Why Renovating Out of Cash Flow Traps You in a 3-Year Project

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0:00 you don't have to be great at everything but be excellent at the things that you're going to be excellent at I would rather be excellent at three or four
0:06 things than be okay at a thousand things welcome to another episode of the owner meeting podcast I'm Christian your
0:12 channel host joined today by my lovely wife Danny OSG good two of us have built multiple companies together we have
0:18 bought a lot of real estate together she's worked in some of the PM company she is one of the owners of all the real estate we do we do a lot of projects
0:26 together today we're going to be talking about one of the biggest mistakes that new investors made we're going to be talking about what it looks like to
0:32 correctly do a project a lot of the money you're going to make in multif family is based on how good of an operator you are we operate as a team
0:40 we're going to talk about how we work together more importantly what you need to do to run your business as profitably
0:45 as humanly possible so Jan Danny welcome back to the channel thank you so one big
0:51 thing that I've seen a lot of new investors do that I wanted to cover today because I think this is a really really important point for people they
0:57 buy these deals especially when they're buying low down deals they're going to buy deals based on the cash flow which
1:03 they should but they're going to do the project based on only the cash flow they're goingon to say hey I can do this deal for basically no money out of
1:08 pocket and so I'm going to raise exactly what I need to close not what I need to do the project and then we'll let the
1:14 tenants pay over time and we'll fix the project so maybe we have a vacancy here a vacancy there we're doing rent increases when we have a move out we'll
1:20 just do everything one unit at a time y we've learned that doesn't work very well Danny what what does it look like
1:26 in a building where we have done that uh it's very slow very tedious I feel like we're always in a constant project I
1:32 mean we always are running out of money we have major issues that come up that we just are not prepared for so Chris
1:38 and I pivoted and we decided that was not the way we were going to go we decided that we needed to always have
1:44 contractor quotes at the start of the projects six them and get the whole project done yes and you're always going
1:49 to go over budget with contractors almost always so you're going to budget for the whole thing a great analogy that I thought of uh this last week was like
1:56 if you try to clean your entire house one room a day so instead of like just getting the house clean you're like oh
2:02 as long as I'm like always cleaning something it should be okay that's kind of like running a building on cash flow if you don't have a lot of real estate I
2:08 think this will be relatable however if you just go and clean the whole house now the house is clean now you have a base level now you have a clean house
2:13 and you can really start maintaining things and keeping them clean piece of real estate is the same way it's cash
2:19 flowing there's a move out the money that you just allocated to start fixing the building goes to the move out stove
2:25 goes you replace the stove what ends up happening is your building slowly slowly gets better than what could have been a 60-day project becomes a two three four
2:33 year project yeah it's very tedious uh we've had buildings where the rents like we weren't able to do rent increases we
2:39 wanted to do in year one we had rent at 550 and we could not afford the move out you can't rock the boat if you can't
2:45 afford to get wet we just did not have enough reserves in the account to get
2:50 through the project so we had to wait for it to regenerate it took time every single vacancy is loss of income that
2:57 additional income helps get you through the project the only way to do it is to
3:03 get your contractor bids up front scope out your entire project not just the close and then you go finish it uh and
3:10 we do this by the way we recommend the same thing to our clients when we run Property Management which we're going to dive into some of our best practices
3:15 there as well today what does it look like on an average deal when it's
3:21 executed perfectly what happens from the time that you close to renovations to
3:28 lease up like what is that process look like high level so high level is when we
3:35 find a project that we love we then immediately get inspectors and contractors in inspectors because they
3:40 catch major things that we would not see otherwise and then once the inspector says you're good to go get your
3:45 contractor quotes we get the contractor bid out for everything once we have those quotes we know how much money we
3:51 need to bring into the project and how much money we need to have in our ban C on day one once we close on the property
3:57 then we get to immediately start we start with phase one which is the quick turns that we can quickly get our profit back up and then we go into the medium
4:04 and then heavy turns and then eventually the whole project is done and it's done really quickly and consistently versus
4:09 if we just did it very slowly as people moved out it just turns into this kind
4:15 of like Patchwork quilt of a property where it just doesn't feel cohesive you don't know what's going on in each unit
4:21 anymore because it took so long and it's just you really lose control of the project at that point and so when you do
4:27 it all at once with the contractors up front the project actually feels completed and then you see a bunch of
4:33 cash flow after the Project's done and one of the things that I really like about that is the lot of cash flow part
4:39 yes I like the part where the properties make a lot of money and that should be your goal too yeah that is the most effective way to get there if you buying
4:45 real estate it's not like Hey how do we spend as little as possible to try to juice the cash on cash return it's how
4:52 much money can we make and how little time effectively responsibly while creating an excellent building and
4:57 fantastic safe wonderful places to stay for your wonderful tenants who pay you every single month y like that is the
5:03 name of the game the other thing that I found is that we got limited on projects we got stretched really thin we're running a PM company uh it's impossible
5:11 to have the best course of all time but I would say the most we're running the most effective multif family strategy
5:17 like that is the most effective where someone would join and they actually go out and just buy real estate being sold
5:22 to anything else we're running an education brand we're running a property management
5:28 company we're Contracting our own Renovations on our own portfolio and we have hundreds and hundreds of units I found one of the biggest drains on that
5:35 system are the properties where we did not buy them with enough Reserve yeah it's the ones where it's like hey we're
5:41 not going to get through this for another three or four years because someone has to write a huge check and if you have say you have three
5:47 Partners I'm not kind of write in the check for all three Partners everyone has to agree we put together a deal
5:52 based on a certain amount of money it takes so long you end up with a never- ending project your ability to go
5:58 and just do more projects and make more money disappears you get bogged down in one project uh one such project that we
6:05 get bogged out a lot on is the Robin Hood Village Resort we talked about this a lot beautiful property really cool
6:12 deal structure we brought in enough money to run the resort not to renovate
6:19 the resort not to fix cabins that they move over time we bought enough to run a product that would what would work
6:26 really well in my opinion yeah is if it was one owner and he came in you're like hey I'm making all this money on all
6:32 these other businesses I can go ahead and just put it into the Robin Hood what does that look like on a on a
6:38 partnership structure level like what does it look like to try to get projects
6:43 done when the bank account has less than you need to do your Renovations so what happens is the projects don't get done
6:49 very well so if you only have a $2,000 budget you're only going to be able to put $2,000 into a unit which you might
6:55 have to miss some things and Skip some things as as well which then doesn't feel completed and you might not get the
7:01 tenants that you want in the units as well well in the case the Robin Hood is that you know the the quality of guests
7:08 that you want or the what I really see it come down to is the total amount of like the nightly stays the marketing
7:15 budget everything gets hit when you can't keep a full Resort it takes a while to get cabins online it's the same thing with multi family it takes a long
7:22 time to get units leas if you're waiting for the next check to order the contractor and then you're waiting for
7:28 the next check to install the next stove and now you are you've lost the first two months and now you're marketing the
7:34 unit online and now you might get a tenant which is usually just around the time another tenant wants to move out
7:40 and it's it's just a never- ending cycle you don't lose money if you bought right yeah but you never finish the project
7:47 and that is one of the things that the two of us we were talking about this earlier today talking about this to the whole week it's why it's so important
7:53 just to overfund the account do the raise if you don't have enough money and it doesn't work with additional Capital
7:59 raise to finish your project you don't have a deal yet yeah just don't do that deal there's other deals that do work
8:05 where you can raise the money and make a ton of money on yeah and also if you find some major issue that happens be up
8:10 front with your your partners and your investors don't just hide it because then they'll find out later and it it
8:16 will not be a fun conversation it won't be a fun conversation at the beginning but also it's a hey guys I just found
8:21 this out how do we tackle this and that's when everybody can go this sucks but let's move on and how do we get this
8:27 fixed correctly well yeah the conversation's never comfortable no you're totally right but have you ever
8:33 had a super negative reaction to an upfront conversation of like hey something I expected happen a pipe burst
8:40 unit flooded you know here's our game plan to handle have you ever had a conversation just go completely sideways when you brought it up front no it's
8:48 after you hide it or you try to fix it without giving heads up like for me I always tell my partners hey this problem
8:54 arose I'm getting solutions for you just heads up it's they're coming but I wanted you to be I want you to be aware
9:00 of it because also they might have some ideas too that actually are the solutions so keeping your partners that
9:06 your partners included is really helpful too they should have a really solid idea
9:12 of what's going on it's a great way to avoid getting sued exactly many of our llc's we the managing member so there's
9:18 a lot of responsibilities that you have when you are running the LLC Everyone's an active member but when we're the
9:24 managing member it's like hey everything needs to be accounted for correctly every invoice needs to be stored everything needs to be communicated uh
9:30 in our LLC is one thing that we've done to protect us we put in a clause that says hey at a certain price everyone
9:38 needs to weigh in yep so the managing member can't just come in and say like hey guys uh surprise there's a $20,000
9:45 bill this is how we're going to handle it we would actually for stuff that large get together call a meeting make a
9:50 decision it covers us legally but it also people get less upset when they're a part of the
9:57 solution things will go sideways on a building if you've ever owned a home
10:02 things break kids break things adults break things weather breaks things water breaks things Fire Burns things there's
10:09 things that will happen to your building over time it is part of owning a building how you handle those with
10:15 Partners is going to have a huge impact huge impact on how much money you make
10:21 now without diving into and we've had so many amazing Partnerships and we have so many amazing Partners however over 30s
10:27 something llc's sometimes Partnerships don't go as planned uh without getting
10:33 too specific where people would get upset with us
10:38 um I'm thinking of the best way to word this without people getting too upset
10:43 what are some of the lessons we've learned from Partnerships that didn't go as
10:49 planned I I'll tee you up with an easy one we had a deal that may or may not have been in the greater Seattle area
10:56 where a partner may have felt that because we were the managing member
11:03 every month of vacancy in a renovation project we owed to them because they
11:10 called vacancy waste now these were units that had fleas and bed bugs we we
11:16 we got good by them yes I ask how we we found out because we actually came in Project yes while we were being snacked
11:23 on they came in and decided after we very profitably very profitably exited the LLC for everyone
11:29 they came after us for every month that a unit wasn't rented ridiculous stuff
11:35 like that how does that play out and how do you avoid scenario because sometimes you
11:41 just get something ridiculous it doesn't matter if you're right by the way if it goes legal it it's whoever wants to pay
11:47 the most to be right is typically what happens on deals like that or other
11:52 deals where people have disagreed with the operating agreement when we've had disputes what does that feel like
12:00 and how do we avoid that today well for me it doesn't feel great at all because either it's some ball was
12:07 dropped or somebody didn't understand what you were trying to communicate to them in the past and they you have to go
12:13 back and re-explain it and then they might have more questions that cause bigger problems and just turns into this
12:19 cascading issue in that example it was a the person was understanding what we
12:24 were saying is like Hey we're trying to get these units leased it's The Greener Seattle area is kind of hard hard sometimes especially on the type of the
12:31 time of year and that was our biggest problem is we were going into fall and winter and those hard tends to lease
12:38 up very true so so You' say a lot of it comes down to communication yeah always
12:44 communicate another thing that I found is there there there's two types of operating agreement there's member managed and there's manager manag when
12:51 we first started we had Equity splits where it made sense where it's like okay there's enough people on these deals it's usually it was us another partner
12:58 and then one or two Capital Partners so every deal there's three or four people on it we did member
13:04 managed one thing that went sideways for us that we'll never do again so if you ever write an operating agreement just
13:10 keep this in mind we had a project that was going well and this is one this ties back to the original Point by the way
13:16 this was one the last building that we ever tried to renovate out of cash flow this is where we learned the projects take too long when you do this yes we're
13:24 going through the project and we have done an excellent job documenting everything we've done this like as
13:29 managing members we dotted te's crossed eyes we bought out one of the partners in that buyout the other
13:35 partner had more Equity than us we used to have balance they bought more Equity than we did a few months
13:41 later we we learned they held a secret meeting out voted us and decided hey we
13:46 think we'll make more money if we run the LLC they wouldn't respond to the PM there was a whole bunch of problems
13:52 where they it's someone with no experience whatsoever in multif family real estate had an operating M that had
13:59 a clause in there that allowed them control over the LLC stuff like
14:06 that just put together your operating agreements in a way or if you have partnership buyouts one of the biggest
14:11 things you can do communicate super clearly to everyone hold regular meetings make sure everyone
14:18 understands everything and then have the paperwork to back it up where you still have some sort of operational control
14:25 yeah Whoever has the most experience should have control if I have a partner who owns twice as many multi family units as we
14:31 do it's not as big of a deal who's the managing member if you're investing with someone who really is more of a Capital
14:37 Partner they're you know they're the money coming in you are the operator make sure that you put in your operating
14:42 agreements that no matter what happens you stay in the driver's seat yeah I think that was really really important
14:49 for me that was one of the many partnership lessons I've learned over the years of it can all go back to what
14:55 you agree on verbally how often you communicate and it can all be held together we always put in writing yeah
15:00 and also we have an LLC where it's equal so one of our partners is pretty much a
15:06 man they're managing their half and we're managing ours and it it works great because we have that verbiage in
15:12 the OA and we make sure or not the OA sorry the um operating agement right
15:17 yeah which is a OA yep thank you sorry uh we have it in the OA and we make sure
15:23 that we're very clear on our boundaries with each other and so it works really well because so
15:29 5050 yeah but it all comes down to who is supposed to be piloting the deal put
15:35 together the correct things in the contract and then clear clear clear communication that first one where we we
15:42 came up to like how it was being managed in the vacancies while the situation was ridiculous like obviously your property
15:50 manager doesn't owe you money for every vacant month that you have while you're under renovation that's that's obviously
15:55 a ridiculous thing we dealt with but there were times in that LLC where had we held a few more meetings we
16:01 communicated more clearly hey this is exactly how we're managing this and why we're managing this as instead of just making them a bunch of money which we
16:07 did if they understood what was happening to make them that money and they were more actively part of those
16:14 decisions I don't think that there would have been any situation where it would have got to where got I also think too
16:19 doing meeting minutes um there are formats online for meeting minutes and so you fill it out you send an email you
16:26 say please reply if you agree to this so that it's documented so that if ever anybody comes back you can go back and
16:32 say nope on this dat at this time this was our meeting this is what we discussed you replied back that you
16:37 agree by everything that's in this email it's just documenting everything so you can protect yourself down the rad as
16:44 well let's get into the juicy bits here getting organized in an LLC especially
16:50 as a husband wife team we made a decision a while back that we wanted to we wanted to play the game we wanted to
16:56 have it all and having it all for us means having the education company the property management company and the
17:01 assets to back it y have the experience but really have control and business
17:07 operations and all of these it takes an insane amount of effort and time to put together the entire business but we want
17:13 the information the application the capital the property management the property acquisition we decided from the
17:19 front end we're going to build it all in housee what does that look like
17:25 especially as the wife of an entrepreneur what does it look like to keep those pieces organized when you
17:31 have everything happening all at once all the time there's there's sales marketing accounting how do you keep that
17:37 organized but where you're able to do the meeting minutes the invoices for every LLC what does that process look
17:44 like if someone wants to build a business like we did how much time do we have uh we have oh it's my podcast we
17:50 have as long as we want uh let's try to keep this to a uh a a five to 10 minute
17:55 segment it was a joke um for me it's it's all about my files what do my files look like what do my paper files look
18:02 like what do my digital files look like what do my files in my emails look like um whenever I get an invoice that the PM
18:09 does not pay um I have a file folder in my email where it has all the properties
18:14 labeled and then I drop it into that file and so that I always have it organized along with my paper files if
18:21 we ever get anything in the mail from like the IRS or whatever it always goes in that file and we keep it for seven
18:27 years um same thing with your digital files I know you're working on like Ein folders and stuff like that like to make
18:34 sure we know where everything is at all times meaning minutes as well like those just go into the files clearly are
18:40 labeled always the same format for everything so we know what to expect and it just if you have that system in place
18:47 it just becomes really systematic and smooth and just becomes second nature and then you just start doing it and it
18:53 just becomes really easy to run everything and this is one of the things especially Real Estate Investors we tend
18:59 to be ADHD entrepreneurs so if you're listening to this podcast you already gotten yeah you got 18 minutes in this
19:05 is there is a like 90% chance that this is you it's really hard to stay organized but what ends up happening is
19:11 you you end up with 30 L you end up with hundreds of rentals you play the game yeah acquiring property is the easy part
19:19 of real estate and so you end up with a whole lot of pieces a whole lot of property in our case a whole lot of
19:26 Partnerships just document everything actually have check list in our in our course but like I follow I try to follow
19:31 this to the te where you have a folder Your settlement statement your insurance docs your meeting minutes your
19:37 p&l your profit and loss your rent roll your EIN yeah offer rating agreement
19:43 everything sits in one file as it gets done this is the easiest time to do it this is just like the analogy of like
19:49 hey you can go clean every room in your house you know once a week or you can just clean the whole house and get it
19:54 clean build the folder have it done when it gets to tax time you take all your
19:59 folders and you go hey CPA is like hey can I have this yeah here you go here's Master access to Boom everything that
20:05 you need now you're just answering a few questions you can file taxes on time or
20:11 with minimal extensions for 30 llc's we run this in-house yeah it's a crazy system we
20:18 have uh what software does one use to run all of these pieces I use key pieces
20:25 for the whole portfolio like yeah Property Management uh entity documentation leasing like what what did
20:31 we do to build a system yeah so I use like Excel a lot of the times I use
20:37 monday.com that's a great platform what is Monday so Monday is a a a service
20:42 that I use where it has folders but the folders I can adjust so like if there's
20:49 vacancies I can have my vacancy status on each one of them I can have my bids in there I can have my pictures I can
20:54 have where they are at currently I can have notes that are time time stamped um
21:00 it just keeps me super organized and what ni about Monday too is I can share it to other people and I can limit
21:06 access so if there's like Caleb homel for instance he needs access to certain
21:11 files that I have I can give him those files but I don't think them all my files so then he can go and see where
21:17 he's where we're at with our vacancies of the properties that we own together but he doesn't have to see all the
21:22 properties I own and all their vacancies and all their status States and for Team Management to make sure that all the
21:28 information lives in the cloud yes so you have lockbox codes you can control who sees them yes but you don't
21:34 accidentally fire the employee who knows all the lockbox codes that is that is what systems like Monday are good for
21:40 it's inner teen Communications and like backend scheduling exactly by the way not a paid advertisement do love the
21:46 software yeah uh another piece that we use AppFolio we've tried a whole bunch
21:52 buildium we we've used uh thing called cozy that was later bought by apartment.com so it's not their
22:00 network afolio has been the most powerful tool that we use for property
22:05 management it does everything everything uh leases screening
22:11 marketing uh bank account management distributions pnls yeah corporate
22:17 accounting for property management uh what did it look like on
22:22 your end so I I'm in you know buying the software getting the interviews setting up the base stuff I do the distributions
22:29 I make sure the money that goes in and out is correct yeah everything else just happens between you and our our team you
22:36 Corey that when we're building this what does that software allow us to do that
22:41 we otherwise couldn't do so that software is great because it lets me commute with the tenants it lets me manage our bills or invoices which is a
22:51 huge part of it too so for our invoices we attach all the invoices we it's time
22:56 stamps when we paid all the things it's great it organizes it so well too because then if you ever need to go back
23:03 you can just search for it and it just pops up and then all the notes around it pop up as well um if we ever have a unit
23:09 turn that's where I send it the contractors the unit turn I don't send the Monday that's for owners I send the
23:17 turns to the contractors through at folio and I put my own notes in there and then they reply back regarding the
23:24 turns as well so those are some of the things I use in um at folio I know like we use Leasing and something
23:30 like that I'm not more I'm not in the leasing as much but I do know that we do a lot of our leasing funnels through at
23:37 folio and we are able to background check all of our tenants we move them in and and they just our tenants have said
23:44 that they love that platform because they're it's easy to communicate with us and they also understand their portal
23:49 and they understand like if they have questions or anything they can ask us questions and they can also pull reports
23:54 too as well and so essentially our folio runs the the properties it's the all the
24:00 the actual the clue yeah it's the accounting and the leasing and the property management yeah the back office
24:07 for our companies is Monday where everything is stored and information is shared among people uh things like Excel
24:13 Google Google drive or Dropbox are all interchangeable pieces choose one don't don't put them all over the place to
24:19 store your actual sensitive files for llc's and tax stocks those are to be stored physically and virtually yep yep
24:28 and that allows us to run the company where we actually can go and buy a ton of real estate if you get disorganized on that stuff your time's gone and I
24:35 would not have time if I didn't have a wife like Danny there's something about being a husband and wife team I I've said this on a podcast
24:42 before but I'm gonna say it again neither spouse should dictate the
24:47 roles of the other spouse don't try to create a job and when I first try to get her out of teaching a big thing I was
24:53 trying to do is like how how can I help create roles that I think she'll thrive in well ended up doing is Danny just
25:00 offered to help on certain things and her she developed her own role and turns out she's amazing at the things that she
25:05 does she keeps organize keeps on time if a vendor is asking me hey where do I send this bill I'm like well there's a
25:12 50% chance I'm going to be speaking that day I could be doing a a webinar running a class I could be onsite at a
25:19 project Danny has found hey I'm really good at making sure our bills actually get paid on time people like to be paid
25:26 while I'm focused on bringing in Topline Revenue which is it's like drive drive drive drive drive you don't have any
25:32 bottom line if your expenses run away from you yeah Danny makes sure hey we have these your company kind this could
25:38 be a partnership structure this could be a marriage structure but letting your spouse dictate how they want to be
25:45 involved in the business has made our business just amazingly better I did tell you at the beginning I only wanted
25:51 to work three hours a day which is not the case nowadays well now now we have a
25:56 full-time baby yes he is cute he is adorable and he is fantastic and I am very grateful that we
26:03 are both stay-at-home parents uh because we run a heck of a lot of business and being able to pass the football uh the
26:09 football being the baby you don't actually pass him but being able to toss the baby from
26:15 from parent to parent through the day has uh has made the time with the kid just absolutely amazing it's been an
26:20 amazing business yeah or are there any tips that you would give people who are working is one of the things like I
26:25 remember talking to my dad about this he's like I I can't imagine working with my spouse my parents love each other been married for a long long
26:32 time but is there any advice that you would give married couples who are in business together on how to stay sane
26:38 because it is not always easy that a tricky One what does it what
26:46 what does it look like for us on a dayto day just kind of lay lay out like what does it look like when I'm trying to run
26:54 three or four companies and there's a ton of stuff coming in all the time and the house
26:59 still needs the run and all the other things that happen how how does that look I mean it's kind of the equivalent
27:05 of t-sh you have so you have all these balls being thrown up in the air at all the times you're constantly making sure they don't hit the floor um I I mean you
27:13 just get the stuff done as fast as you can and then if I need to tag Christian and like Christian is very good at
27:19 certain things and I need his help on certain things because I don't think the way that Christian thinks which is great
27:25 because then I think in different ways and I can you know solve those problems but so I'll tag him in but it's really
27:31 just like seeing what's going on like you know understanding like Christian's busy or now I can't bug him or Xander
27:38 needs this and I need to go do this or I need to go get back to this vendor at this time like it's just knowing what
27:44 ball I need to focus on in that moment and then once I focus on it launching it straight back up in the air again and
27:49 running towards the next one just keep juggling them until they're completed and on my end having someone who else
27:56 who was just constantly thinking about the business and who lives with me is just
28:02 absolutely fantastic it helps keep me on track it it's it it allows the businesses to be what they are when we
28:08 made the decision to have it all that's that's really the cost of doing that is there is a lot of time and there is a
28:14 lot of organization you have to be able to optimize if you want to scale and I I would argue if you want any level of
28:19 Financial Freedom you do in fact have to scale and we are very fortunate Christian that we work very well
28:25 together yes there are some couples who don't and and my advice to those couples is if it's not working find a different
28:32 way because you don't want to be bickering at your spouse all day long you I love seeing Christian all day long
28:38 some couples don't want to and that's okay like if you're like I need my space I need my job to be separate from my
28:44 husbands that's fine but you need to know that also be more interesting to be around
28:50 no just be aware of who you are as people no personality types matter a lot
28:56 and choosing your partner correctly is is a huge thing but sometimes you're in a situation like us there is no reason
29:02 to believe we would have been good in business together because she was a school teacher I was a A salesperson worked for co-star yeah when I decided
29:10 to become an entrepreneur that was never part of our marriage before so we and you had no inherent training or
29:18 experience in the field that we were in I also had no training with working with other adults because I was working with
29:25 kids all day turns out pretty do similar they're kind of like big children that
29:30 are all grown up but I never was in like the corporate world so it's very different jumping into that more or less
29:38 but you know you you pivot you learn that's another thing too is you have to learn how to Pivot if you can't pivot
29:43 you're you're G to be dead in the water yes which is a good final point for this
29:50 podcast when is it time to Pivot I know there's been many projects where we've held on too long to a vendor too long to
29:56 a partner uh we've we've thrown too much money at a project where we we like hey
30:02 is it still the project is it still project worth doing not every company that I've launched has been successful by the way yeah if and that's okay yeah
30:09 you it's like well you should be making all this money from all these companies it's like yes I was over at night success after like eight years of
30:15 grinding at this stuff yeah and I'm really fortunate that it happened that fast when we're building this how do you
30:22 know when it is time to cut off a project or what things are worth the time to continue to nurture
30:28 I am I'm weird I look for signs like and very much if the door is easy to open go
30:34 through it if it's hard to open it's probably not the door to open and that's just like what I do going through our
30:41 companies and businesses if it's if it's just not working just not meshing or clicking it's like okay we need to
30:47 rethink this because it should be fun yes it'll be stressful but it should be fun and if it's just stressful and it's
30:53 just a grind and it's you're losing your motivational like that that's where it's like okay stop we need reflect do we need a pivot
31:01 or not and that's okay and if it's not working it's not working well and this
31:07 is actually something I I love the bottleneck analogy people use the term bottleneck all the time but literally
31:13 think about it like you have a bottle it's this wide and it goes to a little choke point there's only so much flow that can go through that little Point
31:20 what I have found since Danny is very flow oriented where it's like hey what
31:25 what where does the current seem to want to go and let's continue to go towards the things that are working when there
31:30 is a point where we do hit a bottleneck we hit a place where it's like hey there's friction here what's really fun
31:35 as a husband wife team and if you have a business partner hopefully you have someone who's like this Danny can
31:40 quickly identify hey we're stuck here when that is passed to me I then get to determine is this a bottleneck where we
31:47 can widen is this something where we can do are there actions that we can either do today or influence today that can
31:53 alleviate this so that the river can flow or is this something where we've tried six or seven things and it doesn't
31:59 seem like we're supposed to go there like it just it's not working and sometimes that is the case I would have
32:06 loved to own my property management company in Washington state and having it expanded to Texas it would have been
32:13 an amazing thing to be a multi-state just larger PM company what I found as I
32:18 was trying to put the pieces together for that stuff just perpetually kept not working our very few small little
32:25 partners on that deal were causing problems that that wasn't the main issue but like we had people who had just
32:31 altogether stopped working on the company as we were getting ready to move we
32:36 were very pregnant when we moved to Texas I was he wasn't I gained a pretty similar amount
32:43 of weight so one could argue um we we shared the
32:49 baby weight when we came through and put that together that was one of the things we like hey I need this off me for me to
32:57 go to Texas and be a mom especially if we're going to run a property management company down there if we are going to be doing that and we're going to be growing
33:04 the multif family strategy Community by the way she was plugged we have a new school Community check it out
33:09 it's called multi family strategy it's completely free I want to see a $ hundred million transactions go through
33:15 that I volunteer to be the first two of those but there's another 98 million that's going to go through that
33:20 community so join that that is free link is probably below in this episode if it's
33:27 not just go to school and type in multi family strategy but when we are building that
33:32 it allows me to focus on the things that do have the most flow that has the most momentum you have all these mentees all
33:38 over the country who keep buying deals and we're seeing that the deal flow is going up and up like the it was already
33:44 a great ratio and now more people are more likely to buy a deal faster when they join Danny's good at analyzing like
33:50 hey that is obviously working and that has a ton of growth the coaching is getting even better and your passion and
33:59 I love it he he loves what he does like he pours himself into his mentees and
34:04 into that company there are so many projects like that that we're allowed to
34:10 do because I have a spouse who goes hey these are the things that you don't need to do that aren't working and there's a
34:16 lot of businesses that I think could have made a lot of money I have a lot of ideas yes and I have a video of him promised me promising me that he will
34:23 not do anymore right now yes actually actually that expired that was for 2024
34:28 we are in a new year I am free to move about the cabin no you're not oh
34:33 well regardless choosing the things you everything has to vertically integrate
34:38 but you don't need to do everything and that whole Robin Hood taught us that
34:43 that flow method yeah yes it did yes it did yeah the Robin Hood is a honestly
34:49 it's a great deal with a great deal structure and is an amazing property it's a oneof one property that was the attraction there hospitality is what
34:57 didn't make sense for us had we done this flow thing and said hey look at all this buying Apartments renovating
35:03 providing like fighting homelessness that's one of our main things that we're trying to do create excellent places
35:08 affordably for people to live yeah be the opposite of a slum Lord but service
35:13 the people who need that type of housing we're so good at doing that and that's what all of our systems are all
35:19 of our people are good at that Hospitality huge distraction we took things like that we learned like hey you
35:25 don't have to be great at everything but be excellent at the things that you're going to be excellent at I would rather be excellent at three or four things
35:32 than be okay at a thousand things and I don't need multiple income streams over multiple businesses I need
35:38 to be amazing at one thing and we can vertically integrate up the wo but do you haven't heard of that that that
35:43 whole flow mentality that's the I mean is such a great way to run business yeah what door
35:50 is opening go through that door you'll just end up going through more doors you have more opportunities and if you have someone on your team who's a problem
35:56 solver like I I I'm somewhere between a Visionary and integrator I fall kind of on dead center
36:02 on those but when I get into the integration of stuff that's where I can quickly assess okay uh we're not flowing here
36:09 can we fix it or do we need to bypass it those are the only two options it allows us to make uh decision
36:15 quickly closing thought if you could do a business where you can make all of your major decisions the same day that
36:21 they come up you will go way faster than most people who labor on the same problem for year after year after year
36:26 yeah I when we have ideas go quick I love getting the team together and say hey guys we have a great idea this is
36:33 what I think it looks like what would it look like for us to have this rolled out by the end of the day today and
36:39 oftentimes the team is you are insane that can't happen other times we actually have done major major
36:45 operational fees where we've dropped everything and we have changed the direction of an entire company in 24
36:51 hours it's a great skill to have Danny is really good at identifying where we are stuck I am good at making a decision
36:57 on are we going to bypass it are we going to fix it or are we just going to skip
37:02 it all together yeah good team way to go guys that's an episode if you haven't
37:07 yet uh commented liked left a review on the podcast I'm trying to grow this thing we're interviewing owners today
37:14 we're kind of interviewing ourselves but her owners we want to interview the owners that you one day want to emulate
37:20 we've had so many great people on this podcast I believe our next episode is
37:25 going to be episode 50 so while we're still young we are growing so like subscribe to the podcast we appreciate
37:31 you join that free school community and we'll see you all in the next episode bye