The Good Stewards Real Estate Podcast

Run Your Business Or Your Residents Will

Episode Summary

If you intend to scale your business, systems need to be in place. Put your business in a position where it can run independently from you by delegating tasks, outsourcing but in a way that is referenceable in the event something goes wrong.

Episode Notes

Don’t cut corners:

2:10: be able to look at what you're doing from a bird's eye view and know that after about 50+ hours, you’re no longer productive.

4:50: In the beginning, you’ll likely be running a lot of things in your head. You should get in the habit of writing it up digitally. One thing Amanda the CFO has mentioned is that stuff doesn't get logged in the accounting software after it's done, it gets logged before we do it.

6:10: As you're just starting out, it's really the time to start building some of this stuff because it's a lot harder to build it when everything's on fire. Look at it as if it’s not in your property management software, it didn’t happen.

Ways to set up systems:

9:00: Make a GoogleDoc that outlines the entire checklist for a property closing.

12:35: You can only keep 7 things in your head at one time. Writing notes down digitally on something like Ryan’s preference of Evernote. Having a daily items checklist of 3-5 things done today, that moves everything forward.

15:00 Running your todo list arranged by a quadrant list, a Stephen Covey term, can also be a good thing of establishing urgency on your tasks.

17:50: An area that failed due to a lack of systems for Ryan involved the term “marketing photos” which means different things to different people. The misstep in the checklist was that his team didn’t check the marketing photos and ultimately were left wondering why a property wasn’t getting rented.

20:00: Have rules in place for your residents. When is the late notice posted? If you don’t follow through on this, your residents won’t think you care or notice. Your team should know that at the 72 hour mark, they know what their tasks are that day.

Property Closing Checklist:

24:39: Make sure to have “checking the rent roll” on your list when you’re about to purchase a property. Amanda once saved Stewardship Properties 150k off the purchase price just because of closely reviewing the rent roll.

26:05: Also add in reviewing rehab budgets, how on target were you? Am I spending too much on like the construction work? Am I spending too much on the vendors, like the carpet and the HVAC, am I holding the property too long?

28:00: The most important system is the system for newer investors analyzing deals. Make  sure you have your rules for what you're purchasing and that you're analyzing that systematically of where you're pulling comps from. How are you confirming your rehab budgets? How are you checking what the property is going to pull in, in rent in? Are you using Rentometer? Are you verifying that through current rent comps? Are you looking at stuff on Zillow? Are you looking at stuff on Craig's list? How are you making sure this is a good deal and doing that systematically?

29:05: Lastly, put time on your calendar each year to review your policies. Are they working for you? Systems are never done and may need to be adjusted or added to as you continue to scale your operation.

32:50: To add to that, the same things go for your VA’s, property management group, the lot. What’s going right, what’s going wrong and work through the systems to build something that works.


10:40: Atul Gawande’s, Checklist Manifesto.

11:50: David Allen’s, Getting Things Done.

Other notes:

16:06: UnrollMe can be a great tool to simplify your email inbox.

Connect with the Good Stewards:

Episode Transcription

Bill: You're going to work by somebody's system, either you're going to work by your own system, or are you going to work by your resident's chaotic systems that are all individual. And if you start making individual deals all over the place, that's just a lot of things to take care of and remember. So you want to work off your own systems.

[00:00:21] Jandy: Welcome to the good steward podcast, the only podcast dedicated to seasoned real estate investors who want to maximize the cashflow potential in their business. We are buy and hold investors with a thousand plus properties and markets across the US who bring an insider's view into the nitty gritty details of real estate investing. If you're looking to develop the mindset teams in systems that can dramatically build your real estate business and net worth, you're in the right place.

[00:00:55] Ryan: Welcome to this episode of the good stewards podcast. I'm Ryan Dossey.

[00:00:59] Amanda: I'm Amanda Perkins.

[00:01:00] Bill: I'm B:ill Syrios

[00:01:01] Andrew: and I'm Andrew Syrios. Hey everyone. On today's episode, we are going to dive into systems building a business, the foundation, the very bottom level, and what allows you to build that business up. The stuff you don't see but is absolutely, it's just like a house is built on a foundation. You don't necessarily see it from the outside, but if it's not there. It will collapse. Same goes for business. So that's, we're going to dive in today. Make sure to check us out on our website, Also our ebook, uh, the buy and hold blueprint. Uh, make sure to check those out. It's a great resource for those wanting to buy and hold real estate. And we are going to get into the weeds now on systems. And. This is something a lot of people talk about. They say, Oh, you need systems. Systems are good, systems are great. I love systems. You're lost without systems, and they just keep saying systems over and over again. Is it that supposed to mean something? So we're going to actually. Actually go into a little bit more in depth what that means to have systems and what it means to have a system as far as I'm concerned, is creating something that allows you to save time or, um, and not have to redo the same thing over and over again.

[00:02:08] So if you can push the, or at least cut out certain steps of it, or, or, or a way to monitor your activity, something along those lines. So it's either a way to be able to look at what you're doing from a bird's eye view. Or way to cut out certain parts of the process or delegate those parts on a consistent basis so you're not constantly reinventing the wheel because you use only what, a 24 hours in a day. There's 168 hours in the week. Am I doing my math correct there? Yeah. And one, you don't even want to work. I mean, you don't want to work all those hours, even if you could physically handle it. I mean, there's even studies out there saying that basically any work you do after 40 hours, actually you decrease your productivity or you don't. You kind of stand still because you just can't, you, you, you're not as productive. You work 50 hours, you're not as productive during those 50 as you would be doing 40 now, I think it's probably closer to 50 hours a week. That cutoff is, but regardless of where it is, at a certain point, you're no longer productive. And so you've got to find ways to work smarter and work on your business, as they say, instead of simply working, you know, just doing the day to day tasks. And this involves a whole host of different possibilities from delegating to employees, to hiring virtual assistants, to buying software, to learning that software, to creating, you know, Google spreadsheets to policies and procedures manuals. And. And I mean everywhere in between.

[00:03:33] So I guess we'll just dive into into some examples. I think we can, I think we've all, I mean, I think we've all had, I think the first place to start is just the problems we have from not having systems and what those causes. You could kind of go around the table here, the, the meta. You know, the metaphorical table, digital table of sorts, and it just kind of what, what issues did you have, you either had in the past that have really hamstrung you because you haven't had systems or that you kind of realize like the problem that was there that you decided to build a system around?

[00:04:07] Ryan: I'll start.

[00:04:08] Andrew: Yeah.

[00:04:08] Ryan: Um, so in the beginning you can get away with like running a lot of stuff out of your head of like, Oh, I need to do this. I need to do that. That works with like five units, you get to 10, 20, 30 a hundred and it's a little harder to remember like 37 things you need to do with different people. And I think as you have staff, it's particularly important that they're not keeping things in their head. That stuff is out on paper. Um, there's policies, procedures, there's places that things are getting done. Um, one of my favorite conversations I had with Amanda, that I'm not sure if she even remembers, was, uh, we had one of those, one of those phone calls, um, that if you ever have a CFO, um, you'll know what I'm talking about where it's like, Hey, uh, stuff doesn't get logged in the accounting software after it's done, it gets logged before we do it. Like, Oh, that makes sense. So we're not forgetting like, yeah, you know, I wrote this check, that kind of stuff. But I think the big thing is you have to kind of be a little forward thinking. On what challenges are you going to have come up and how are you gonna handle those?

[00:05:19] So, in Indianapolis, for instance, um, we ended up with a large amount of evictions off of two multi-families. We bought in a very short time span and we realized we didn't really have a. System or process for turning and keeping track of that many turns at once. We simply hadn't had to do it before. So things like who's doing what, when is stuff getting done? Who's inspecting it, and making sure pictures are getting taken. That kind of stuff. Yeah. We had no system for. So naturally stuff wasn't going super well. Um, so you kind of have to be a little like forward thinking of, okay, if I have 10 vacancies, what's my system for filling those?

[00:06:02] Where is that getting tracked and logged. If I have 10 turns, how am I going to track what those 10 different projects need and who am I going to have to do that work and how am I going to get the bids out? As you're just starting out, it's really the time to start building some of this stuff cause it's a lot harder to build it when everything's on fire.

[00:06:21] Andrew: Although that is typically is when it gets built,

[00:06:23] Ryan: yes.

[00:06:25]Andrew: I think w I think one of the things you said that's key is it needs to be on paper and that's it. Like it, not just in your head, but on paper. Um, I, my brother has a saying what he, it would, particularly property management with everything. If it's not in rentmanager or property management software, it didn't happen. Like if you told me like you did this, but it's not in rentmanager. You didn't do it. Um,

[00:06:42] Amanda: Because I can't go in and see if he did it or not.

[00:06:45] Andrew: same goes for what Ryan's talking about. They were like, what? What are you gonna do? Well, create a policy for it. Write it down and have it referenceable every time you come up against a problem. Yes. It takes a little bit more time to not only just fix it, but also write the policy. What are you going to do to fix that day? They're going to come up with new things he never even thought of. You're gonna ask people like, what are the problems you've had? They are going to tell you, we're going to tell you is everything we can think of it during the next day. You know the this 30 minute time, but there's gonna be stuff we don't get to. Well, if you hit a problem, find a solution and then try to create a policy for it and then write it down and keep it in place that you reference. You don't have to reinvent the wheel.

[00:07:20] Ryan: I would claify, not on paper, but online.

[00:07:23] Andrew: Yeah.

[00:07:24] Ryan: If you have like a sheet somewhere, it doesn't, it doesn't do anyone any good.

[00:07:27] Andrew: I was, I was, what I meant to say was on a, uh, on a, a cocktail napkin,

[00:07:32] Ryan: It's not in the cloud

[00:07:33] Andrew: the cocktail cocktail napkin.

[00:07:35] Bill: I'll do it on a regular napkin rather than a cocktail napkin.

[00:07:38] Amanda: It needs to be smaller, I can think of specifically. Um, I mean, we have a ton of systems, but one that became so obvious that we needed to do something was when we were just beginning Kansas city back in 2011 and everyone...

[00:07:55] Andrew: No, we did everything perfectly.

[00:07:56] Amanda: We did it all perfectly... Everyone had their own responsibilities, but everyone was kind of, you know, we constantly were emailing like, did you remember to do this? Did you remember to do this? Did we get utilities on? Did we get a private lender in place? Did we get a loan set up that sort of thing.

[00:08:10] Bill: What about insurance? Did we get property insurance on them?

[00:08:13] Amanda: All of that.

[00:08:14] Andrew: You know, pretty quickly if you had a private lender in place or not.

[00:08:17] Amanda: When 30 days comes.

[00:08:20] Bill: Amanda, you can continue, but we did a couple of times. I remember that we forgot to put insurance on the property because if you get a bank loan up front, they always insist. That you have a binder in closing, but when you have a private lender, sometimes that can slide by because there's nobody there overseeing whether you put insurance on the property. And there was a couple of times we went for, I'll let Amanda speak how long it was, but uh, quite awhile before

[00:08:47] Amanda: hours, hours...

[00:08:48] Bill: Oh okay, hours before we had insurance, I, because we didn't have that check list out. In our spreadsheet that that had to be done in the process of purchasing the house. Amanda, you can get

[00:08:59] Amanda: well, and what we ended up doing, because this is what worked for us, is we made a Google doc called property closing checklist and it started with, um, you know, like the property address when it's closing. Did we do this scope of work? Did we have the sewer scoped? Yeah. All the way down to utilities turned on, getting insurance, finding a lender. And then we divided tasks among responsible people, uh, within that. So that was a way to delegate. And so that you could, you didn't have to constantly be like losing sleep at night and think, Oh my gosh, did we remember to do this? You could know, okay, well, we're all working off of the same process and this is what we're doing for this. And actually we, I mean, the property closing property closing checklist is one example of it, but we do it in a lot of different things with our office.

[00:09:49] Things that have multiple steps that we want to make sure that. Everybody is doing the same stuff. And one thing that, um, the reason why our systems are so important to us is if you're constantly trying to remember what you did or didn't do, it eats up so much of the space in your brain. And so all you're worrying about is. Did I close that loop? Did that happen? Did that happen? If you can figure out a way to get something in a system and trust as system, it makes your life so much more straightforward and easy. You could focus on the things that aren't running around about, did I get those utilities on when that's not even your responsibility, but that sort of thing.

[00:10:29] Andrew: Let me, uh, shill two books, uh, for, uh, that aren't, that we did not make that are not the buy-and-hold blueprint. You should read right after the, that book. Um, sorry. Um, but yeah, uh, checklists are really essential for all sorts of things like property closing. You wouldn't think like, of course I needed to get the empty utilities on. I need to get the insurance in place. I mean, just something that's simple. Of course, you know, all the steps. Um, they, the, it has been proven demonstrably that, yeah, you might know all the steps in theory, but when you're going through all your day to day processes, things get missed. And a book called the checklist manifesto is highly recommended. I mean, he goes through all of these different, uh, these different examples, particularly hospitals where the air rate went from like, uh, the hospital. I, it was the worst error rate in, in the state. I can't remember what it was, but it was terrifying, especially given it as a hospital.

[00:11:22] Bill: Did I remember to give them that life saving drug or not, I can't remember.

[00:11:26] Andrew: Oh, they talk about an example where they did brain surgery on the wrong hemisphere of the brain. I mean there's like, because they didn't do run through the checklist and that's, that's a bad thing by the way.

[00:11:34] Ryan: I'd be pissed.

[00:11:35] Andrew: Well, you might be

[00:11:37] Bill: You'd be a vegetable you,

[00:11:38] Ryan: you

[00:11:40] Andrew: might be a vegetable too.

[00:11:42] And so like they were able to reduce their rates. I think the best in the state, flip it completely because of just going through this checklist pro, this and this, what would seem almost a ne innumerable numbers of, of, of, uh, of items to go through that nurses and doctors are fully aware of. But to make sure. Everything we'll step was followed. And the next one is, is the trusted system. This is a personal one, getting things done by David Allen. I can't recommend high enough. I'm very good way of, of getting yourself in order and also getting your business too. Um, I personally use it. We haven't systematized it into the business. That would be challenging, but we've, we've thought about it and we'd probably want to move in that direction, but it's a way of just getting. Every item you need to do on an action item list, everything you're waiting for in a waiting for list projects on a project list a things you need to talk about with people on an agenda list and checking that on a consistent basis.

[00:12:35] And it just, it gets it all out. You can only keep, they've said is like four to seven things in your head at one time. So if you're gonna try to keep it in your head, you will forget it. And so getting it out of your head, as Ryan was saying, onto, onto a, uh, digital cocktail napkin. And, uh, and then. That way that you can reference like you don't, like, you're waiting for something. You don't have to, you don't have to like, Oh God, this person needs to get me this. You know, a week later you're gonna forget a day later, an hour later, getting it in your system, getting somewhere that you can reference all the things you're waiting for, all the things you need to do, um, is a critical thing to, um, to do for you. So that the least to do list. But I think moving up, getting things done by David Allen, I'd highly recommend a for way a personal system of, of keeping your own commitments in line.

[00:13:18] Ryan: On the personal level, I'd also highly recommend Evernote. Um, I think it's like 100 bucks a year. Um, but, uh, there's all kinds of research and stuff that's been done even just on journaling in the morning and kind of getting any of those loose ends amanda talked about tied down somewhere. Cause once it's written you can kind of forget about it. A Tim Ferris calls it caging the monkeys in the morning. He'll go through and write down like anything he's thinking about, stressed, about, excited, about anything kind of floating around in his head. That way he can kind of step back and like, okay, what do I need to do today? Um, one of the thing that I'd recommend that was kind of Andrew alluded to is kind of having a like, daily key item checklist of like, if you get these three to five things done, today, everything moves forward.

[00:14:08] Um, I feel like a lot of the times as entrepreneurs in particular, our email box just kind of swallows our soul, and we'll have a day that we start out and it's like, Oh, I've got to get this, this, and this done and get everything done. And then you open your email to like. That email or something's on fire and you have to put it out and then that, you know, consumes your whole day. Um, so I, I'd highly recommend one of my personal practices is also in Evernote. I'll put down three to five things that if I accomplish that day, and these are like quadrant two activities, right? That if I accomplish that day, move everything forward. So, um, I'd recommend doing that too.

[00:14:43]Bill: For windows yesterday sort of

[00:14:43] Andrew: thing. Right.

[00:14:43] Bill: Yesterday. I happened to count how many emails I had before noon, at 29 emails before noon. And it's kind of like when you get a that that was excessive for me, I must say. Uh, but it was like that was just a little overwhelming. I bet you, Amanda, that's not unusual for you to have that many.

[00:15:02] Andrew: Uh, but 29 emails before work starts.

[00:15:05] Bill: Yeah. But when you're talking about quadrant two, that's a Stephen Covey term. So for Stephen Covey, those are important but not urgent things. Quadrant one is important and urgent, and that's where we spend much of our time, which is a reactive kind of business experience where we're, we're looking at those 29 emails, we're going through them or reacting to one after another, and that just sucks the time out of your day. But if you can go to quadrant two, and that's not urgent, but important, the things that you've laid ahead of yourself saying, this is what I want my day to be about, this what I want my week to be about.

[00:15:43] And those other things will come. But there'll be secondary priorities. Those urgent things I'll have to be taken care of at some level. But a lot of times, if I focus on the priority things, that quadrant two things, then the rest of my day, business life sorts itself out in the way I want to see it happen rather than other people dictating what my life should be about.

[00:16:06] Ryan: Real quick, before we hop back to systems on the drowning and email note, there's a great free tool, a, it's called unroll me. Uh. Let's see, it is and you literally connect your email account and it will show you every marketing list, every subscription you're on, and you can bulk unsubscribed from hundreds of things at a time. So, um, a lot of us, you know, we're getting notifications from tools we have and solicitations from people that we're not really interested in. And instead of going through and kind of manually unsubscribing with one click, you can pretty much unsubscribed from everything. So worth checking out.

[00:16:45] Bill: Amanda, how many emails do you get in a day? I'm just curious. Uh, you,

[00:16:48] Amanda: um, it depends on the project I'm working on. Um, I would say a hundred to 200. That's why I have a lot of unread emails in my inbox, which I'm not supposed to do because someday I'm going to get back to them and I'm never gonna.

[00:17:06] Bill: Do you have an email system that you tried to prioritize emails cause that even David Allen, that's a lot of, he has a means of doing that and getting things down.

[00:17:16] Andrew: David Allen just says, get off of all those lists, like Ryan was saying, and I, and unroll me sounds like a great tool to do that. And. Every day, get your email list, get the number of emails in your inbox down to zero.

[00:17:29] Um, put them into like, I've got all, I've got a folder for action items. I've got a folder for waiting for, I got a folder for reference. I got a folder for 'em someday, maybe. And then I've got hundreds of other folders, like based on our, you know, individual properties or financing or things like that, but I get them all out of my inbox every day. That's my goal.

[00:17:50] Ryan: So I'll be the first one to fall on the sword for areas that have suffered due to a lack of systems. Um, so as you hire a, you'll, you'll delegate and the military has this phrase of trust, but verify. And, um, I learned quite humiliatingly, um, that that is something you want to do. Um, so I was talking to Amanda and Bill and I'm like, yeah, we've got this, we've got this property that's just not, not renting. Right. And you know, I can't figure out what's going on with it. You know, we're priced right for the area rehab is good. And we'd hired a new leasing agent, who hopefully does it listen to this, and uh, said, you know, Hey, go take marketing photos. Um, well, as we learned marketing photos mean different things to different people. So where our system broke down, we had, Hey, we needed marketing photos. Those needed to get uploaded and then included. But we didn't have on our checklist of. Look at the marketing photos. So Amanda goes, well, let me pull it up online and pulls up a this, this building and like the employee tried to use like the iPhone Panorama in rooms. So the rooms were folded into like U's, uh, like lights weren't on. And the pictures, um, you know, toilets were like open.

[00:19:08] Amanda: Cabinet doors open.

[00:19:08] Ryan: I think my favorite though, my favorite was the kitchen where all of the cabinets were open. All of the lights were off, and there was literally a can of caulk rolling through the middle of the floor. And this was our, this was our marketing of this, of this particular building. And, uh. It was like, I mean, I don't, I can't justify this as, okay, like, this is totally a failing on, on my part. And I, uh, I got off the phone and was talking to our office admin. And, uh, he was like, I've never felt more exposed before in more humiliated in my entire life that that's what we put up. And I was like, well, we've got one more thing to add to the checklist. So there you go.

[00:19:49] Andrew: At least, you know, nobody looked at it very long.

[00:19:53] Bill: that was surprising.

[00:19:54] Amanda: Really rudimentarily, really like suffering from systems. I mean, if you think about rent collection in your mind, you think I signed a tenant. A resident, I laid down the rules. They just pay their rent. We don't have to worry about it, but it's really not as simple as that. And if you. Just believe that you're going to not be collecting very much rent. And so, you know, and every time you know this has happened, like they're going to pay their rent, but it's like, no, you have to set the rules down. Rent's due on the first, when it's late, you send out letters the day that you can file a 72 hour notice are posted, 72 hour notice. You post, you follow all of those for every single late payment. So that. Your residents know what to expect from you and know that you're paying attention, that they didn't pay their rent.

[00:20:42] If it's the 15th of the month and their rent was due on the first and they haven't heard from you, they don't think you care or notice. So it's important, you know, it's important that you delegate those systems and you have somebody that you trust that you hired that is following the letter of that is following those systems and not being, and not making their own decisions of, Oh, they'll pay. I don't have to worry about this. I don't have to do this, because every time that that's happened. It's worked out poorly for us. And it does happen.

[00:21:10] Andrew: Yeah, to really, really jump on that. I mean, the payment plan part is really critical. I, a lot of ma and pa landlords will get like, Oh, what? When can you get it to me? Okay, we can get it to me by the 23rd okay, well they don't, so, Oh, when now can you get it to me? So you got put in in place and it'll, having a policy gives you a backbone to, it makes it much easier. So ours is at once a year, you can get a payment plan and you have one chance to get to it. We're going to set the date and then you're going to get us that money. And if you don't, which is filing for eviction now, you can always pay off the balance and the eviction fee whenever you want, but if you don't hit that one payment plan, we're going to, we're just moving through with the process. Or you can move out. We can figure out that, that part. Like if we can't pay, we can, we'd rather have you just move out and, and we won't evict you and that's quicker for us and easier.

[00:21:59] Ryan: I think to highlight something Amanda touched on though, is yeah. When rent's due and then when it's late, you let them know that it's late. And I swear some of our folks, they like, it's like a living on the edge thing of like, they want to see how close they can get to the eviction pool before they get burned. And then it's like, Oh, okay, well I'll, I'll pay on like the ninth day that I possibly can before this goes to court. And we've got people that like, it's every single month. And you know, um, you'll hear a lot of landlords talk about making money. Off of their late fees and it's absolutely true, but you only make money off your late fees. If you charge them and enforce them with the promise of honoring your lease, which is, Hey, there is an impending eviction if you don't honor your word here. So, um, I would just kind of highlight that as a key system for us in Indianapolis. Um, our rent is late on the fifth, or after the fifth. Um, they have til the eighth to basically get caught up before legally, we can post a notice of eviction, which is a physical piece of paper tape to the door, and it's 10 days. And, um, you know, it's like, if you don't post that on the eighth, you're just delaying how much longer it's going to take for you to get possession of your property back. So, um, you know, we've, we've had months where it's like, cool, we have 20 that we have to post them. We had months where we have like three, so it can be a lot of work, but our staff knows like on the eighth that is their job that day.

[00:23:29] Bill: Yeah. Cause you're going to work by somebody's system. Either you're gonna work by your own system or are you going to work by your resident's chaotic. Um, systems that are all individual. And if you start making individual deals all over the place, that's just a lot of things to take care of and remember. So you want to work off your own systems. And as Andrew mentioned. Uh, in Kansas city, I know they give people one shot to make up for a missed a rent. And they'll, uh, create a payment plan, but you have one chance a year to do that. And again, they're in control of their own systems rather than having the residents, in control of those situations.

[00:24:14] Andrew: If the resident whines and complains, it can be like, this is the policy for, everyone we can't change it for one person. And that, like, we've had, we had a, we had a property in Kansas city we had with a different manager and we had so many balances from so many residents of that property and everyone was on a different. Payment plan of source, if you could even call it that, and it's just like this haphazard ad hoc way of doing it. It's going to, one, it's going to cost you money. It's going to drive you crazy when you and that.

[00:24:39] Bill: Yeah. When you purchase a property, you should be really aware of the rent roll and sometimes we've fallen down a of checking the rent roll very well. Amanda's saved us a, I think it was $150,000 on a purchase. Of a apartment complex because she had an Eagle eye out for the last six to eight months of a rent roll where we weren't really looking very carefully and there was a lot of inconsistencies. It's the story will tell at another time, but when you're purchasing a property, if you have a lot of inconsistencies in the rent roll of when people pay, you know that that's a not a very well managed property and you need to go in with your eyes open. Yeah. That it could be a lot of evictions right out of the shoot. It could be a lot of, uh, pain with, uh, residents now coming under a new system that they're not used to. Again, they're used to creating the system and now you're, the one in control of the system. And that's a hard transition for a lot of people. So rent roles are really important to look at carefully of the payment. Uh, you know, the payment history of a property and also is not unlike some sellers to fudge those rent rolls. So, uh,

[00:25:51] Ryan: ask us how we know

[00:25:52] Bill: exactly.

[00:25:53] Andrew: Yeah. I would say just like you have a property closing checklists, you should have a property due diligence checklist and, and just like, and I mean a couple of these things. One, kind of jumping back to the point you made about quadrant two stuff is important but not urgent. Like. A lot of it isn't necessarily fun. It's not necessarily fun to look over rent roles and, and operating statements and just like dive into them. Nobody really, maybe a few weird people do, but nobody really likes doing that. And some of it is actually just downright painful. Like one, one example of a system that is highly worth putting into place, um, but is not any fun, is reviewing rehab budgets. Um, and this is something that you want to have. Always every time you finish a project, either when the rehabs done or when you've sold it, or when you've refinanced it, you should go back and look at how the rehab went, and spoilers, it probably didn't go as well as you expected. Again, as I've said before, no investor I've ever met in my entire life has ever complained about, you know, budgeting too much for rehab. "Oh God, 'm always coming in under, I'm over financing things." Never heard it. It's never happened. Um, so going back through and seeing, okay.

[00:27:02] What's going on here? Am I spending too much on like the construction work? Am I spending too much on the vendors? Like the carpet and the HVAC and the kind of the key, the big items, but not, not the basic construction work. Is it too much on the PunchOut? I'm not counting all the little knickknacks. Are we holding it too long? Is it the holding costs that are, that are doing, am I not budgeting enough or is our contractor not doing, or maybe we have employees doing it and they're taking what, you know, every hour they're there costs you money. Maybe they're maybe maybe you need to stop by and motivate them a little more. Maybe. Lay them off and get new ones. Maybe need to get a new contractor. Maybe you need to bid it out more, or probably, I mean, that stuff has all happened to us, but in all likelihood, you're not budgeting enough.

[00:27:40] Ryan: I would say one of the most, um, single handed important systems for a new investor is their system for analyzing deals. Like, how were you going to determine if this is, if this is a buy and hold, if this is a flip or if this is something you're going to just pass on, right? Um. To kind of touch on Andrew's point of, I've never met an investor that said, you know, geez, I budgeted too much. I've never met an investor that was like, Oh, you know, I just, I get too good at deals all the time. Um, I get hundreds of emails and DMS and PMs through social media of people that are like, yeah, here's this deal I'm looking at. And it's like they're paying 98% of ARV trying to get a 0.08% rent to cost ratio. And they're like, yeah, but I got the seller down like eight grand. I think it's a deal. It's like you're not even in the same state as a deal. Right? So making sure you have your rules for what you're purchasing and that you're analyzing that systematically of where you're pulling comps from. How are you confirming your rehab budgets? How are you checking what the property is going to pull in, in rent in? Are you using Rentometer? Are you verifying that through current rent comps? Are you looking at stuff on Zillow? Are you looking at stuff on Craig's list? How are you making sure this is a good deal and doing that systematically?

[00:29:04] Um. A lot of investors, I won't say most, but especially the first few. There's almost this like pressure or this need to scratch this itch of becoming an investor that they'll, you know, maybe let stuff slide a little bit or, you know, well, I don't really need to do vinyl plank flooring. I'll do carpet to get my costs down. You start to make compromises and you know, you maybe get away with that on one or two, but over the course of a portfolio, you end up with a bunch of thin deals that were poorly rehabbed, that don't really cash flow because you were impatient. So I would highly recommend having a checklist and a system in process for making purchase decisions.

[00:29:49] Andrew: Write it down. On your digital, a cocktail napkin, and also makes sure to put it in your calendar to review it. Because we've, we've created policy lists, policy manuals before, whatever, and just you make it and then it collects dust or digital dust or whatever. Put it, literally put it in your calendar like we have a policy and procedures manual and our KC branch, and we have every year we go back through it and we're gonna like update everything, make sure it's all relevant, make sure it's all the same. We'll actually what we do, um, you know, and, and so what if it gets left on the shelf, you're not going to reference it. You need to make sure it's consistent, that you reference it and that you use it. And just remember, I mean, one of the big things with systems is. What gets monitored, gets managed. And, uh, and so like, like with, um, with what Ryan was saying about like, uh, people who are co or you know, DMing about like, Hey, I got a bunch of like, 10,000 off this, this, they're asking price.

[00:30:43] Well, that's not a, that's not a good way to do it. Like, you know how much you get off their prices, it matter you, you've pay over asking if they're, if they're if they listed it really, really low, uh, it's about what it's ARV is. So you gotta look at the right price there. You know it. With us, it's like figuring out what, why are rehab budgets coming in? Which is probably because we're not, are too high, because we're not, we're not a budgeting enough. So we started adding a contingency. We've gotten up to 20% added contingency on top of what ever I estimate for rehab and holding costs. So it's like, you know, by monitoring these things, you figure out where the errors are. In any readjust what you're doing. So you're like, okay, well we're not, we're not gonna, we're not gonna find our, our, our offer price based on how, what their list price is and how much we can get off of it. We're gonna do use comps. We're not going to get our rehab price of just what I think we're gonna add a contingency, etc.

[00:31:30] Etc. And then you also need to constantly be checking and systems are never done. You're always tweaking. You're always adding. That's just, it's. Yeah. Unlike a foundation of a property, you're always building on top of it, or maybe you're building out, so you need to continue building the foundation as you build the, build the business, and it's, it's a work that's never done just as building your business is never done.

[00:31:50] Ryan: Also say on the systems note, I'm with, as, as you get a bigger company. Um, Andrew talked about scheduling things like reviewing policies and procedures, but make sure you're also scheduling times to meet with general contractors, walk projects. Um, can't tell you how many people I know, um, how many people we've even worked with that, uh.

[00:32:13] That's been their downfall is they just assume stuff's getting done and they're not checking on projects. They're not, you know, they're not walking units that are vacant. And realizing that it got broken into for, you know, until a week after the fact, or paying contractors for work that wasn't done because they didn't go check on the project, that kind of stuff. So I'd make sure you're adding those to your calendars as well. Just. Reviewing your vacant inventory, actually visiting your rehabs. Um, you know, again, trust but verify.

[00:32:46] Bill: You know, I think that's what meetings should be about. Meetings are opportunities to do. Check, check in on your systems, and if it's a one on one meeting with one of your staff people, uh, whether it's a virtual meeting with a VA, whether it's your whole company, uh, you know, your property management group meeting, it's. Let's check in on our systems, what, what, what's going right, what's going wrong? And let's work through it. I think, Amanda, you might, uh, tell us a little bit about systems regarding the staff, people that you begin to hire and how that is really critical and important.

[00:33:23] Amanda: It really goes back to Ryan's trust, but verify. Um. I'm in full disclosure, I 100% agree with systems and I have systems that I use for certain things, but I am not somebody who can get down in the weeds and run a system for everything that I'm doing in my life. But the people that I hire, like if I hire somebody to be a property manager and I've lined out their roles and responsibilities and I've given them a framework to work in, I expect them to follow my system. So what? I'm better at managing people to do their systems than I am to actually. Uh, be in the weeds step-by-step, doing things now. Some things I can, but the, you know, the, down that out on the dirty, it's not my forte. I'm actually as a system breaker, I can create it, but I can't be the one running it, if that makes any sense.

[00:34:19] Bill: Know your strengths.

[00:34:20] Ryan: That' a great distinction

[00:34:22] Bill: important and, uh, yeah. I, I would say that Amanda and I are pretty much, uh, twins, uh, joined at the hip with this issue. But, uh, we have people around us and we've had the had to, uh, hire people around us who are very good at working the system.

[00:34:40] Andrew: Alright, well I think we're over the 30 minute Mark, so we should probably wrap this one up. Thank you again for joining us. Please visit our site of You can get our ebook there and please join us again next week. Thank you.