy people, and two, know the process, so that you can assign specialists that you trust to each part of the process. Let’s dig into each of these a little bit.

The first part, the foxhole people – how do you personally identify people you can trust?

Bobby Montagne: I don’t just get on Google and find out who the architects are in my area and hire one… I talk to other developers, for example. I talk to other people in the space, and I get referrals. Somebody might tell me — I’d say his name… The best real estate transaction lawyer I know, Jack LaVoy. He was referred to me from a friend of mine who had done some business with him and I reached out to this friend of mine who is in a similar business, and I said “I need a really good real estate lawyer. Do you know anybody?” and he gave me Jack’s number.

So I call Jack, I get to know Jack, I like Jack, I  like his style, I check his references, he’s with a good law firm, they check out, so I go and have a cup of coffee with Jack, I talk about what I wanna do, he tells me if he can help me or not… If he can – great, he’s my guy; if he can’t, maybe he can tell me somebody who could, and then I’ll go chat with that guy. So it’s not something that happens overnight; it happens over a period of time. And you, as the entrepreneur, have to make all of this happen, because folks aren’t gonna call you and say “Hey, I understand you’re thinking about this. I might be able to help you.” You’ve gotta go find these people. It’s an effort, you have to be the catalyst that makes it happen.

So to answer your question, the best way to find people that you’re gonna end up trusting and who can help you are referrals from people that you already trust.

Joe Fairless: As far as the specialist that you identify from each part of the process, it sounds like you could take the same approach you just said and just apply it to that as well, because you just find people in the space that you already trust and get referrals for the specialists… So is that just a copy and paste type of answer for this, too?

Bobby Montagne: It absolutely is. For example, let’s say I find that corner, it’s got a dilapidated building on it; I think the opportunity could be to take that building down and build in this case four or six townhouses. During that process, I’m gonna wanna know what those six townhouses might sell for once they’re done as I envision them being done – four bedrooms, three and a half baths, high-end kitchen, two-car garage… In that neighborhood.

I have to know what those will sell for at the end of the day when they’re built, a year or two years from now… So I might reach out to the local realtors in that space and say “Hey, I’m thinking about building this 4-bedroom townhouse. Brick front, three and a half baths, two-car garage. I’ve done some comps myself, and I think they might trade for 800k each. What do you think?” and then you have that discussion.

So all of a sudden now you have a realtor who knows what you wanna do and is helping you out, and who if they play their cards right and are helpful through the whole process, will end up listing those six townhouses for you, and it works for them, too.

Joe Fairless: 15 billion dollars in career transactions… So when something along the way, especially when you were in development, something didn’t go according to plan, and if you took the approach — well, first off, is that a correct assumption?

Bobby Montagne: Absolutely.

Joe Fairless: Okay, fair enough.

Bobby Montagne: Almost in every case it didn’t go as I originally envisioned, but with the proper persistence, you get to the finish line.

Joe Fairless: Okay, so here’s my question. If you took the approach that you are saying to take, which I completely agree with – find trustworthy people, and then find specialists after you know the process, and plug them in, and you found them through a referral, but something didn’t work out because they messed up, they weren’t the right person, what is a way to mitigate that from happening as much as possible? Because I imagine you have come across that before where you got a referral from someone who worked with someone, someone who was trusted, and then they worked with you and it did not work out at all, and you’re like “What the heck? I just followed this process… What went wrong?!”

Bobby Montagne: Yeah, it has happened to me on a number of occasions and I’ve learned from it. The takeaway is really simple, and I didn’t invent this phrase, but it pays off to put in your brain – hire slow, fire fast. What that means is do your due diligence, check your referrals, make sure that your architect has done a project similar, for example, to the one that you’re pursuing, has a reputation, knows how to get in front of a planning commission or planning council to get approvals, has some experience in that space, knows what the questions are gonna be before they’re asked, so he’s already answered them, has the proper supporting documentation, pictures, plans etc.

So hire slow. Go to referrals, talk to the person, ask them questions… Questions just like the questions you asked me – hey, when you’ve been hired before and it didn’t go right, how did you end up working it out? Now you’re in the battle, and your architect (from my example) cannot deliver the plans and the specifications that you need in order to advance your plan, and you call them and you nudge and you push him, and every day, every time you talk to him he gets back to you slower, he’s hard to reach… He’s just not delivering. It’s time to fire fast. Get rid of him. Move to plan B. When you’re vetting all the different architects, don’t just throw away the ones you didn’t hire; keep their name and number around, just in case you need them.

But I can look back at all the mistakes that I’ve made by putting the wrong team together, and in almost every case it’s because I didn’t properly vet them in the beginning. I was in a hurry, I just wanted to make it happen, I wanted to hit a deadline, I wanted to make the spring market, I was afraid I’d lose the project if I didn’t get it done… So I traded the quality, the due diligence of the team members I’m looking to hire – I traded that for speed, and in every case it took the project longer, because switching courses, switching architects, switching general contractors mid-stream is costly and painful, both with respect to time and money.

Joe Fairless: Great stuff.

Bobby Montagne: Sometimes you just have to do it. I just always go back to “Hire slow, fire fast.”

Joe Fairless: Anything else as it relates to building a dream team as an entrepreneur that we haven’t discussed, that we should?

Bobby Montagne: Fire fast is very painful; it’s emotional, it’s hard, it’s confrontational and none of us like confrontation. I don’t care where you’re from, nobody seeks confrontation… So it’s hard to do, so you tend to procrastinate it, and you make matters worse.

The best way is to fire fast and fire fair. The conversation basically goes “What’s happening here isn’t exactly what you had told me would happen when we were talking, and it’s now how I envisioned it happening. If we’re both honest with ourselves, this probably isn’t gonna work.” So instead of just firing him, the “You’re fired!” kind of thing and have that conversation, I say “Hey look, I wanna unwind this honorably. I want it to be if I run into you in a restaurant that we have a conversation and we don’t avoid one another… So you’ve probably done some work and you probably think I owe you some money at this point… Let’s have that discussion, let’s get square and let’s just look at this as something that we both made a mistake on and we wanna move on.”

So you can’t stiff a guy money-wise because he’s not doing exactly what you want. You have to be fair, and if he thinks you owe him 20k and you think he’s done 10k worth of work, have that discussion and make a deal and move on.

Joe Fairless: How can the Best Ever listeners get in touch with you?

Bobby Montagne: The best way is through our website. It’s long, but it’s easy – walnutstreetfinance.com.

Joe Fairless: Bobby, I really enjoyed our conversation. This is applicable not only to real estate investors, but entrepreneurs in general… But since this is a real estate investing podcast, I’ll stay focused on that… Any type of real estate venture, this is helpful for, and the two steps that you mentioned – one is find foxhole people, so people you can trust, and two, know the process.

I wrote down something, just playing off of what you built, and I just wanna get your thoughts on it to see if you’re okay with maybe amending it or maybe just building on this a little bit. I wrote down three things. One is – and this is purely just listening to you and writing based on my notes from your conversation… So one, sit down and write out the entire process. So first we’ve gotta know the process.

Two – confirm that process with someone who has more experience, to make sure we’re not missing any parts of the process.

Three – assign trustworthy specialists to each part of the process. What do you think about that?

Bobby Montagne: That’s exactly right. That’s the nutshell. A piece of it you added I’m not sure I said, but I think it’s absolutely right – after you think you know the process, after you think you know what the assembly line looks like, go talk with somebody who has done it before, talk to one of the specialists who understands the whole thing, and make sure that you’ve got a trustworthy specialist, someone smart in each one of those stops along the assembly line.

Joe Fairless: This is great stuff. Thank you again for joining us again, Bobby. I hope you have a best ever weekend, and we’ll talk to you soon.

Bobby Montagne: Thank you so much. I appreciate inviting me back. I look forward to talking to you again.

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