Build the Org Chart Your Cash Flow Goal Actually Requires

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0:00 When you are starting and your goal is $10,000, you need to build your business to build $10,000 a month. That is the
0:06 business that you have to build. And there's a way to map this. That is super simple. If you have $100,000 a month
0:12 that you're trying to create, it's a completely different business with a completely different org chart. So, what
0:17 you have to do is you have to map out the goals, which Cody just presented. And for you guys watching on YouTube,
0:23 first of all, make it to the event next time. Second of all, watch Cody's episode. I'll post that as well. These
0:28 two are actually going to go together hand in hand fantastically. So you set your goals, you know where
0:34 your targets are. Then you need to map out, okay, what roles and people do I actually need in the universe to create
0:39 this business. Now $10,000 a month, very, very simple to do it yourself. So I'll map out what that engine looks like
0:46 and how you can get your time back. Who here in the audience is doing real estate because they want time freedom?
0:52 Like eventually the goal is time freedom. That's okay, that's most of us. Obviously, financial freedom, being able
0:58 to do vacations, retiring a spouse, there's a lot of different reasons to want to get into real estate, but ultimately a lot of us want to make work
1:05 optional, or you just want to have control over your time. So, having a single person org is really hard if you
1:12 want ultimate time freedom. The correct scale of your business is going to be completely dependent on you. Cody talked
1:18 about upscaling, downscaling. One of my personal reasons for scaling up is because I had an obligation with the
1:25 Robin Hood I needed to figure out. That was a million dollars. I had two years to do it. So, the engine that I had to build didn't look like the engine I was
1:32 trying to build at first. Get to 50 to 100 rentals. Get to $10,000 a month cash flow. It became, huh, wait, I need to be
1:39 making about $42,000 a month. I'm not currently making $42,000 a month. We
1:44 have a different engine that we have to build. So, I have two pages left because Cody has used up the rest of my pages of
1:50 math, which I appreciate. That was an awesome segment. Thank you for doing that. So, I'm going to in two pages or less show you exactly what the org chart
1:57 looks like. Mapping. This is how I made every single company, multif family strategy. It's how we built the PM
2:02 company. The first one that I sold, the second one that I have, uh we have a sales and marketing company that I also
2:08 traded my way out of. And I have a ton of real estate. Some of these we're just
2:13 about to close on 144 unit. has its own org chart with its own on-site staff.
2:18 The last business we had to do this for was called the Robin Hood Village Resort. You're sitting inside it. This has five staff in the winter, up to 10
2:25 staff in the summer. All of these need to have a mapping for how you manage your time, especially if you end up in a
2:31 position where you have a few different businesses. We have PM supporting the rentals. We have you have to do
2:37 accounting, you have to do HR, you there's so many roles at some point, you can't have all of the financial freedom
2:44 and all of the time freedom unless you map out who are your key people. If your goals are just you just owning your real
2:50 estate, always doing it. Matt Hawkins, one of my favorite mentors, lumberjack landlord on YouTube, that's exactly what
2:57 he did. He said, "Hey, no people, no partners. This is what I'm going to do." You can build that business. It will
3:03 have certain limits. It can only make so much and for many people way more than you need. Way more. Matt is worth more
3:09 than me, Cody, and probably most of us in this room combined. You can do this as a solo op. I'm going to show you what
3:15 that looks like and then what the engine looks like if you choose to scale your business to time freedom. So, at the top
3:20 of your org chart almost every time, if you are the one in charge and driving the ship, you
3:26 My handwriting is worse than Cody's, by the way, so buckle in. You are at the top of the ORG chart. You know, you you
3:31 know your capabilities. You know your goals. I always put in the corner what my actual objective is. So, I'm going to
3:37 start with we're making $10,000. Again, YouTube, I have two pages to work this in for. So, zoom in on your cameras if
3:43 you're watching on your phone. You have you have a goal. I am trying to get to $10,000 per month. What do I need to do
3:49 this in real estate? Well, I'm going to need to start stacking cash flow. And if I'm finding my deals are adding $1,000
3:55 here, $2,000 a month here, I'm probably going to need to do five, six, seven transactions over the next few years. So
4:01 as I'm doing this, what do I actually need to do functionally? And so I break it into categories. We have deal
4:07 finding. Okay, how are we finding deals primarily? For me, it's been heavily
4:14 direct to owner, build relationships in markets. I should probably do that one myself. So I know no matter how I scale
4:21 my business, that's always going to be highly dependent on me. And then we have broker relationships. The people who
4:27 professionally are out there finding and negotiating deals. How do I move to the top of their list and work exclusively
4:32 with them? So, this will divide into two categories. Call that broker relationship and owners. Now, once we
4:40 acquire said properties, we have to do management. This could be third party. This could be you. I opted to do some of
4:46 this myself because we got absolutely robbed by my first property manager. And I've had this happen to me multiple
4:52 times. I like the control. It's a crappy business to be in. It is low margin. If
4:57 you do a great job for your clients, you increase the value of their property, they sell it, and you get fired. If you
5:03 do a terrible job, you definitely get fired. If you do a mediocre job, then like, who wants to have a mediocre
5:08 business? So, PM is a hard job. It can be fun if you own a lot of the rentals. So, I do third-party management for
5:15 people around me. And it's about 50/50 between my rentals and other people's rentals. That way, I can be excellent
5:20 for everyone, but I don't depend on my clients to make that business work. But management going to be part of your
5:26 business. Management, who's going to be running that team? Then we have capital. Now, if you want
5:32 to get to $10,000 a month, these don't take that much time. I spend for this
5:39 goal finding deals. I need to book a call with an owner.
5:45 Roughly, I'm making one or two calls a day on average. I'm making like 10 calls a week. and someone maybe two or three
5:52 someone's will actually pick up the phone and going through this conversation at least one of them is going to book a coffee meeting with me
5:57 which means on average once a week I'm meeting with some owner in a market where I want to buy a property and if
6:03 it's out of state I'm just booking a phone call I'm not having the full phone call on a cold call they're not ready
6:08 for it I am calling to schedule either a call or a coffee meeting or in Texas a
6:13 barbecue meeting it depends on where you're at so for me I'm like okay two phone calls
6:19 We're talking like 30 minutes maximum per day at time. Usually for me it's like 10.
6:25 Very little time in deal finding. Calling brokers. One of the easiest things in the world to do. We talk about it all the time on my YouTube channel
6:31 all the time on multi family strategy. Talking to brokers is a very simple process. It's kind of like ordering a
6:36 drink at Starbucks. They literally are there waiting for someone to call on the deal to talk about the deal. So when you
6:42 reach out to them, your only mission is to come off as a ready, able, and willing buyer. When you start, none of
6:48 this takes much time. These are listed online and they're just deals. The price that's online doesn't mean anything. All
6:55 you know when you see a building online, you know what the building looks like. You know what they claim the numbers are
7:00 if they decided to share any on their listing and you know that it is a seller willing to sell. Multi family brokers
7:06 are okay. So, uh, used to work for Loopnet. Loopnet. And even better, Crexy. C R I E C R E X I. I can only
7:15 write with my hand. This hand knows how to spell. My mouth is not. It's funny. If I wrote it, I can spell it. So, you
7:20 hop on loop net. You hop on correct. See, whoever lists the properties that look like what you want to buy. So, I'm actually shopping the image, not the
7:27 numbers. I'm like, that would be cool. That would be cool. That looks horrible. That building is 380 class A units. I'm
7:33 going to assume I don't qualify to buy that yet. You can really quickly figure out that's what I want to buy. Whoever
7:39 is listing the properties that I want to buy, that's the broker that I want to have the relationship with because this isn't going to be their only deal most
7:45 likely. And those firms tend to represent that. So, the beautiful thing with brokers is that they market
7:50 themselves. You can do this. This cost you 30 minutes raising capital. You do this after you find a deal. I need those
7:58 relationships. A lot of these people are those owners that you met with, people who already own in that market who have
8:04 already made money in real estate. One thing you find is the people who tend to own a lot of the buildings in your
8:09 market have a lot of money because they bought a lot of buildings in your market and they've owned for a while. They're
8:15 comfortable with your market. A lot of my capital partners are owners already in the markets that I'm operating in.
8:21 Very, very, very common. I'm also going to build other relationships. I'll go to meetups. I'll do all sorts of stuff.
8:27 Raising capital is easy if you have a deal. We talk about this all the time. I won't use all my whiteboard space for
8:33 it, but it's deal debt equity. You find the deal, you manufacture the deal. Like
8:38 Cody's math section, you choose the most appropriate debt product. I view it, you
8:43 know, the little drop down arrow when you're looking at options on a computer. You click it. What's available for this deal? Sometimes it's seller finance,
8:50 sometimes it's private capital, sometimes it's an equity partner, sometime you can go through the whole list. Bank debt, direct to Fanny, bridge
8:58 loans, it goes on and on. You choose the best debt product and then after you have a full package, you're going to
9:05 someone for the last 10% of the deal, the last 20% of the deal. Hey, we have this opportunity. This is how much money
9:11 it's going to make. Capital is not complicated. It's almost impossible without this piece. Now, once you close
9:16 your deal, you need to have some idea how you're going to manage it. This involves
9:21 maintenance. Yeah, whatever. Too many, too many letters. Maintenance and construction. We have to do our capital
9:27 improvements. We have to have an idea of what we're doing. Otherwise, our building's going to fall apart and then we're going to lose all of our money.
9:32 Management, we have to have rent collection and we'll call it tenant communications. Someone needs to interface with your tenants. They need
9:38 to be answering the phone, coordinating the contractors. If you want to get to $10,000 a month, $120,000 a year.
9:45 Capital raise. This is going to take you a few days of time on a deal that you've packaged. The capital raise, total time
9:52 commitment, low and it doesn't come up all the time. management. You can make
9:57 the option at the 10K level whether you want to self-manage, which I recommend if it's your first few deals and they're
10:03 in your market. If it's out of state, immediately add someone to your team who can get boots on ground at your
10:08 property. I don't like the idea of managing out of state without a manager. But you have a decision to make on who
10:14 you slot here. What you have to do, this is just called creating your org chart. For every business, you need to know,
10:20 okay, two gets to 10K a month. I need to buy a few properties, probably two, three, four year at most. If I want to
10:27 do this in the next two to three years, this is a pretty easy math. So, you've
10:33 mapped out what you want to do. You understand what a deal looks like, which is what Cody just showed us. This is the
10:38 engine I'm going to chuck into this machine. Where I see people go wrong is they try to go like, "Okay, well, I'm
10:44 going to need to get an acquisitions manager. I'm going to go I've seen this happen. They go they lease an expensive
10:49 office. They get five staff members in there. They get dialers on the phone. The first mentor Cody and I had who was
10:56 the perfect mentor on how not to buy real estate. Worst worst investor I've ever met. He had this vision and he
11:02 matched his vision. Just a completely imaginary. He had no number up here. He just went, "We need dialers. We need 10
11:08 dialers just calling for deals. I'm going to hire a bunch of random brokers with limited experience. I'll train them
11:14 myself. They're going to handle all of these deals." And guess what happened? His business didn't work at all. He wanted to put a I don't know cars
11:21 unfortunately. A big engine. He wanted to put whatever engine you put in a Bugatti in a Camryized business and it
11:28 blew his car apart which I imagine would happen if you did that. I don't know. I don't know mechanics. But I I just
11:34 imagine you can't do that. There's probably a reason that they build them the way that they do. You want to make sure that you build a
11:40 business that makes sense for you. This will not cost you a lot of time to do yourself. for $10,000.
11:46 That's a few 12plexes that have gone well, maybe a 25 unit building. You can do this in less than 100 units. You're
11:53 not handling too much. Management is up to you. This will lower your margin if you offload it. You'll get a little less
12:00 experience, but you can absolutely you have to buy one or two more deals to offset your cost of management. This is
12:06 the engine that you put in your machine for 10K a month. We're doing
12:11 two calls. That's a two. I promise. That's a two. Capital is going to take
12:17 you per transaction. This is going to take you like a week or so out of a year
12:24 to do three or four deals. Like you're talking low low time commitment. Capital. You're
12:30 putting together a presentation. You're raising capital. Management for a midsize portfolio. Very
12:36 part-time job. You're doing a little bit of work every week. You're going to get, if you're self-managing, you're going to get some calls. You're going to get some
12:43 obligations. Once you pass 30 units, you're going to put it in professional management. Either way, this is the
12:48 entire engine that you need to put in this little system. It's not actually that hard to build. The most important thing though, and this is when you
12:55 scale, why this is so important to understand. Caleb just grasped this in his business and was like, it all took
13:02 off. You have to assign someone to each of these roles. And what gets timeconuming and gets impossible is you
13:09 scale to a bigger number than this. And here's every role needs to have someone assigned to it. So if your assignment is
13:14 you, I'm just going to abbreviate it. You you you
13:21 can't build a huge business. If you're trying to get to 10K a month, awesome. Do it. If you want to get to 15K a
13:26 month, you can do this. Matt Hawkins, he's probably at 25, 30K a month. He's busy and he's hired someone underneath
13:33 him. So he has him, his wife, and a private property manager that just works for their family. his org chart has
13:40 started to expand. He also has a boatload of cash flow. If
13:45 you want to build a little bigger business, you have to start filling these out. So, here's what a little example of what my engine is starting to
13:52 look like as we have individual properties that need their own staff. Up top, I have me who I'll call you.
14:02 In this management 147 smaller properties, this is just for Stevenville, Texas. I have 186 units
14:09 there. I have a few smaller properties. I have a 76 unit. I have 144. This requires
14:16 one on-site. This will require two on-sites. For this much real estate, we need some maintenance to keep expanding
14:23 in the market. I still need acquisition capital. These are the basic. I need to
14:28 have deal flow. I need to have money to keep acquiring deals and expanding. I need to figure out maintenance. I need
14:34 to have on-site leasing for each property because I now have so many tenants calling in with so many
14:40 projects. As this starts to scale, I cannot possibly pick up the phone for this all day. We did in this building,
14:47 we did six evictions right off the bat. So, we're processing evictions. All of those need unit turns. To do the scale
14:55 of that, we need to have a maintenance crew and they need to have I believe we have three individuals there who all
15:01 have different roles at our main company. And then on top of that, you need your networks of plumbers,
15:06 electricians, and so you have a business like this. This is for one town. This is for Stevenville. In the next
15:13 next week, I closed on 144 units in Abalene, Texas. In February, we closed
15:18 on the 81 next door to that, bringing us at 225 units in Abalene, Texas, which means we had to build the same engine
15:25 all over again, but even bigger, because it looks like we're doing another 80 unit after that. Be a 300 unit market. I
15:33 cannot do this and then have Abene and then have Waco and then have Washington
15:38 and then have the Robin Hood and have everything be you, you you you you. I have seen a ton of people try to do that
15:45 model. That's where some of my friends have gotten stuck and their goal is something crazy. Now, as we mentioned at
15:51 the very beginning of this, I had some partners to buy out on the Robin Hood. And so because we structured the first deal wrong,
15:57 my goal went from, hey, I want to get to 10, 15K a month to, okay, how would I
16:03 scale my business in a way where I don't have to sell off any of my properties or lose ground
16:09 and still survive and correctly manage the Robin Hood with the capital that it needs and to buy out my partners. I need
16:15 to figure out a million dollars in two years, which is why this 42,000. It's rounded slightly up, but that is
16:21 essentially what you need to do to hit a million dollars a year or not a year, a million dollars in two years. So, that
16:28 being my goal, I've set aside a few different engines and then we just allocate. Now, here's the rules of the
16:34 game. When you have all these roles, you are trying to get the right people on the bus and then you're trying to get
16:39 the right people in the right seats. Sometimes you hire the right people, but they're failing in a role. You try moving them somewhere else and they
16:45 thrive. Sometimes you keep moving around, they're just not a fit. You kindly excuse them from the bus. Cody
16:51 and I had a partner and uh Moses Lake. We drove in and we are going to visit a
16:57 broker and he's not a very talented broker unfortunately. And when we introduced them or we were
17:03 about to introduce them like, "Hey, just so you know, this guy's kind of our like he's kind of the C team." And he immediately just went, "I don't know if
17:09 we need to do this meeting then. I played select soccer. I I only play A." And I was like, while that seems a little bit mean sometimes, it's true.
17:15 You can't have an A team with a bunch of C players. It's impossible. You're trying to figure out with the salary cap
17:20 that I have, how do I recruit the best possible team? And so we'll go through
17:26 and we'll do the math. How much payroll does this all cost? And I'll actually put my payroll over here. And I'll map
17:33 out, okay, to build this team. What do I have in expendable income from the
17:38 profit of this engine? From the 186 units that I have here, I have 150, I
17:45 think it was 145. I have 145k in salary cap to spend to fill these roles. This
17:53 is your entire map. That is my goal per month, but I'm not there yet. Well, I wasn't.
17:59 Here's my individual market. I have a business that has this much to spend on the best players that can possibly
18:05 recruit. You can also give equity in the deals if you run out of salary caps. So,
18:10 you can give up some to get some. Since I can't have me me me
18:18 led by Corey, she takes up 50K of salary cap and has a
18:23 small equity stake in my PM company. So, she has she's underpaid, but she's given a portion of the company that's rapidly
18:28 growing. Good deal for her. here the on-site here. I also have a 44
18:35 unit that needs a little bit of uh attention here uh here and there. But for this engine that we're building
18:40 here, this is the Abene deal. I realized Stevenville, we'll do this here. We'll just call this the 44 unit and the
18:46 smaller now we're perfectly mapped for what Stevenville is on site. Hannah was a property manager who has a company in
18:52 Stevenville that does fantastic in single family. She's lived in Stevenville her whole life. She's connected with every nonprofit and we
19:00 always have problems with the stupid fire marshal who I don't like and don't agree with.
19:05 He only likes working with people from Stevenville. It's a small town and he wants to work with all of his buddies.
19:10 However, the assistant fire marshal is married to Hannah. Putting Hannah on her team makes a lot of sense. Hannah does
19:18 uh part-time outer 44 unit and part-time outer 76 unit. So, the rules of the game here are you
19:24 need to slot names on everything. Every position needs a name. No positions can have two names. So every position in
19:30 your company needs to flow in the right direction. Any person can be slotted in as many
19:36 roles as you can handle. Can't put two per people on the same role. That's the only rule for filling out an org chart.
19:43 Smaller properties, this is handled. This is done zone. This is done. Hannah will do this but
19:51 reports to Corey and Corey assist. This is a good model for the management side acquisition. We have a lot of deal flow
19:58 in this market. I am currently sitting at the head position of Robin Hood
20:04 property management, the acquisition company, multif family strategy. I'm working as many hours as one can humanly
20:10 work and still kind of sleep occasionally. So for Christian, I love negotiating deals. However,
20:17 we have someone on the team who's even better at doing this. the guy who only wants to do networking, Caleb Hmel, one
20:23 of my first mentees. He has a little over 200 rentals today. Our flow here,
20:29 Caleb owns the broker relationships that we mentioned. He owns uh the owner
20:34 relationships. We tag team. He actually introduces me to a lot of people. Whenever he has a meeting, he's like, "Hey, we're meeting someone. This guy's
20:40 worth meeting." I drive out and meet. I do the same thing. I network. I bring Caleb along. We operate as one unit. But
20:47 overall the beginning of of acquisition, Caleb within there, close, negotiate,
20:55 all of the sales that go in here, Caleb will present five or six deals to me that he has underwritten saying, "Hey,
21:00 we have relationships here, here, here, and here. We have opportunities here, here, and here, and here. I want to pursue one of these two. Now, I will
21:06 come in, choose one, and we'll start the capital raising process. We'll go under contract." This saved me a ton of time.
21:13 In the beginning, our 10K goal, Cody and I both were doing the job. We were
21:18 calling owners. We were negotiating deals. We were getting things under contract. We specialized a bit, but it was just
21:25 the two of us tag teaming. One of us could do the other's job, the other could do the other's job. We were interchangeable parts. In this, Caleb
21:31 has defined roles. He's like, "I will maintain these broker relationships. I'll go to the broker lunches while
21:37 you're coaching multif family strategy." When Christian's at the property putting out a fire, literally putting out a
21:42 fire. We had we had one at the 76 a garage uh burned down. I drive out and
21:47 handle the fire, Caleb is back in office making sure that everything is running smoothly and that all the deals are
21:53 progressing. You add to this legal legal and lending all of these pieces of acquisition. Caleb takes the top end of
21:59 the funnel for I take the bottom. He talks to our lenders. He negotiates with our lenders. He presents loan packages
22:04 to me. I then pick up the rest of it, file the paperwork, get us to the finish line. This smooth handoff process is a
22:11 twoperson process. Compensation for Caleb. He gets a whopping zero dollars. But we
22:18 share every deal that we do together 50/50. Caleb is a straightup partner. He gets equity, which cost me none of my
22:24 salary cap. So we have Hannah at right now she's at 45. Okay. We have Cory. We
22:31 have 95k of our salary cap spent of a budget of 45 maintenance. You can bring
22:37 this in house for me. I don't want to do that. I have too many companies. I have
22:42 great contractors. We work on these relationships. So, I can put this in its own little outsource box. It cost me
22:49 money that I could have spent on salary to just make sure this is always coordinated. What I did is said, "Hey,
22:56 the rest of my salary cap here about $50,000. That's what we're going to basically be
23:01 tossing to three different groups for all the project coordination." Now, of course, your actual renovation budgets
23:08 are their budgets. But I took the rest of my salary cap and said, "Hey, this works. We're way within budget. For
23:14 maintenance, we have a group called N2 in Stevenville. We have a couple of other fantastic contractors. We have a
23:20 solo guy named Daniel Seals, who's our handyman. We chose to do maintenance where they play zone instead of
23:25 man-to-man. Instead of having on-site maintenance for every property, I have multiple teams that all know my
23:31 properties that all rove between properties. We need something quick, Daniel Seals drives out. We need
23:36 something big, N2 drives out. There's always someone working on the portfolio at all times, but they're manning
23:43 Stevenville as opposed to my property to property or
23:48 who oversees the maintenance people though. I wish I had the time. Danny, my
23:53 lovely wife, who I retired from teaching. I got stuck with that job. We're going to work on retiring her from her new job very soon. So, we're our
24:00 goal, personal goal for me is we want to we have kid number one. My my little kids Andre just turned one. Would like
24:06 to continue to grow the family. So, her new goal cuz she actually loves this job. She's amazing at renovation,
24:12 design, and coordinating the contractors. And she's meaner than I am, which means the contractors actually get
24:17 stuff done on time. Danny's goal is to retire from this. So, we know that we need to open up salary cap for someone to oversee this. Danny comes in as an
24:24 equity holder in the entire portfolio and the PM company alongside me. What I
24:29 want to show here though is the difference between 42 month and 10K a month is wildly different. You can solo
24:37 the 10K a month. You have to figure out Corey, Hannah, Caleb, Danny, and all the
24:45 associated contractors. And you have to have the software to track it. Then you have investor relations which is just
24:51 me. So I guess we'll add that as one more piece to our org. IR. We know with
24:57 Caleb from working with him for a while, Caleb is the best worker of all time and he is the one of the most effective
25:03 people as long as you give him one primary task. If you give him two tasks,
25:09 he tries to do both at 100%. If you've ever tried to split yourself at 200%, it does not work well. Caleb needs to
25:15 charge at one thing. So, we keep Caleb on the lending, the brokers, the legal, but the it's all front end. It's all
25:21 relations. So, Caleb's job, outreach, connections. He has the sweetest job.
25:26 His job is basically take people out to lunch all the time, all day long. However, I don't have time to do that.
25:33 That is the most costly thing to me time-wise. Caleb runs the fun part,
25:38 spends all of his hours on the fun part, and allows everyone else to do everything that they do. When we get to
25:44 the investor relations, I'm typically the one who's maintaining everything with all of my investors, making sure we
25:51 have communication flow so that people aren't just sitting there left in the dark, which is the worst thing you can
25:56 do, period, in your portfolio is make everyone a bunch of money and don't let them know that you're making money along
26:02 the way. Cuz if you hit any snag in this process, who hears a real estate transaction not go exactly as planned?
26:09 You guys are standing in my one that went least to plan. And by standing, I mean sitting. This was so stressful. If
26:15 we had not communicated with the partners how things were going, can you imagine how the call would go near the
26:20 end? Hey guys, so surprise, it's been a couple years. Yeah, we didn't make as
26:26 much money as we thought. Like that's how you get yourself sued. People get mad. People get upset if you have a
26:32 problem in here and you're doing good in investor relations. So this is my main role
26:38 or can be yours for investor relations. This is the part where I'm like, "Hey, does everyone know what's happening? When there's a problem, am I allowing my
26:45 partners to weigh in?" Example, Matt and I have a project in Afraida. It's
26:50 actually the rena is going fantastic. The building is beautiful. Leasing is going okay, but we have a little bit of
26:58 a dispute with how our PM's managing it and the timelines on the project. It's not going poorly at all. It's leasing
27:03 up. It's making money, but it is a little bit behind schedule. If I just
27:08 announce to Matt in front of everyone right now, "Hey, surprise, Matt. We're making money, but not yet," that could
27:14 be a little bit shocking. But what we do is him and our other partner, we get together and we actually talk about the
27:19 deal. We talk about ideas on how to fix it. And we can build our own orb chart for the problems. So, we have another
27:26 investor on it. We'll call him Steven because I don't know if he wants to be named. His name's not Steven. But he'll
27:32 go through, we're leasing our retail spaces. He's like, "I'll reach out to the Chamber of Commerces. let me own the retail space. Now, they're part of the
27:40 solution. I have yet to see almost anyone get sued on a deal where you brought in everyone as part of the
27:46 solution. Everyone's aware of the problems and everyone's working on it. It's when you try to fix it all yourself
27:52 that you have the problems. Caleb's first ever deal, he did what Cody and I did. Amazing. Your first mentee does
27:58 exactly the same mistake as you. Caleb came in and he found
28:04 okay so if I raise exactly enough to close the deal but I have a reno project if someone moves out I now lack the cash
28:10 flow to continue my reno project he had a awesome deal fantastic debt shark it
28:16 be like nine out of 10 for if I was just ranking that deal a nearperfect deal
28:22 because he didn't raise enough and he didn't have the right investors what he did instead of call everyone is he just
28:28 kept writing checks and just funding all the rena. He owned 20% of the deal. He
28:34 was footing 100% of the bills. When it came time to refinance, he then
28:39 let his investors know, hey guys, by the way, I have a ton more money in this deal than you guys. How do I get
28:46 refunded? And everyone was like, I thought the deal was going amazing. I always got my distribution. It was the
28:51 most awkward conversation. What he ended up having to do, which wasn't too bad, he found other investors who had a whole
28:57 bunch more money to buy them out, fund the rest of his project. Everyone got a return, and Caleb used that to balance
29:03 the capital account. So, he got his money out, their money out. They actually all posted a profit, and he
29:08 brought in other people to finish his epic deal, who had the liquidity. You can fix anything that you do in writing
29:14 as long as everyone agrees to it. It's the beautiful thing about contracts. Cody and I learned that a few years in is everything in writing can be changed
29:21 in writing. There's a lot of flexibility, but that was one of the most stressful things that ever happened
29:26 to him. I remember he would call me just in an absolute panic cuz he's like, "We didn't talk. I want to own this piece of
29:33 my business." You might find you have an engineering background. You might actually be amazing at
29:39 maintenance. You might even start a maintenance business that plugs into your company where you make a lot of money on this side while getting to this
29:45 goal. This could be you. This could be someone else. You're not a social person. You're or you're just an
29:52 analytical person. Sometimes those people can't present to investors at all. It's just not your strength. Fill
29:58 in your strengths. Make sure you have the best people on your team for this. You can plug this engine into a 200 unit
30:04 market or a 300 unit market. It's a simple engine. And I know it looks like it's really complicated because I ran
30:09 out of pages so we had to keep this condensed. You can plug this engine.
30:15 I have my salary cap. I look at it like a baseball team. You have a salary cap and if you have someone who's like really good, you can pay the luxury tax.
30:22 You can give them a little extra equity or you can maybe reduce your profitability a little bit to bring on
30:27 the the A+. I don't know baseball, but there's the whoever the guy is on the Dodgers who's like the best of all time.
30:32 Someone, what's his name? Otani. Thank you. Thank you.
30:37 You can pay a little extra if you find an Otani. If you have like a greatest of all time, I'm probably going to give
30:43 Hannah a pretty substantial raise at some point and she's pretty much an invaluable player for Stevenville. I'll
30:48 sacrifice some profitability to keep an A team. But this is all you're doing. You're mapping out your baseball team.
30:54 How do I get the right players in the right position within salary cap to win my World Series, which is right here.
31:02 I've expended my baseball knowledge. There's four bases. Okay, now we've done all the baseball knowledge. I have
31:08 formula used for your salary cap. Uh salary cap. Uh so I have found in PM. So this is what I use. It may or may not
31:14 be applicable to you, but when I do my deals, I negotiate the management
31:20 contract because I have property management into the investment opportunity. So I'll say, hey, I'm going
31:26 to manage, for example, the 144 I'm doing. It is 3% plus salaries. My
31:32 salaries for the 144 is $120,000 a year for up to three employees. When we
31:38 acquire the 81 unit, that is going to add $50,000 to the salary cap for my
31:44 on-site person and is built into the actual investment. So, my profit in that is nominal because
31:52 we have fixed cost overhead software. the 3% less all of my variable cost for
32:00 running the PM in that market is my profit. So I'm making like a point on management on a lot of my deals, but the
32:07 on-site employees are direct pass through from the LLC. So in this I have the 76 unit has enough of a salary cap
32:17 built into the deal to support this individual. The 45 is really goes to Corey who oversees multiple regions. So
32:24 you would take this and zoom it out one more where you have Abene, you have
32:30 Stephvenville, you have Waco, you have Washington. Corey would sit right above all those
32:37 and her salary is dictated by a portion of all of those that comes out of that nominal 3%. She's absorbed through all
32:44 of that. Yes. Yes. Yes. 3% goes into overhead and again that that pays for the management
32:51 and the software. And again, I have run at about a 1% margin on what we bring
32:57 in. It's not a lot of money. 1% of the gross rents of everything we manage is about
33:03 what we profit. Uh but because I run a little skinnier, I'm able to provide all the services of like we can provide
33:08 direct on-site. And as a bonus, if you were going to run your building with on-site management,
33:15 you don't have to worry about payroll, you don't have to worry about taxes, filing W2s, you just pass straight
33:20 through to us. So, when you look at the full property management package, I'm like, "We're going to do your staffing.
33:26 We're going to do your rent collections. Uh, we could, my company does asset management as well. So, we can do your
33:32 distributions to owners, your accounting, your bookkeeping, all of that rolls into 3% plus whatever the on-site salary is. And if you're a
33:39 smaller building like a 25lex, we'll probably be about, depending on the market, like a 6% management fee. That's
33:44 just a flat easy way to run it uh that we've been able to do for an extended period of
33:49 time. So, if it needs an on-site salary cap exists, which is why for me to open a new market, I need to have at least
33:57 one building that is large enough to have on-site managers because that's how I personally open up my salary cap wise.
34:04 I have to get a network of people all paying 6 to 8% to be able to fund all the overhead. This model has been a lot
34:11 easier for me to manage where I can put key personnel that are paid for by the buildings, but they specifically serve
34:18 that building and have the advantage of your tenants can walk into the office and sign a lease. It's beautiful thing.
34:25 But this is how I built this to scale. Yeah. So really that goes under our capital
34:30 stack. Wow. It's like we planned this. Look at the one that doesn't have anything underneath it. Okay. Capital stack. So we need to make sure that our
34:37 deals are fully funded for three pieces. closing reserve Renault. Thank you. The one that
34:43 you just asked about. So, when I'm doing my due diligence, we walk with uh the entire team. So, I I use a a group
34:48 that's based out of Dallas that does all of my inspections and lease audits. They'll roll in with the contractors.
34:56 Same time, I'll get all of my quotes for all of the rena that I want to do. So, we have an estimate when we start and we confirm this during our due diligence.
35:03 So, rena is going to have dollars. Closing is going to have the cost. It's going to have reserve. I like to have it
35:09 at a bigger building there's a certain point where just you have enough money in the account but I usually like to do a few months full operating expenses
35:17 mortgaging like all expenses we can survive for 60 days if everyone moved out. So, in the 144 I'm buying, we're
35:24 buying at 98% occupied. Our math is, hey, if every if all 144 people moved
35:30 out, which it would statistically almost impossible if they all left, we still have enough money in the account to
35:36 survive for 2 3 months. That's our reserve. Renault budget is fixed on that one, which we did at uh that particular
35:43 one because they're all in good condition. $5,000 per unit every 3 years. The only reason I do that is
35:49 because if you do a litec property or affordable in Texas, that happens to be
35:54 where you get 50% off property taxes if you do that. So, I was like, I started doing that because we have to. And then
36:00 I realized that's actually a great number for a stabilized property. $5,000
36:05 per unit renovation every 3 years. That keeps your properties pretty nice. Covers any ACs that goes out, does some
36:12 unit turns. That's been a really healthy base renovation budget. And then we add in whatever we have for large capex
36:19 projects. These are Texas prices and yeah in Washington prices then yeah just just add a couple million uh per per
36:26 every 3 years I do about 5,000 per door is is been a really reasonable full
36:31 remodel budget for me. So so if I'm coming in taking over a building for the first time that covers a lot of failed
36:37 ACs that covers a lot of unit turns. A lot of our unit turns even in Washington state they're three to
36:44 $5,000. there's a heavy one can obviously cost tens of thousands of dollars. But on a decent building,
36:50 you're usually not turning every unit every year, but you will have stuff that fail. You have dishwashers that go out.
36:56 You have roofs that spring a leak. There's enough that comes up in 3 years. On a good condition, just base scenario
37:04 that works really well for us. And then I add any major projects such as I'm opening on the 144. were opening a 4,200
37:11 square foot commercial space that had flooded years ago and they just kind of left it. They took out the drywall, but
37:18 they just kind of left it. We're going to restore that space. That obviously has its own allocation, but that all
37:24 goes into your capital raise. Do not close the deal without all of these. And this one managed by Big C. Caleb's
37:30 little C. I'm kidding. Yeah. If your if your name does not start with a C, probably can't partner. I apolog I'm
37:37 kidding. No, I do I do a lot of the capital allocations. Caleb will actually run these numbers with me. We both run
37:43 all of our numbers, but when we go through, I'm making sure when we raise, we are very very very confident. We can
37:49 close with enough money to get through the project. Again, my base thesis, if you buy income and you don't lose that
37:56 income, so you hold the building indefinitely, you've given yourself a raise for life. I do not want to jeopardize that. It is hard enough to do
38:03 this. It's not that hard. Like once you get down to it, it's sticks, bricks, and money. Like that's it's just real estate
38:10 that makes money. You're buying a small business. When you're running through this, if you run out of money, you kill the cash
38:16 flow. All the cash flow goes back in the building. You're stuck in this death cycle of I get money in, I spend it on
38:22 the building, now the money's gone. Next month, something else fails, and you just get stuck in never cash flow land,
38:29 which you may or may not survive. just buy deals that have enough income, have these reserves, and if you don't have
38:34 this, you don't have a deal yet. And you just go back to the drawing board and you go, "Okay, well, what do we have to do for this? We need to borrow less
38:41 money, cheaper money, lower the price, change the interest rate." There's lots of different ways to manage this, but
38:48 we're just making sure we have all these in check. And you have to make sure that you have someone who's on top of making sure the darn money comes in. That's
38:54 pretty much your business model. Talk words. Wow. Long day at the Robin Hood.
39:00 If you take this and insert this directly into the business, it matches this. It falls within this. You know
39:06 your pieces. Sitting down and drawing the dark or chart. While it's not the most interesting thing you can do in the
39:11 world, this takes you maybe
39:17 3 hours. Imagine it took you a full day. You have 365
 of these. So, we're saying
39:22 uh onethird of 1% of your year was spent on actually deciding what engine you
39:28 want to power your goal. This is one of the most basic things you can do. Every time we found a problem in our business,
39:34 Caleb and I ran a uh sales and marketing company for a while and I helped him start it. So, it's Caleb's company and I
39:39 had a little bit of like tiny sliver of equity to help consult and help him get started. Here's the problem with his
39:45 business model. Caleb had setters is for online offers. He had a bunch of really
39:50 cool has a bunch of really cool clients including Christians, closers. He has
39:56 hiring. So, he has an HR. He has payroll which I guess kind of goes under HR but the way he ran it felt like two
40:01 different two different departments setters closures payroll and you have tech very techheavy company so he needed
40:09 a lot of automations a lot of software always integrating everything probably could have used any of you programmers
40:15 in here cuz I know we have a whole bunch of them this is Caleb's business now there's multiple setters there's
40:21 multiple closers one HR person one main tech person with
40:26 a support person and then payroll is someone else. When Caleb was like, "Dude, every time I pay attention to one
40:32 thing, it goes off." He has one client that he focuses on, they made an incredible amount of money. It was really cool to watch the stats, but then
40:39 all of the other clients would do less. And Caleb's like, "Okay, well, I have all these people working for me. Why is
40:45 the system not working?" If you look to who they report to, HR managed by Caleb, setters managed by Caleb, closes managed
40:51 by Caleb, payroll managed by Caleb, tech managed by Caleb. The whole building was the whole business, even though it had
40:56 employees, every single role was owned by Caleb. It took about an hour of
41:02 sitting with him and one of my marketing buddies, Dylan. We sat down and we mapped out his business on an actual
41:08 spreadsheet and we said, "Here's your problem. This cannot be your business for a big business. Caleb's running a
41:13 sevenfigure business. You can't run a million dollar a year run rate with you, you you you
41:20 trying to figure out all these people and be good at the same time. There is a point where you look at your pieces and
41:25 you go, "Okay, someone needs to own the hiring for me so that I can focus my attention on the things that I do best."
41:31 Caleb's best thing in the world, client acquisition, and he's really good at the software. In Caleb's business, if he
41:38 goes, "Okay, I'm going to go onboard clients." So, we'll call that another one, expansion. If the business is now
41:44 Caleb's on expansion and Caleb's really good with the tech. So Caleb
41:51 owns the tech team. Now he can put person one here, person two here, person
41:57 three here, and this can end up being person one as well. Now you have a threeperson team. You've followed the
42:03 rules. Not everything flows to Caleb, but the information flows to him on a simple spreadsheet. Now he knows where
42:09 people are in his business. What the And that's what you want in this in here's what I want to know at the top of
42:16 at the top of this. This is what I want to know. I want one spreadsheet that says this is your delinquency. This is your occupancy. This is how much money
42:21 you made this month. Here are our turns and make readies and here's what we expect to have to spend this month. I
42:28 can look at that every single week, which I do on Monday at 9:00 a.m. Central time with my wife and my entire
42:33 team. And we can look through and go, "Awesome, awesome, awesome, awesome. Why are there 20 people delinquent? This
42:38 makes no sense." And guess what? We researched the rest of the day. What's off in that one part of the business?
42:44 And then we find, turns out, our last one was the government shutdown. Turns out a ton of our tenants in that
42:51 particular part of our portfolio were 55 plus on a fixed income and a lot of them were retired vets. Their money wasn't
42:58 being set. Well, okay. Now, we've identified a problem instantly in our business.
43:03 You're not going to evict all your vets because the government shut down. We just came in and said, "Hey, you are
43:09 actually responsible to have money to pay your rent." Like, the fact that you're on fixed income, you should still
43:14 have money set aside. Late fees are still in place, but we're not doing any evictions on a you have as much time as
43:20 you need or payment plans to figure this out. Just there should be a little late fee tacked on solutions like that. I've
43:27 seen people maintain delinquencies and they don't even know 20 30% delinquent
43:32 tenants and I'll come in as a property management. I audit their business and I'm like, they're like, "Oh, yeah, we're
43:38 95% occupied." I'm like, "Do you want to know your effective occupancy?" It's 60%. You're not making any money. Oh, I
43:45 wondered why the accounts are always so low. It's like, if you suck at accounting, you add
43:50 accounting to your team. I have found what this has allowed me to do, and this is why I'm sharing this this problem.
43:57 Caleb's company is really good. Caleb actually makes a lot of money now. Uh, and he makes a lot of money in real estate. Caleb lives in this really cool
44:04 tower in downtown Dallas and he's never had a job in his life. Didn't go to
44:09 college. He got to do that because he figured out the freaking org chart. He finally figured out the piece like, "Oh,
44:14 wait. You put the people on the bus. You get the people in the right seats." This is the only way that I have seen. And I
44:20 know it's messy, but building how much do I have to spend? How much am I trying
44:25 to profit? What do I need to do to get there? If you build this team and you spend a day on just kind of noodling
44:32 through what are all the pieces and who does it, you can start building this team, it's the only way I know to get
44:39 from 10 to 20, 20 to 30, 30 to 50,000 a month. This saved the Robin Hood. It
44:45 also allows me some amount of time freedom to run the companies that I run and you get to scale. So the big choice
44:51 for everyone here, the decision everyone has to make, and this is really the the end takeaway here, what do you want that
44:56 top number to be? What are you actually trying to build? And you get there. And then once you hit it, you get to set a new goal. And it can be more money. It
45:02 could be more time. It could be another vacation with your family. My personal goal, D and I want to expand our family.
45:08 I haven't had time freedom because I chose the Robin Hood project. We chose the adventure and we're paying for the
45:13 adventure. Now that I've bought the partners out, I get to structure a lot of my business around how do I get a
45:19 little bit of time back and where do I want to invest that time? I get to pour back into multif family strategy, which is my number one passion project. And we
45:27 get to make this place absolutely awesome. Outside of that, more kiddos are awesome. That's that's what
45:33 Christian wants to do. Less debt, more kids. That is how you build this. You put an engine in it. You know where
45:38 you're headed. And then you do what Cody did. And I know he's Oh, there he go. He's right over there. I thought he was helping us cook. Even better, Cody. The
45:45 thing that Cody's doing, which I think is the responsible thing. You hit your goal. And when enough stuff is enough, you start paying down the debt like
45:51 crazy. And now you have less obligations, more stability. the best investors that Cody and I ever
45:56 interviewed. And I interview people on my channel every single week on the Owner Meeting podcast, the best, most
46:03 stable people built their business, they hit their goals, and then they paid off their debt. One of our first mentors
46:10 ever, Gary Man in Moses Lake, this guy has like a $100,000 a month cash flow.
46:15 He has all of these rentals. I'm like, "How did you get there?" He's like, "Well, I put them all in 30-year fixed rate debt. I never got around to
46:21 refinancing, so then they were all paid off." What a great Don't rip all the money out of your business. You don't
46:27 have to scale to infinity. Know where you're going. For me, I wanted to get to 15. I then had to get to 42. So, we
46:33 built an engine to get to 42. Now that we're sitting there, I want to focus on stabilizing the
46:40 business, paying down debt. I want to go full Gary Man. I don't need to have a whole bunch of debt in real estate.
46:45 We'll take on debt to do new acquisitions. We won't relever other than refinancing to buy out partners or
46:51 to end a partnership. That's the whole model.