Returning guest Ryan Groene from episode JF1686 shares a great learning experience around partnering with the wrong group of individuals. Ryan explains how quick partnerships on a single deal or two is significantly different from partnering to grow a business. He shares 5 great questions he plans to ask before deciding to partner with a future individual and how important it is to get to know them at a more personal level.
Ryan Groene Real Estate Background:
- Full-time Mobile Home Park Owner and Operator
- Has owned 3 mobile home parks totaling 175 spaces,
- Based in Charleston, SC
- Say hi to him at ryan.groene55ATgmail.com
- Best Ever Book: What it Takes By Stephen Schwarzman
Best Ever Tweet:
“You kinda have to find somebody who matches your lifestyle, and somebody you don’t mind spending a lot of time with, whether it’s virtual over on the phone, email back and forth, texting back and forth or even in person.” Ryan Groene
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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. First off, I hope you’re having a best ever weekend. Because today is Saturday, we’ve got a special segment for you called Situation Saturday.
Here’s the situation – you want a partner. You then go get partners, and then you might have a different vision for where you need to go once you get into a partnership… So what do you do, how do you approach it, and what are some things you can put in place prior to that partnership, to help make things smooth whenever you do part ways.
With us today, we’re gonna be talking to someone who has gone through that process, learned a lot of lessons, and is wanting to share it with us. I’m looking forward to that conversation, Ryan Groene. How are you doing, my friend?
Ryan Groene: I’m doing great. I hope you’re doing well, Joe.
Joe Fairless: I sure am, and I am grateful that you’re back on the show. Best Ever listeners, you can just search Ryan’s first and last name and my name, and I’m sure his other episode will come up, where he gave his Best Ever advice.
A little bit about Ryan – he is a full-time mobile home park owner and operator. He has owned three mobile home parks totaling 175 units, and I say “he has owned” because now 1) he sold his interest in two of them, which is part of the main part of this conversation… So he’s no longer in two of the partnerships, but he still has one. He’s based in Charleston, South Carolina. With that being said, Ryan, first, do you wanna give the Best Ever listeners a refresher on your background, and then we’ll go right into it?
Ryan Groene: Yeah, my background is basically right out of college I worked in finance; I had a W2, like most of the Best Ever listeners. Then I made a transition to full-time mobile home park owner/operator/investor. About a year and a half ago, right before we [unintelligible [00:03:16].02] Basically, the past year I have owned three parks, bought three parks, like Joe said; I’ve also operated a portfolio with Buckeye Communities in Ohio.
We had about ten parks, about 500 spaces or so, and then I also had my 175 spaces. So I was operating that portfolio the last year. We’ve since scaled that back. We’ve sold a handful of those parks, we still have a couple, and I’m still doing that, but I’ve also changed locations, so my role has kind of changed a little bit. Still looking for more parks to buy, and I’m kind of gonna get into what transpired the last year with my partnerships with buying parks, and stuff like that.
Joe Fairless: Tell us the story.
Ryan Groene: Basically, I had bought one park, my 75-space community in Fayetteville. Then through that I have met some other potential partners. They were interested in mobile home parks. They had never maybe necessarily owned one, or they had limited knowledge, or they were looking to get into this space… So basically, we bought two parks together. I had relationships with the deal, and I am the operational piece to the partnership side of things.
Long story short, we were looking to basically scale a business, grow a business, and put about 500 to 1,000 pads under our management and ownership. And building a business is a lot different than who we partner with, than doing one deal together. Because when you just do one deal together, you maybe only talk to each other a few hours a week. Building a business together when you have large amounts of work to do, you’re around each other a lot more, communicating a lot more. So establishing those boundaries upfront is pretty important.
I would advise everybody to get to know somebody, not just in a working relationship, but also on a personal level, because you wanna find out what is their lifestyle, what is their work schedule, what is their communication schedule, what is their life goals, where are they at in their lives… And when you’re building/scaling a business – do they have that ability or want to do that? That buying one deal together, or even a couple deals, is a lot different than building a massive portfolio together.
And then, when you get past all that – we had known each other relatively short timeframe. We knew each other really less than a year; they were the capital pieces, I was the operational piece. I had also found the deal. And really, you wanna have an operating agreement going in; that’s really just a fail-safe for partnerships. You wanna have clear, defined roles, what’s everybody’s expectations… And then if something happens, life happens – people get sick, people have kids, people pass away, their spouse passes away, if they have a regular job, their work gets real busy, so they can’t devote as much time…
You kind of have to find somebody that matches your lifestyle, and somebody that you don’t mind spending a lot of time with, whether it’s virtual, on the phone, emailing back and forth, texting back and forth, or even in person. And it is kind of like a marriage, but you’re playing with a lot more money… And in marriage, while you’re playing with money, people sometimes can get ugly. It gets ugly when things go bad. Luckily for me, we had a pretty good split. There were no lawsuits involved, or anything. We kind of realized that maybe we weren’t the correct fit to build a larger business, so that’s kind of why I sold my partnership rights. It’s just easier for everybody.
I may have lost some money in the short-term, but in the long-run it’s probably better for my mental capacity, in order to focus on new things, versus bringing up the past and always having to deal with it.
Joe Fairless: What was happening that resulted in you saying “Okay, I think we need to part ways”, and with them agreeing that that was the case?
Ryan Groene: When you’re trying to build a business, like forming a partnership to build something larger, you have discussions, right? People’s goals come out, people’s lifestyles come out… And most of my partners – I was full-time, and some others were full-time, but they also had other jobs or other commitments…
Joe Fairless: How many total partners?
Ryan Groene: There was five.
Joe Fairless: Five. Well, there’s the first mistake.
Ryan Groene: Yes, I agree. Too many people. You should limit it — most of the good partnerships, kind of like you see Warren Buffet and Charlie Munger, just to name a clear example… There’s two people. So that was the first problem; there was a lot of people, and everybody had their own lives and their own time commitments. And then once you start putting pencil to paper and starting to look at more deals and buy stuff, you start to figure out maybe who’s committed and who’s not. If they are committed, maybe they want something a little bit more, that you’re not necessarily willing to give up… Whether that be equity, time, whatever it might be.
So first of all – yeah, we had too many people. That was probably the first mistake. But you don’t learn that until you go through it. And then the second thing was just maybe our communication styles weren’t the same. Maybe one guy needs everything right away, and the other person, while they have other stuff going on, they may take a little bit more time to do it. So expectations, communication styles, and also just who is doing what. We have to establish that upfront… Whether you establish different reports, and you go over it, you measure it, and then you discuss it, versus trying to micro-manage the situation from afar.
Joe Fairless: What’s your preferred method of communication?
Ryan Groene: It depends on what we’re talking about. If we have to have a phone conversation, that’s perfectly okay. When you have that many people, a lot of times it takes a long time, and you have to have drawn-out conversations, conference calls…
Joe Fairless: Way too many people. [laughs]
Ryan Groene: Yeah, it’s too many people to make a decision. So you have to have the person that can make the decision, or two people that can make a decision. My preferred method, depending on what the decision is, is to get on the phone and talk about it… Because I think you get tones, you get a lot more truth than behind a screen.
Joe Fairless: Yes…
Ryan Groene: When you read a text or read an email, it’s hard to decipher what that is… Because I’m not a very good texter. Or if I text, it might not be how I talk in conversation, I misspell stuff sometimes… So it can kind of get lost in translation. There’s a million different things… Versus actually having a conversation – the flow of the conversation, and tones and all that plays into it.
Joe Fairless: I agree. Alright, partners — going into it, you found the deal, and you were on the operations side… What were the other four doing? You said money, but were they all four money people, or what?
Ryan Groene: Yes and no. Everybody had their own roles, had different experience with different things. One guy was maybe better at scaling a business, one guy was good at finding deals, one guy maybe had the balance sheet… On the deal specifically they weren’t necessarily all money (I played a little bit of it), but they had key strengths that maybe I didn’t necessarily have, or I had something they didn’t have… So we all kind of played a role, we all kind of knew each other, and we were trying to buy a bunch of stuff… And it kind of just snowballed into that organically. Then when we were starting to move and look to buy things, things came out that maybe it wasn’t the best, because people have lives. Like I said, life happens.
This was a transition of 4-6 months, give or take… So it wasn’t just like a weekend type of thing. It was a longer, drawn-out process, and we had thought about it a lot… And like I said, life happens and you start thinking about it… When you pull away from the calls and emails, you start thinking about it, “Can this actually work?” and most of the time when you have that many people it doesn’t necessarily work. It’s hard to make it work.
Joe Fairless: But the two deals that you sold your interest in – were they performing well?
Ryan Groene: Yeah, the deals were performing. There was nothing wrong with the deal.
Joe Fairless: Why not just ride those two deals out, and then just choose not to partner up on other stuff?
Ryan Groene: Because the reason being I think it was an easier decision, just like I said, split and not have to deal with the headaches. For me it was more of a mental type of thing; I don’t wanna keep having a conversation… And then it was just more of like still continuing to be friends with an ex-wife, an ex-girlfriend, an ex-boyfriend, whatever. There’s always a little bit of tension. Maybe you don’t talk about it, but it’s hard to get past the emotional side of things a lot of times.
Maybe you partnered on these deals, and the deals were performing, but then when you’re trying to build a business and build a larger portfolio, those things stumble into those deals.
Joe Fairless: Alright.
Ryan Groene: They were performing financially, they were good assets, and everything about that. We had bought them right… I’m mainly a turnaround, big value-add, buy-at-discount type of investor, and we were starting that process, and it does take a lot of effort to do that… So it was easier just to part ways, just so we could all focus on new things and not have to worry about it. We’re not talking millions of dollars, we’re talking enough to where somebody could maybe write a check and just be done with it.
Joe Fairless: Okay. And you got into those deals with no money of your own?
Ryan Groene: Correct.
Joe Fairless: Okay. You told me that before we started recording, that’s why I wanted to just mention it. So you got money when you exited out, so you did come out ahead financially, just perhaps not how much you would have if you had stayed in it through its completion.
Ryan Groene: That is exactly correct. My piece, while I may have some money to invest in certain deals — basically, I had found the deal, some equity based on finding the deal, and then also operating the deal… The day-to-day in charge of the asset, and in charge of the on-site manager.
Joe Fairless: What are five questions that you’re gonna ask your next partner, either directly or indirectly you’ll get the answer to? What are five questions you would ask?
Ryan Groene: One, “What is your goal for the next five years, when it comes to investing in real estate? What is your lifestyle? Are you investing because you want passive income and you wanna sit on the beach, or do you wanna build a large business?” Two, “How do you communicate? How do you manage problems?” Four, I’d probably say “What is your time commitment? Do you wanna be active or passive? Do you want an active role, or what role do you want and can you play?” And that kind of translates into “What are your strengths? What are your weaknesses? How do we line up?”
And five would be “Let’s become friends first before we start a partnership together. Do we have similar interests in your personal life? Do you have kids, and maybe I don’t have kids? Or are you a golfer and maybe I’m a golfer? Do we have similar interests that aren’t just real estate related?”
Joe Fairless: Okay, I like that. “Goals for next five years/what’s your lifestyle that you wanna be?”, number one. Two is “How do you communicate and manage problems?” Three, “What’s your time commitment? Do you wanna be passive or active?” Four, “Strengths and weaknesses?” and five, “Let’s get to know each other on a personal level.” You can ask questions about interests, but really that can just develop over time, to see.
What about also when the chips are down and there’s a — well, I guess you already asked that; you’re one step ahead of me. “How do you manage problems?” I guess what I’m really getting at is the character of the person. How would you go about assessing if they’re a good person or not? Because it’s one thing “How do you manage problems?” “Oh, well, I identify the root of the problem, then I take steps to resolve it, and then I see if it’s gonna be reoccurring or not.” That doesn’t at all get to “Am I going to lie to you about the problem? Am I going to steal money from you or the partnership?” How would you go about qualifying that when you’re in the honeymoon stage?
Ryan Groene: Yeah, that question you could get a little bit more clear, because that can translate into a whole set of other questions, scenarios. For me, I’m very transparent about my past, about what I’ve done, partnerships that have gone bad or that have done well, my strengths, my time commitment… So I would ask people that, I would try to get to know them. Your reputation is what it is, and people talk, whether it’s for good or bad.
I would probably ask around, kind of “Hey, have you ever done a deal with this person? What are they like? What is his personal life?” You try to get to the root of the problem… And people are deceiving at times. I’m not saying deceive somebody for the benefit of doing a partnership together, but it comes back to the personal interest and kind of hanging out with the person. You do get to know their character when you get to hang out with them a lot more.
So that comes back to the getting to know a person, both on a professional level, and also a personal level… Because most of the time, people can put on a fake facade when they’re in their professional life; you can fake it for an hour or two when you’re hanging out with a person. But when you hang out with a person repeatedly, when you go tour properties together, when you get on calls, when you hang out with the person, maybe you go do something that’s not related to investing at all… You start talking about personal interests and you can find how that person is… And then also just watching their demeanor, how do they treat people, how do they talk with people, and the reputation when you start asking around. It definitely comes out a lot of times.
Joe Fairless: A couple other ideas I had just now while we’re talking about this is 1) looking them up on social media, which is probably an obvious thing, but something that deserves to be mentioned here… Because if they’re posting whacky posts on Facebook about some controversial thing that you are completely against… One thing I’ve noticed is if someone is posting things and then the comments are people cussing a lot to them, or just talking in ways that I wouldn’t want to be associated with those commenters, then most likely the person who’s posting it, who has all these people commenting in whatever capacity that I’m not agreeing with, I’m probably not gonna agree with the person posting that stuff, too. It’s probably not someone who I’d wanna be associated with, if they’re associating themselves with a bunch of people who are talking in ways that I wouldn’t wanna be around… Even if the person posting is putting on a front that “Hey, we’re all good. I don’t act this way”, if their friends are acting that way, that’s indicative of how they probably are.
And then on a related note, in addition to looking them up on Facebook and Instagram and wherever else… And if they have their account private on Instagram, for example – well, that could be an indication of something, as well… But then also asking them “Hey, who are a couple of your really good friends? How do you know them?” Just getting a sense of who they are currently connected with, how they know them, and then even a step further, having lunch of dinner or drinks or something with those friends and you, and maybe a couple of your friends, or something like that.
It gets a little weird if you say “Hey, why don’t you bring your best friends and I’ll bring my best friends, and we’ll hang out?” That’s just a weird thing, so I understand that, but it isn’t weird if there is a happy hour, and everyone’s at a happy hour together… Or you just go hang out with their friends if they’re going somewhere. There could be a less weird scenario where you could hang out with their friends. Because ultimately, you’re a product of those who you surround yourself with, and it’d be good to know that.
Ryan Groene: Exactly. Yeah, and I’m not talking like become best friends with them, and go have sleepovers and all that; that stuff that we did as kids. I just mean you have to get along with the person. This is mainly when we’re talking about active joint venturing with people. I’m not talking about syndicating from a general partnership/limited partnership type of relationship, because that could be a little bit more professional… And as you know, you still wanna qualify people, and you still wanna get to know them, but that’s a little bit different, as you definitely talked about and had a lot more experience with. I am talking from an active joint venture, where everybody has an active role as defined by the SEC. The active role could be weekly meetings, weekly calls, or just a monthly call… But they are all general partners.
Joe Fairless: Mm-hm. Ryan, how can the Best Ever listeners learn more about what you’re doing?
Ryan Groene: I am on all social medias. I’m on LinkedIn, Facebook, I’m also on Instagram… You can email me, firstname.lastname@example.org [unintelligible [00:18:51].20] questions. Also, you can follow me on all the social media platforms. And I appreciate you having me on the show.
Joe Fairless: I appreciate you sharing what you’ve learned from your first-hand experience. That’s the best way for us to learn. Well, the best way for us to learn is for us to experience ourselves, but we might not want to… So sometimes it’s good to learn from others who have experienced it, and then that is the purpose of this show – to learn from others who have experienced it, so we can all do bigger and better things.
I appreciate you talking about some questions that you would ask potential partners. Really quick – what are your goals for the next five years? What type of communication style do you have and how do you manage those problems that come up? What’s your time commitment look like that you want to have in this venture? Is it active or passive? Strengths, weaknesses? And then lastly, “Let’s learn about each other personally/ Similar interests” etc. And don’t phrase that last question that way… “Ryan, let’s learn about each other…” [laughter]
Ryan Groene: Yeah, exactly.
Joe Fairless: Well, everyone gets it. Okay, cool. Well, Ryan, thanks for being on the show. I hope you have a best ever weekend, and talk to you again soon.
Ryan Groene: You too.