Taking Risks | REIal Talk Podcast | Investing | EP. 41

Hi, guys. Welcome back to another Freedom Vlog episode. And we are on Episode number 57. I am Caitlin, the marketing and communications coordinator here for the Freedom Real Estate Group family of companies. And you also may see a familiar face here, Aaron Davis. He is with us again. And today we are going to be talking about taking risks and the payoffs with taking risks. So the first one that I have is starting a business.

Yeah, unfortunately, I know a little bit about that. There's a lot to be said about how to mitigate risk in a startup.

Yeah. I mean, starting a business alone is taking a risk. But then. So if you are starting a business and you're doing a lot of research or anything on it, you may find one of the highest points when doing your research is that most businesses fail within the first year.

That's right.

I feel like a lot of that is because people will start their business, see failures, but they don't tend to do a lot about it, or they tend to just start it and expect it to kind of do its own thing. And it's not really how it works. You have to take what you learn from your fails and turn those into successes. I mean, how many times, like, and I can relate this to tennis, was the first thing that just came to mind was a jump serve. It's one of the harder serves to learn how to do. And it took me a whole year to learn how to do it, but I failed multiple times in order to get it, and then. But once I did, I had a very, very powerful serve. So I don't know how I just thought of that. And that was the first thing that came to mind.

But I totally get it. There's a tough balance between being so stubborn that you don't quit and quitting when it doesn't work. Right. And so I think as a founder in a startup or even as a small team in a new organization, you sometimes struggle to differentiate between a tactic or a strategy that's failing and needs to be abandoned or from which you need to pivot, and then the. The mission or the purpose, or, you know, the. The objective of the business that you don't want to quit on, that you're committed to. Right.

Yeah.

And that is. And they overlap. It's not like there's a clear line between those two. So it gets a little tricky.

Right.

And, you know, for me, in my experience, it has been, you know, that I've had to stop often and reassess, just like you and I do when we're talking about goals in Our operations. Right.

Yeah.

Stop reassess. What are we trying to accomplish? Okay, what's that intended to accomplish? Right.

Yeah.

And then ultimately you're talking about purpose of life or whatever else.

Right.

Somewhere short of that, you know, you establish what your real goal of your goal is and you say, okay, that's the thing. I'm not gonna, you know, I won't deviate from.

Right.

Accomplishing that, that big, you know, objective. But all those other things, you know, your tactics and even your strategy for how you go about accomplishing those things. You need to be a quitter sometimes.

Yeah. Yeah, absolutely. And there. And that's when realizing sometimes, like you were talking about being stubborn, you want something to work out so bad, but it's just not working. And even no matter how bad you want it to work out, sometimes you need to just drop that or put it on the back burner for a while to focus on other things that will give you that success that you're looking for and push through.

That's. That's absolutely right. There are things you need to be 100% committed to. Maybe it's some core value in life or something. You know, I always hold everything 99.9. Right. Like, you never know what you don't know. You know, always stay subject. But then there are some things you need to pursue and commit to with a very loose grip.

Yeah.

And you know, and treat it like an experiment. You see, if this is going to work, even if you have a strong conviction in something and it seems real, absolute, you've done the homework. There's something to be said for being 80% committed to a given approach to something. Right. And so differentiating from what the actual purpose in that business is. Excuse me. Whether it's your own personal financial freedom, and if that's it, if that's your purpose of going into business, then everything is subject to change. You can literally do anything. Right. From robbing stores to investing in real estate. That's your only, you know, guiding principle. But you'll have others. You know what I mean?

Yeah.

So you establish what those things are like. I don't, you know, I don't want to do harm to others in my pursuit of financial freedom. Right. And so you've got these guiding couple of things or whatever.

Yeah.

Those things won't change. But if. If that's really your only kind of, like, business value or whatever, is something about getting financial freedom, you could completely change industries. Right. You're selling ice cream one day, you're selling cars the next.

Yeah. I mean, and it's all on you. Learn from your mistakes and learn from your successes. You know, take the best of both worlds and see what you can mesh together.

Yeah, I think that's where fast feedback cycles comes into play.

Yeah.

So I had, I had experience, have experience doing a tech product startup of sorts. It was really kind of a service product combination. And, you know, getting a good volume of feedback from users and customers fast and clear is so critical and then responding to it. Yeah, like changing something based on, based on what you hear.

Yeah, that's a good point. Because a lot of times based on, you know, what I've heard from others is they will ask for feedback, but then they don't do anything with it. So taking action on that feedback, regardless of if it's the feedback that you are looking for or not, is gonna be crucial. I know I asked for feedback from the marketing team about myself. This kind of goes into management a little bit and I was like, be completely vulnerable. You guys aren't gonna get fired or anything. I appreciate you guys, but I need your feedback so I can see how I'm performing, how I' that way I can better help you guys, our team and our companies. And that was exactly what I did. I saw their feedback. There were, I mean, it wasn't a whole lot of feedback, but there was one thing that really stuck out to me and I sat the marketing team down and I was like, okay, let's talk about this. Like, let's work through it. And since we have done that, communication has been much better between all of us. So taking it and actually making action steps out of the feedback that you're getting is also incredibly important.

Yeah. I think risk mitigation done well is a humbling experience. Right. You know, these principles, you know, fast feedback cycles will do apply to management, they apply to product development, they apply to management, they apply to real estate. Right. Like in terms of our process and investing in real estate in various ways. And then obviously they apply to running a startup or building a product as well. A lot of applications in marketing, which. We can talk for miles about that.

Yeah, absolutely. Yeah. So marketing talk for miles. I'm trying to figure out where to start in terms of taking the risks. Sometimes you just have to have to do it. I know we have recently started to experience in new advertising strategies and it's not anything that we've done before, so we didn't really know how to scale it. No matter what kind of research we found, there wasn't a clear direction or answer so it was, okay, let's do what we feel is best based on this research and based what we think is going to work best for the results that we want. And that's what we're doing. And sometimes you just have to do that. And that also turns back into the feedback cycles. We are going to get feedback from that and then we can only grow from that. So sometimes you just have to take those risks with those budgets. Certain type of media for advertising. How long you want to do it for and what kind of message you're trying to get out is also important. Your messaging, you know, you could say we're Freedom Real Estate Group turnkey, but it's all on how you want to say. You could say, you know, are you wanting to invest smart and live happy or are you wanting to get started in real estate?

Yeah.

You know, that's two different audiences that you are kind of talking to. Two different messages. But it could be the same end goal.

Yeah. So that brings to mind a B testing in ads. Right. So what have you learned through your experience doing AB testing and advertising?

A lot. So one of the most recent ones we've done are emails and.

Oh yeah, it applies to email campaigns. Emails, ads.

Yeah. So we have found through a B testing that creative subject lines are getting a much higher open rate than an informative type.

Interesting.

I thought was very interesting. Interesting. But it also proved to have a higher click through rate on our emails with the creative ones. We weren't necessarily expecting that. The one thing that we were really looking for with the subject line testing was our open rate. But because of that we ended up finding out additional information like our click rate, like how many clicks we were getting throughout the emails, which was very interesting.

And you just did that. But for those who don't know what a B testing is, you just split your audience in half and send them two different things and see which one you make sure you're. That you know the split is not right. You know that it's a, A they're both a fair representation of a whole.

Yeah, absolutely.

So somewhat scientific.

Yeah.

And then, and then test two different approaches. Right. Just change the subject line here or change the content in the ad there or change the timing or whatever.

Yeah.

And do it two ways and see which one works better. Right?

Yeah. AB testing is very fun to see and to look at the data and because it's your like you think one thing and then you start doing this a B testing and then you're even. You're either proven right or proven wrong on it or you find additional information that you didn't even think about.

Yeah.

So I love a B testing. I am excited to do it. I unfortunately don't get to be too much involved with it. That's more Lauren. But it is fun, exciting.

Yeah. There's a couple of leaders that I know who are accustomed to, and I mimic them talking about running the experiment and treating business tactics as experiments. And in so doing, you create an acceptable context in which for something to fail. Right. In which something can fail.

Yeah.

And so you kind of know. And even when I took the job as a CEO, the family companies, I told the owners, hey, don't get alarmed. What do you need from me? They said, I said, don't get alarmed. If you see a little smoke coming out of the lab. We're going to blow some things up.

Yeah.

And the trick is blow small things up. Don't blow up the building.

Right.

In your lab. Your beaker is going to blow up or whatever. That's fine. You know, figuratively speaking, of course.

Right.

We're going to send out an email to a few hundred people as a test. You know, try out the subject line or whatever. You know, this applies 100 ways. And if it sucks, it sucks. But you keep that experiment small, then it's not. It's not so painful, Right?

Yeah, definitely. We haven't done that with just emails. We've done that with multiple things, especially recently Facebook ads. That's another thing we've done a B testing on that we have recently started. And there's a lot of data that can be pulled from it and a lot. Ton of different things that you can a B test on. Kind of like you were saying, you know, it's not just a subject line in an email. It could be something that we, like we're doing now is what's going to get more attention, a still photo or a video.

Right.

What's going to grab more of the population's attention?

Yeah. So going back to kind of reorienting yourself in the context we're talking about risk mitigation and, you know, AB testing is a great mechanism in marketing and product development.

Yeah.

To mitigate the risks of making a change. In other words, you just make a small change, sample it to, you know, a sizable enough audience or, you know, a relevant enough audience or whatever that the feedback is meaningful. See if it sticks.

Yeah.

It's better then roll with it and implement it. Right.

And it's. It's even. It's a risk to do that alone. But then even more so when you get ad spend or money involved because then that's money you're spending and it could not go well or it could go well. You don't know what's gonna happen with it.

So do it with 3,000 before you do it with 30.

Yeah, yeah.

Keep those experiments small. Learn, learn, learn. Then increase your budget.

Yeah, learn.

Then double down. That's a great risk mitigation tactic when you're getting into something new. You know, speaking of marketing and ads in particular, the advertising medium, some give us better ways of testing and risk mitigation than others, right?

Oh yeah, absolutely. Facebook in particular. Facebook is getting a little better with their ab testing. Email. Email usually has. Is a lot more. There's a lot more things and tools and data that you can look at and collect versus like Facebook.

But the beautiful thing about both is you can see the data the next day.

Yeah, absolutely.

It's so fast.

And that's what I was gonna say. But like if you do like an ad spread in like a magazine, that's not physical data that you can just get online and look at real quick as easily. It's something that's going to have to come in over time as you get those phone calls or emails. Right now we, we tried something different with ours. We put a QR code in there as well. That way we could try to collect data more often or faster versus just a phone call because people can scan that QR code all day long but not call. So that kind of gives us a little bit of feedback to see, okay, are people seeing our ad and are isn't intriguing them.

It's a mechanism to measure engagement in, in a shorter, shorter cycle.

Yeah, yeah, great. I mean, and even that alone, that goes into design and that is a risk because now you're taking up more. You're overlaying something on top of the physical layout and you're like, is this going to look cluttered? Like, should we not do this? So it's a lot of.

Yeah.

Questioning and figuring out what results are going to produce the best.

You know, marketing is just like running a startup is largely marketing. It's product and marketing, so on sales and engineering. But it's marketing is not unlike management, not unlike real estate. There's a lot of tiny little variables. Right. So when you think you have the formula, then you realize, oh, wait a minute, this doesn't, this paint doesn't work when it's 45.

Yes.

Or whatever else you think you found the perfect medium to create the Paper, perfect color. And like, wait a minute, it's not. Doesn't work in this cut, in this lighting or whatever. Marketing is that way. And that there's so many little variables. There's no template to say this is the risk free way to do it.

No.

And I don't know how many times I've read somebody's like, we've got the recipe, but. Well, not really.

You might. For that current point in time or.

Some subset of what you're doing.

Yeah. But marketing in particular is constantly changing, especially with online media. I mean, how many times do you get updates on your phone with all your apps? You know, I feel like every day I get on my phone, I have a new update on one of my apps, or even whether my phone and those updates are causing, you know, different processes for things like the Facebook ads. When Facebook and Instagram meshed together, that was huge. But that was something that took a long time to kind of get there. So now it's nice because you can integrate your ads with Facebook and Instagram on one platform versus two. But that's like I said, something that has taken several times, an update to get there.

Yeah. I think that the theme I'm hearing as we talk through risk mitigation and marketing is fast feedback cycles and testing, small pilot tests or a B testing and your experience, and then also piloting a product in a single store or whatever else. Run a small experiment before you blow up the whole lab.

Yeah, absolutely. Yeah. And that's exactly what I wrote. I wrote, create short measurements that can be easily evaluated at the end.

Yeah.

And then slowly ramp it up from there.

Yeah. So that kind of goes into management a little bit. I wish it was that easy. I wish I could be like, huh, this management technique, I wonder if this will work. I'm just going to, you know, as I'm managing Caitlin, I'm just going to start throwing this into our conversation and see if she turns out great. But, you know, as a person, you bring too many other variables for that to be a real way to do things.

Right, Right.

Management's a little tricky. The mitigations for risk in leadership are completely different, you know?

Yeah.

Like product or marketing, where you can do fast feedback cycles and that kind of thing. There's. It's a whole different other kind of risk.

It's like almost like a trust risk. I know. For me, one of the things that you kind of directed me to do was to just pass tax off. Because originally I was like, okay, this is a new project. I want to start to understand it a little bit, and then I'll pass it off. And you're like, you know, sometimes you have to do things that are uncomfortable, and you just need to pass it off and just trust that they'll do it. And then at the end, evaluate it and see what you learned from it. So that is something that I have been doing a lot more of ever.

It's unnerving when you're good at something to get somebody else's.

It is. It is. And at first I was like, oh, my gosh. I was like, I'm really about to do this. Like, this is a big project. I was like, I don't even really fully understand this yet. But I was like, you know what? Aaron's right. Let me just pass it off. Tell. Tell them all about it. And she came back to me, I think, a week later and was like, okay, this is all what I found. I was like, that was amazing. And work that I didn't have to do that gave me time to do other things.

I think we sometimes take so much pride in what we do and what we do well that we fool ourselves into thinking nobody else could do it. But there's nothing that any of us do. Not that what you do isn't exceptional, but there's nothing that any of us do that somebody else couldn't do. In fact, there's nothing any of us do that somebody else isn't doing. There's 10 people in the world that are the only person who's doing that.

Right, right, exactly.

So there's. There's always somebody else who can do it. And in our. In our space, we're not. We're not doing it. You know, we're not splitting atoms here or anything.

Right.

So it's not simple work. It's hard. There's a lot of nuances here and there, but, you know, there's. We have people around us who can pick up the tasks and figure them out.

Right, right.

About perspective. It's about feedback and all those kind of things. I always operate with that 70% rule. I think that's what I told you. If I recall, if it gets done, 70% as well. That's a good start. Roll with it.

Yeah.

You know what I mean? Next thing you know, that person will be doing it 150 times as well as you. Like, I think. I think that's where you're going with marketing and ads and all that stuff. Like, maybe when we first started talking about it six months ago, we were peers. I don't think we're going to be for very long. You're the expert. You know what I mean?

So anyway, yeah, it's. And I'm the type of person where I. I'm a perfectionist through and through. And it is something that I didn't really see come full circle until I was working on IPM's website and I spent three months just designing it and like figuring out the colors and the text. I went in and I changed like the colors and it would just be like two like hex code numbers off or something. Like, it was ridiculous how nitty gritty I was getting with it. And I finally realized I was like, you know what? We just need to get this website done. We just need to get it out there. At this point, it is good enough to be seen by the public. I can work on it in the back end while it is released. And so I think for me, that was kind of the starting point of realizing that. And then when Lauren came on, another marketing team member, I was very hesitant to pass things off. I had like a whole list of things I was going to pass off. And then when she got here, I probably cross off half of those things. I was like, no, I can still do those. I can still do this. Now that she has been here a lot longer and I have gotten a lot more comfortable with it, she has taken on all those. And there have been days, even this past week where I was like, hey, Lauren, be prepared next week to take on some more things. And Coco, you too, because I just, I don't have time. I need help with these or, you know, you guys are a little more well versed in these areas. Just pass them off. And it has helped a lot. I. It was, I was nerve wracking for me at first, very nerve wracking. But it was just. It paid off.

Yeah.

Because now I have more time to focus on other things. They are learning and growing and it's more eyes on creativity, which is something that I've also grown to appreciate is it's not having multiple eyes and getting multiple opinions on one thing can help.

That's a great mitigation tactic too. Getting input and perspective. It can be disruptive, obviously. So you only want to do it so much or with certain, certain audience or engagement or whatever. But more eyes, more opinions, more perspective is a quick and dirty way to kind of validate. It's just proofreading times.

Yeah.

Or.

Yeah, right.

Yeah. As you were, as you were talking about your team and how you lead them, I was Thinking about risk mitigation and like professional sports and how those leaders work, those, you know, head coaches work. I was like, I'm a little league coach. There's two kinds of coaches that I see. There's the coach who during the game is yelling to the kids exactly where to kick to who, and then there's the coach who just quietly give somebody a thumbs up when he catches eye contact and lets them play their game. Because all those yelling and prodding, all that stuff has been done in practice. Right. So you're essentially, you're allowing them to fail and then whatever works well, you're going to congratulate, honor, point out whatever doesn't work well, you practice that. Right?

Yeah.

So there's a, there's a calm to it. There's a feedback. It's more about observation and response as opposed to managing, guiding. And so what you're talking about is going from a. Do this task to accomplish this goal. And I think that's a, that's a good evolution in a leader's experience. And you get more mental engagement from people when they're. They're trying to accomplish the goal. Right. As opposed to executing a task for you. So that's kind of what you're describing. That team that gets coached in practice versus that team that gets coached in the game. Kick that ball that way.

Yeah. I think that this doesn't really apply to risk management. It can a little bit. But something that I have noticed since I have become a team leader, supervisor, what have you is critiquing versus critiquing with reasoning and explanation and the why.

Right.

Yeah. And that has helped so much. Coco, when she first started, you know, we were working through things, and one of the things that she really just expressed me that she appreciated was that I explained why.

Yeah.

She was like, you know, I was doing these things, but I really wasn't knowing why. I was just doing it because I was told. But you're explaining why, and now it makes sense. Now I understand.

Yeah. What you'll find is people will solve problems. Problems.

Yeah.

Exact of just doing tasks and running into a problem and not even recognizing it. They'll solve problems as they're executing. That's good. And, you know, the application to risk is that it's. You don't know what somebody's judgment's going to be in a given moment. So you're essentially saying, like, I trust you to run the business. And, and in my experience, that has been a, a great payoff. That's been a good Risk return. I've had people that didn't respond well to a lot of latitude and a very loose control of exactly how they operate and that kind of thing. Sometimes you afford somebody a lot of slack and they just hang themselves with it. That hasn't been my experience most of the time. The other 90% of the time, you give people more room and more clarity about the purpose, the objective, the why, and they actually execute better than if you're in there, if you're in their. Their, you know, day to day details. Right. So, yeah, it feels riskier, but in reality, my observations that it's actually less risk to trust people and give them clarity about what you're trying to accomplish. We're going to go through that exercise today because we're kind of in this yearly planning.

Yeah.

Cycle or whatever. And I'm pulling lieutenants in. Right. It doesn't have to just be the people who run the thing, those who kind of like key contributors or whatever, a handful of others or whatever. Like give us more perspective, more, you know, more ideas, whatever else. What are we doing wrong?

Yeah.

To walk into that room presuming that as a CEO I know all the answers is just exceedingly arrogant. And it would feel like less risky if I'm making all the calls, but in reality it's not. It's more risky not to have 20 minds.

Yeah.

Problem. Right. So anyway, I think what you're getting at in the risk mitigation and management is that trust feels risky, but it's actually not. You're actually reducing risk.

Yeah.

By letting people engage with their full mind in their work.

Yeah. So I'm glad you brought up the goals. I mean, even as simple as creating goals for a year or even a quarter or a month, you're taking a risk because you don't know if you can hit that. That's why it's a goal. I know when I first started here, almost two years ago, it's crazy to say almost two years ago, when I first started writing goals, I used all my goals. They were like, I probably had like 30 things listed out for each company.

Caitlin. It was a to do list is what it was.

And then when I revisited them and created a new structure, one, I. I was worried going into the quarter meeting for Q4, I was like, I have like four things on here. They're gonna be like, okay. And then what?

Yeah.

So again, that's me being a perfectionist. But I was worried about it. And it ended up paying off because we did hit some quite a Few of our bigger goals for the quarter because I was able to focus on those. And it was a much clearer process. And even more so this quarter, we even shortened it a little more.

It's crazy what it does to somebody when you get out of their weeds and bring them up into your strategy and just let them operate. Right. And so you've. You're kind of a case. Case study for that.

Yeah.

You just pull somebody into what you're trying to accomplish. It's usually not a big secret. You just, for whatever reason, don't talk about it clearly. Right. It's not like we were hiding anything.

Right.

Had some strategic, you know, firewall to keep, you know, certain people from seeing stuff. It was just this laundry list that you brought to the table and said, hey, I'm going to do all these things. I'm like, wow, she gets a lot done. Why? Why? Why? Yeah, I think my first challenge was to Danny when we were going through that experience. It's like, so what's. What's her. Why? Like what. What's her objective? What's the objective of all that stuff? Well, and then she's like, ah, good question. And then so we started answering that question. We're still answering that question. It should be an ongoing thing that we revisit. But, yeah, my observation, you responded to that really well. And then the tactics you choose and the things you focus on or whatever are just smarter because you're in those details daily. And so if you're thinking about the big picture objective, you'll make moves that I don't know to direct you to make. Right.

Yeah.

Like in that field, from over here on the sideline, if I'm yelling at you and you're on the left wing striker position, and I'm saying, take the shot. And I can't tell how far that person behind you is or what they're murmuring to their, you know, whatever, like, you know better than me whether you should take the shot.

Yes.

Is what I'm getting at. Right.

Yeah, absolutely.

I think a lot of leaders need that. You know, mitigating risk as a leader in management involves introducing yourself to more feeling of risk. You're actually reducing risk by. By giving more trust, affording more trust and clarity.

Yeah. I was going to say. And that's. And that's trust that you're putting in someone. And trust can be risky.

Yeah. Because, I mean, sometimes it doesn't pay.

Yeah.

If 90% of the time it does, it's a good investment.

Yeah, absolutely. I agree.

For the first time I thought about real estate talking through this, because I was thinking about that kind of like 90%. If you win 90 of the time, you're winning.

Right.

I was looking through some of the deals we went through over the last quarter. We had one that was really bad, and the rest were great. So we won, you know. But, you know, the same can be true for your. In your portfolio if you've got a dozen rentals and one of them performs really bad. Mark and I spoke about this in a previous podcast. And you know, your first one, you have to be more careful with.

Yeah.

Because you can't take a bath on that one. Right. Like, as you go, you can afford to be a little bit more. You can, you know, you can move. Pace, you know, is your friend. Volume is your friend. And if you have one that goes bad, you're okay with a reason or whatever. You don't just throw it away, but you have one that doesn't do as well as the others because you're moving fast or whatever. That's okay. But don't. You don't want to let it be your first one.

Yeah. Well. And not only that, but you are. You're taking a risk by letting someone that you really don't know all that well live in your home in hopes that they're going to treat your property like a home.

Yeah.

And take care of it. I know. In a previous podcast with our rehab coordinator, Rehab Nightmares, we were talking about some past tenants for my parents who just didn't. It didn't go well. Not to say that's everyone, but here and there, you know, it could happen.

Yeah.

And that's a risk. Whenever they move out, you know, there was one. It ended up being a complete gut job. And when they moved in, everything in, it was brand new. Like all new flooring, paint, countertops, counters, everything. And they were there for a year and a half and they completely destroyed it. But now that was. Oh, that was years ago. Maybe 2014 or 15.

Okay.

And we have that house rented now.

It's done well since.

Yeah, it's doing well.

And that's a really good point. So, like, you know what just occurred to me? You know how I'm talking about one. If you've got one property out of 100 that goes bad, big deal. You got one door out of 100 that goes bad. No big deal. You know?

Right.

You got one. One out of ten that goes bad. That's bad. It hurts, but it's not going to ruin your performance of your portfolio. If you have one out of one that goes bad, you're hurting. But what occurred to me just now is that when you make a real estate investment, let's presume you're making that investment for a 12 year period. Right. You're buying, rehabbing and renting a property that you intend to rent for 12 years and you have one tenant who, who tears apart the property and doesn't pay, has to be evicted in one year and then you have 11 years of great cash flow.

Yeah.

When you think about it as a long term investment, instead of getting paranoid, a lot of times I think people make the same move, the same mistake that they make in the stock market or whatever. Oh, it's down, it's bad, let's get out.

Yeah.

Well, no, you had a really poor performing tenant. It shouldn't happen a lot. It should be very rare. But it does happen. And when it happens, when you bail on a great asset, then you're, you're, you're starting from scratch and you're kind of, you're bailing at the worst time because it's going to have to be rehabbed to sell it anyway. Right.

Right. Yeah.

Why would you not continue to execute the plan knowing that occasionally you're going to have bad experience?

Yeah.

Hopefully it's 1 out of 100. Closer to 1 out of 100 than 1 out of 10. But you know, when you, when your performance in a given asset is one out of a dozen, whether it's dozen properties or a dozen years, you're, you're looking at it the right way.

Yeah. I mean that even, even if it is a year, year and a half, what have you, that is a short measurement that you can take and you can learn from and you'll be like, okay, maybe I need to have a better process for screening applicants. Maybe I need to buckle down on it more. Maybe I should do maybe that bi weekly walkthrough.

Right.

Or by annually. Yes. Thank you.

Bi weekly would be a little imposing.

Yeah, just a little. Just a little.

Your landlord would become your best friend. Right.

So, but in learning those things and then, you know, after a period of time, like if, say you did do that and be like, okay, you know, this tenant has proven to show nothing wrong in the past four walkthroughs. We'll change it to a year.

Yeah.

And go from there.

Exactly. Yeah. And there's, there's other ways, you know, doing our, we recently implemented in our property management operating company, we've implemented our H VAC service. So a couple Times a year we're doing H Vac servicing which you know, has us putting eyes on the property, which is a good habit in general. And also it's kind of protecting one of the assets within the asset and giving us kind of inspection opportunity. So that's, I mean those are, those are good tactics I think. Whatever you can do. You know, having a property manager that you trust that's engaged, that cares, that actually cares about you as an investor that thinks like an investor, not just a job, but they're investors as well.

That's right.

That's also a nice asset to have. So I think about Chris obviously being a real estate investor himself and running our property management division. A partner like that who's engaged with you and the things that matter because they matter to them as well is also a good mitigation tactic.

Yeah, that's what I was just about to say. Hiring a PM company is again a risk. But then having the property manager himself also be an investor and understand and be able to level with you on the understanding of value with it.

Yep.

Is huge. And that only puts in further trust which can be proven to work out.

Yeah, I was thinking about. That's exactly right. The property manager you can trust is a big deal if you're a real estate investor and if you're look close and you want to be a handyman and vet tenants and all that stuff, you want to do your own property management. I've done that before. That can be cool to a certain extent. At some point it gets exhausting and obnoxious and it's nice to have a partner who you can trust to do with it. And establishing that is really important. That another thing that occurred to me with regard to risk mitigation is don't spend your last dollar mark and I talked about that too. Like have cash handy because you don't know if it's going to be the first year or the hundredth year where that asset performs badly. But if you're holding it for decades at some point in there, you're very unlikely to have tenant in that property for 30 years. Right. It's possible. I guess that happens occasionally too. Yeah, but it's not the most common thing. So at some point you could have a bad experience and you know, if it happens to be in those early years or whatever, just don't be without cash because you need to quickly get that thing cash flowing again.

Right.

So I've seen people get too over committed or they buy too many doors or too many assets or whatever. And they don't protect their cash position enough. And, and then you're not able to get that thing cash flowing again when it turns, when somebody moves out or whatever else.

Well, even if you're into like fix and flipping, if, you know, yeah.

You get 90% into a rehab and then you can't finish it.

Yeah. So don't have a little experience in this. Don't, you know, buy a property and it's your first rehab or even your second, maybe even third, and go in and try to put all the bells and whistles in. You don't know what problems beyond the surface that you can run into. So in all backs, taking risk, buying a house and rehabbing it, whether you are going to turn it into turnkey or you're going to buy and keep it yourself, or you're just going to fix and flip, there is a risk when rehabbing any property.

I think our Matt, Matthew Packer, our acquisitions guy and I talked a lot about that. Rehab nightmares and risk mitigation in general. That, you know, having the end in mind is a, is a winning tactic for mitigating risk when it comes to real estate investment. If you're thinking in advance about how you intend to, you know, are, at what price are you selling that property if you're going to fix and flip.

Right.

You know, if you're selling it to a retail homeowner or whatever, at what price? Think about that. If you're not the agent, talk with your selling agent or whoever, whoever's going to sell that property for you, whoever the expert is on assessing its value. You should be engaged in that before you even make the acquisition.

Right.

And you know, the same is true for, you know, that sales perspective or that property management perspective should be engaged at the early end of the scope. Whether it's your own personal experience or an outside influence, you should be bringing that, that end strategy into the, into the beginning decisions of that property. Right. Including having enough budget, having enough time, etc.

Yeah, absolutely. And a lot of times those are going to end up paying off and you will learn from it and be able to grow from them.

Yeah, back to that same thing we were just saying like the feedback cycles.

Yeah.

Learning and growing.

I mean, you might have a few setbacks or headaches, if you will, but that's all. If you, it's all on how you look at it. You can let that headache take over and you can just be done with it and you can sell the property or be done with it, or you can learn from it. And grow. And like I've said before earlier, you can be successful from it and you can then even teach others on how to do it or with your best judgment, you know, based on your experience.

That was kind of my experience, actually. I think I got my, my, my self written master's degree. Not a real one, but I, I got my expertise in real estate investing as a, as a solo operation. Just kind of throwing myself at it and failing less each time.

Right.

Because I learned a little something from each. I did a lot of fix and flips and a few rental investments and I learned a little something each time about what not to do. Right.

Yeah.

And so I think that's the key too. You should be learning a little bit of something from each transaction that you do. What went well? What didn't go well? Another kind of favorite tap tactic that I've referenced from my life in the tech world is that, that kind of keep stop start or whatever. Just the, the we call it a, you know, kind of a stop and review. Like what went well, what didn't go well, what are we going to repeat? What are we not going to repeat? That whole concept. Right?

Yeah.

Intentionally stopping, looking back, assessing a good mitigation, risk mitigation that you kind of referenced multiple times in this conversation is just constant learning.

Yeah.

And one of the best mechanisms for constant learning is, you know, committing yourself in advance to a period at which you stop and reflect, you know, a retrospective of sorts. Right. And you look back and you say, what went well? What didn't go well? What am I going to repeat? What am I not going to repeat? What didn't I think of, I'm going to now think of and do in the future.

Yeah. Or what should I have done in the middle of the process?

I always, I like the keep stop start just because it flows easy. But what am I going to keep doing? What am I going to stop doing? What am I going to start doing? Right.

Yeah, I like that a lot. I've been doing that a lot professionally and personally actually.

Yeah. You're at home fighting with your spouse, significant other, you're like, huh, that was really toxic and unproductive. What am I going to keep doing? Stop doing. Stop doing. Anyway. Yeah, cool.

Good stuff. That was good.

Good stuff. I feel like there's, yeah, there's a lot to be said about all those subjects, but we've said quite a bit, haven't we?

Yeah. I think originally this was supposed to be a vlog, but we were just flowing.

I think we got it all in there.

I think so, too. Well, this is also podcast 41.

Yeah.

For real time.

Listen to podcast 41.

It works.

Yeah.

Well, I don't have anything else to say. There's a lot that can go into risks and taking risk and learning from it.

Yeah.

So I could go on and on with this.

I think we hit the high points. The summary I'm hearing is short feedback cycles, constant learning and improvement. Trust is important.

Yep.

And then what was the other one?

Growing. That's what I would add. Growing from it.

I think we hit the high ones.

Yeah.

Okay, cool. Good conversation.

Yeah. All right. Well, that is all that we have for you guys. I know I talked a little bit about teaching others, so fun fact. Next week, I believe we are actually going to be talking about real estate investing for future generations.

Yeah.

Okay. So it kind of ties in together. Well, if you guys have any questions, please reach out to us@podcastreedomrealestategroup.com or send a comment below. We'll reach out to it and we will respond to it. As always, invest smart and live happy. Thanks for your fans. Nothing on this show should be considered.

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