April 26, 2019

JF1697: Rounding Up The Best Things Learned From Real Estate Investors Last Week #FollowAlongFriday with Joe and Theo

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Joe and Theo are back at it with Follow Along Friday, telling us the best things they learned in the previous week. Joe interviews a group of real estate investors every week for the podcast, today he tells us about the best things he learned from those interviews last week. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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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, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff.

Welcome back, Theo Hicks. Nice to have you back on the show.

Theo Hicks: It’s good to be back, Joe. Looking forward to today’s conversation.

Joe Fairless: Yeah, we missed you, and we’ve got some things that we’re gonna talk about today… Specifically, three lessons that I learned from last week’s interviews. They’re ranging – one is more setting up your business foundation; the other is just some random thing that I did learn, so I wanna mention it… It might be applicable to people; I won’t spend a lot of time on that. The third is something to reiterate to any Best Ever listener who might have a self-defeating story that they’re telling theirself about finding deals.

First, let’s dig into it… Number one – and these are lessons that… Well, taking a step back – when we do interviews for this show, they are done on Thursdays, and there’s nine, ten, eleven interviews that I do on Thursdays, or if I’m not able to do them, then you step in and you do the interviews… But the point is that we’re interviewing 9-10 people in one day, and it’s a day of learning, that’s for sure. So what we’ve started to do on these Follow Along Friday episodes is to highlight some of the lessons that have been learned from those conversations. The lessons that I’m mentioning – certainly learned a lot more from the conversations than just what I’m highlighting; I just wanna call out a couple things.

One, Terry Ogburn – he’s actually in your neck of the woods, Theo; he’s in Tampa, Florida.

Theo Hicks: Okay…

Joe Fairless: And he talked about the eight components of an operation manual for your business. This is for every real estate investor who has a business, so everyone raise your hand, we’ve all got businesses… We should have an operations manual. That’s kind of intuitive, although I guarantee probably 85%-90% of everyone listening – myself included – do not have operation manuals for our businesses… So it’s nice to hear — he not only talked about the components of it, but he went into detail during the interview; I won’t go into details of the components, but I will tell you the components, and if you wanna dig into that, then just listen to the Terry Ogburn interview. And by the way, the people who I’m talking about – those interviews will be released sometime over the next 30 days from when this episode goes live.

So the eight components to an operations manual for your business – number one, the business development plan; so how are you going to generate business, how are you going to have the business evolve over time, and getting specific there.

Two is the strategic action plan, and here is the key with the strategic action plan – grade yourself every quarter with specific numbers, and make sure that that’s in place; it’s something that we do, Theo, as you’re well aware – we track the amount of new visitors to our website, the amount of new passive accredited investors who reach out to us, the amount of visits to our blog, if we’re doing a special series, like you do (the Syndication School series), we track the visits on that particular landing page… And we have a call every Tuesday and Thursday at 8 AM in the morning. But on the Tuesday call, Theo goes over the metrics and how we’ve progressed (or lack thereof) and then we talk about that.

So having a strategic action plan in every quarter, grading yourself – we do it weekly, but perhaps the strategic action plan is more high-level; maybe focus on more of the key performance indicators that are your bottom line indicators, and then the weekly check-ins will tie into those.

For example, one key performance indicator for my business is new accredited investor leads. And now, three main lead sources for my business, for new accredited investors – one, word of mouth referrals; our current investors referring others. That’s now (I’m proud to say) number one. Two is Bigger Pockets, and then three is this podcast. So that would be more macro level that we would do every quarter when we take a look at that, and then on a weekly or more consistent basis we look at the landing page results, and the performance of certain campaigns, certain series etc. that ladder up to the other stuff. So that’s number two.

Number three is org chart. Self-explanatory, right? But here’s the thing… When I asked Terry which of these components takes the most time to come up with and think through, he actually said the org chart, because it’s writing in the people and the responsibilities and the roles that they serve, and that can take some time. I know first-hand that can really take some time to really think through that.

If you have  a business model that’s more traditional, like wholesaling or fixing and flipping, then you probably know the people you need. You need an acquisitions person, a dispositions person, maybe someone overseeing  the construction, someone handling the calls that are coming in etc. So you can probably borrow a page from someone else’s book who you know, who you know, who’s in the industry, and fill that in… But if you have an apartment syndication company, like I’ve got, then it can be a little more challenging… But nonetheless it’s important to have. So that’s number three, org chart.

Number four is a checklist for the job functions. I guess I jumped the gun on that; you’ve got the org chart, and then number four is the checklist for the job functions. That’s the part that takes the most amount of time.

Number five, a budget proforma forecasting income that you want. That’s the fun part, right? Forecasting… “Okay, here’s where we wanna be”, and then have things in place to make sure that you’re tracking against that. So that’s number five.

Number six is policies and procedures manuals… News alert, right? But you need it, because if you have a good relationship with everyone on your team now doesn’t mean you will have that in the future, so you need to make sure that there are policies and procedures in place… And then also, just setting expectations with the team. I know when I was working with organizations as a W-2 employee, if there weren’t certain rules or policies, then it’s the Wild Wild West. But if you know the parameters of “Okay, here’s my expectations, and now let me deliver on those expectations”, then it’s a lot easier for everyone involved. It’s actually for everyone’s benefit.

Number seven is a direct marketing plan. What’s your plan to reach people? I guess a business development plan is slightly different. You’ll have to listen to the interview and hear the nuances there, because I know I said number one was business development plan and I grouped in marketing there… But there is a specific, direct marketing plan.

Then number eight is a social media plan. Terry actually segments out social media in its separate bucket, as a component of the operations manual.

To recap – business development plan, number one; strategic action plan, number two; org chart, number three; checklist for job functions, number four; a proforma, forecasting income, number five; policies and procedures, number six; direct marketing plan, number seven, and social media plan, number eight. Any comments?

Theo Hicks: Yeah, so I’m sure some people, as you mentioned in the beginning, 85% to 90% of us likely don’t have all eight of these components. They maybe have a few of them, maybe they’re in their heads, but if you’re just starting out or don’t have a large business, you may be asking yourself “Well, how am I gonna have an org chart? It’s just me, and that’s it.” And I remember — it wasn’t this last year’s conference, but it was the 2018 conference… I can’t remember who it was; I think it was Scott Lewis. He was explaining the org chart and how important that is, and he was also addressing the objection of “Well, if I’m just me, why would I make an org chart? It’s just my name and then everything else…” But you wanna break out the different roles that you’re doing, and then, as Joe mentioned, take out the checklist for each of those job functions. That way, once you’re ready to bring on someone, you can be like, “Okay, right now I’m fulfilling 20 roles, so in my ideal business I’d have 20 people working for me. Here’s the first person I’m gonna bring on, and they’re gonna fulfill roles one through ten, and I’ll do eleven through twenty.”

That way, you know exactly who you need to bring on; maybe you don’t know when you’re gonna bring them on, but you know, “Okay, eventually I’m gonna need to fulfill these specific roles” and you can tackle that throughout the year, as opposed to just waiting and kind of randomly bringing on people, and not necessarily knowing who’s gonna do what, or who you need to do what. That’s one thing that stuck out with the org chart; that’s gonna take the longest. The reason it’s gonna take the longest is because you have to figure out exactly who you’re going to need… And I’m sure for you, Joe, you probably didn’t know exactly who will you be hiring when you first started out. You probably realized you’re gonna have someone that specifically helps you with social media, and then someone helps you with marketing, and someone helps you with this. Obviously, all of these things are gonna evolve, as well; they’re not gonna be set in stone and never change, either.

Joe Fairless: And I love it, because the key here is the vision and being intentional about what you’re doing… And certainly, as you said, it’s gonna evolve. But just putting it down on paper and say “Okay, here are the eight components to operations manual. Now let me put on paper what I believe them to be as of this moment in time, knowing that they’re gonna evolve.” Just putting them on paper I guarantee you will trigger some questions and some ideas to help advance your business further and a lot faster than if you hadn’t done that.

Theo Hicks: Exactly.

Joe Fairless: Alright. Second, really quick, Jason Pero – you can hear his story, it’s very impressive… The single-family home portfolio that he and his wife purchased and accumulated, and now he’s in multifamily stuff… But I wanna mention that during our conversation he said he bought a Laundromat and a car wash with the assumption that they would be passive, because with the Laundromat you put quarters into the washer dryer, and with a car wash you do the same thing… Not so much. Not passive at all. Incredibly active, and it was his least favorite investment to date. I think he ended up selling it; you can listen to the interview and hear all the details.

One is Laundromats and car washes are not passive… And I didn’t necessarily know that either; I would think, “Yeah, it’s just quarters.” But you’ve gotta collect those quarters, and you’ve gotta make sure no one’s stealing, and you have to mitigate the risk from people not stealing… Of course, I guess you could do electronic payments, but usually people who are at a Laundromat – that’s not the best form of payment for them, I imagine. It’s probably gonna be change. And there are other systems too you can look up, but just know that Laundromats and car washes are not passive. You don’t have any comments on that, do you?

Theo Hicks: I do not.

Joe Fairless: I didn’t think so. [laughs] And then Jens Nielsen, the third thing – he talked about different deals that he did starting out; he’s a multifamily investor, and he talked about an eleven-unit that he started with, and then a 16-unit… And I started asking him, “How did you find these deals?” The 16-unit he did with direct mail; he was connecting directly with owners. A 16-unit property. That’s a pretty good size property, getting direct to  owner. A $740,000 purchase price. By the way, the 11-unit, the first one that he did, it was owner-financing, so he was able to secure that… And that was actually a broker who he had a relationship with; it was the broker’s idea to do owner financing, because the numbers were not working.

I’m bringing up Jens Nielsen’s interview for two reasons. One, if you feel like there aren’t enough deals or you’re not getting the right deals, are you doing direct mail, where you’re creating your own list, looking at the assessor’s records, checking out the LLC that owns it, then mailing handwritten envelopes to them, handwritten letters to them? Are you doing that? Are you doing it consistently, and are you following up with those leads? Because if not, then you’re not maximizing your opportunities to find deals.

Then the other thing I wanna mention about Jens is that he was looking in tertiary markets, so not the Dallases, the San Antonios, the Austins; he was looking in the Tyler, Texases, or the Abilene, Texas… Not specifically those markets, but you get the idea… That’s what a tertiary market is. He actually bought in Albuquerque, New Mexico. It’s a market that not a lot of people talk  about, but he was able to get these deals.

I personally wouldn’t buy in a tertiary market, because the size of properties that we’re buying, 250+ units, there are less buyers when we exit, therefore we’re not gonna get the same type of bump whenever we exit out… But the cashflow could be really good. So it’s good for certain buyers, it’s just not good for the type of business model that we do, or not as good… But certainly good for certain buyers, depending on what their plan is for the property and their portfolio.

So if you’re having trouble finding deals – two things. One, are you really doing all the direct mail that you can possibly doing? Really? Really, really, really? And then two is maybe look at some tertiary markets – Albuquerque, New Mexico, Abilene, Tyler, markets like that.

Theo Hicks: This goes back to what we talked about the last time we did Follow Along Friday, about a month ago, when you were talking about doing things that no one else is doing, pursuing those investment strategies… The example was this guy discovered that he could buy properties with foundation issues and fix them rather inexpensively… And I guarantee you that when he’s sending out these mailers in these tertiary markets, those owners are not getting as many mailers as someone would be getting in Dallas, Texas. I’m sure it’s not as many people to mail to, but they’re also not gonna be receiving 25 letters from different investors, as well.

Joe Fairless: Yup, absolutely. My mom used to say “The squeaky wheel gets the grease” growing up.

Theo Hicks: There you go.

Joe Fairless: It’s true, in most cases. The squeaky wheel can also be incredibly annoying, so you wanna be careful with any saying like that; you wanna take it for what it’s intended for, not perhaps literally, because then you could take it to a different level that you shouldn’t go, but… Yeah, that’s a great way of getting leads. What have you got going on?

Theo Hicks: Well, I had a baby, that’s why I wasn’t here.

Joe Fairless: Congratulations again. All is well?

Theo Hicks: All is well. It wasn’t what I expected, but I really enjoyed it.

Joe Fairless: In what way wasn’t it what you expected?

Theo Hicks: Probably the sleeping. I didn’t expect to be able to sleep as much as I am now. It might change once my wife goes back to work, but… I was expecting to sleep a few hours a night, and it really hasn’t changed that much. You kind of just get up for a little bit, and then go right back to sleep. Obviously, while I was off, I could sleep a little bit more, but I was kind of preparing for coming back to work, so I actually get up earlier now than I was getting up, because obviously the baby is waking you up… But no, I love it; it’s great.

Joe Fairless: Awesome.

Theo Hicks: Besides that, just getting back in the swing of things… I haven’t worked for a month, so… Just kind of getting back into the swing of things – it feels natural again. I’m glad to be back on Follow Along Friday, and I’m actually doing the interviews today, so I get to talk about what I learned on next week’s Follow Along Friday, so that’s good, too.

Joe Fairless: Looking forward to it.

Theo Hicks: Do you wanna jump into the trivia or do you have any other updates?

Joe Fairless: No, let’s do it.

Theo Hicks: Great. So we were hoping we could do a Follow Along Friday, because the last time we did Follow Along Friday it was the first time Joe got the trivia question right, live on the air, so… All the way back in mid-March, if you don’t remember, the trivia question was “From the landlords perspective, what’s the best month of the year to lease out your unit?” That’s the month of the year that would result in the highest lease to rent. The answer was August. So if you were the first person to answer that question (that wasn’t Joe) correctly, then you receive a free signed copy of our Best Ever book.

This week’s question – I picked these questions that are gonna be relevant to us as investors. Sometimes they’re fun, but most of the time they’re gonna be things that are relevant or interesting to us as investors, in particular rental landlords, people that are buying multifamilies or rental properties.

This week’s question is “What is the average age of the first-time homebuyer?” The average age of the person when they buy their first home.

Joe Fairless: Now, in 2019?

Theo Hicks: This data was from last year, from 2018. That was the most recent data I could find.

Joe Fairless: First-time homebuyer, average age… 34.

Theo Hicks: That’s a really good guess. I’m not gonna say it’s right or wrong. But everyone listening, make sure that you also submit your answer to that question, “What is the average age of the first-time homebuyer?” You can either do that via e-mail, at info@JoeFairless.com, or in the comment section of the YouTube video. Again, the first person to answer that question correctly will receive a signed copy of our Best Ever book.

Joe Fairless: Volume one, right?

Theo Hicks: Volume one.

Joe Fairless: Alright, sweet. Are we doing a review?

Theo Hicks: We’re doing a review. Lastly, we read a review from the Best Ever Apartment Syndication Book. If you haven’t already, buy that book on Amazon, leave a review, and if you send us a screenshot of that review to info@joefairless.com, you will not only receive a link to download some free apartment syndication goodies based off of the book, but you’ll also have the opportunity to have your review read aloud on the podcast.

This week’s review is gonna come from Jack F. Jack said:

“At first glance, the content of this book is second to none. Working at an investment real estate company, consistently surrounded by experts, I can easily say that the information presented in these pages is not abundantly available, much less easy to find.

It’s a worthwhile read, not just for people specifically trying to do apartment syndication, but for anyone who wants to get serious about investing. We on the other hand have been serious about investing for some time, and now we’re excited to put this content to the test and try our hand at apartment syndication. We’ll hopefully have quite a story to tell when we edit this review next.”

Joe Fairless: Awesome. Well, thank you for those thoughts, and especially given your background and your experience level that you mentioned. That means a lot.

Best Ever listeners, I enjoyed our conversation. I hope you have a best ever day, and we’ll talk to you again tomorrow.

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