You never keep the employees or the prior management when you acquire a building or a company.

Hello and welcome to Multifamily Strategy. I'm in the lower office today, so if you're like, where's the cool studio? Uh, when we go live, sometimes we're literally going live in the middle of the day. I am building my company to a whole new level in the property management company. So live here on Instagram, live here on YouTube. So if you're like, why is Christian sometimes not looking at the camera? Uh, that's why. Today I'm talking about one of my favorite things of all time though, uh, which is the actual employment model of how you scale. There is a point where if you are buying apartments, if you're in companies I have bought 3, technically 4 companies. I've done over 32 real estate transactions for a total of 650 units. Not because I'm awesome, I just wanted to give you the context of who you're actually hearing from. Uh, Sam in the chat, hello to you. Um, also, um, you guys are welcome to comment. This is actually live, so if you guys on YouTube or on Instagram, I have both you guys, uh, here and here. I have a little bit of weird setup, but my studio is getting a couple of upgrades, so you guys are down here in the lower office. me. Talking about one of my favorite things of all times. There is something that I have discovered in companies, and this comes up again and again and again for my mentees. So I'm going to just pass this to you one-to-one. Uh, Robinhood Village Resort, it started with 9 employees when I acquired that company. I bought a PM company that came with 3 employees. I have had countless buildings that come with in-office staff, sometimes 2, a few times had 3 staff working in a building. Um, every single time we've done this, we've either fired all of them, or we've tried to keep a few of them because they have a great resume, they seem to know the property. The logic here, or in the business case, the property management company, or the— it's nice to retain people who know things, right? The, the thought process here is, if I retain this employee, or if I retain this person, their knowledge will help us move forward with less mistakes. And I've made this mistake many times, uh, so this is not the first time that I've had these, uh, these thoughts. We have retained exactly over the years, and this is about 20, 25 people, we've retained zero of them. They have all been a mistake every single time we have tried. And sorry if you're one of these people and you see this live, you know what I'm talking about. It's the wrong fit for you and it's the wrong fit for us every single time. Why is that? When you take over a business or a property, you're usually implementing a new management style because you have an idea of why the company is worth more to you than it was to the prior owner or the property, why it's worth more to you than it was from the person you bought it from. That's why you bought the darn property or the project. It comes with these employees like the Robinhood does. We have a business plan that is wildly different than what they've been doing. You cannot keep people who are used to doing the way that wasn't working and expect it to work out and retain those people. And here's what I found over the years. Um, so I picked up a building— won't name any buildings or specific names— but I picked up a building. We found out that the employee was actually sleeping on the couch. They had hid a couch the windows so tenants couldn't see them. So they moved into a little side office. They were sleeping through a majority of their workday on the couch. We came in— we— I do surprise audits, so I come in and say, hey guys, what's up? And I found out that they literally just made a little nest for themselves in the office and were doing nothing. Uh, surprise, surprise, we find out that a lot of the lease renewals were never signed by tenants when they sold us the building. That employee had forged it because— get this, and this is directly applicable— The management plan that she was on rewarded her specifically for getting the higher revenue leases signed. They weren't auditing this, so a lazy employer will come in, they're like, hey, look it, I leased up the building, I got the occupants. Yep, uh, we noticed there were some delinquencies in the building, and what we found out is the delinquencies were caused because tenants had no idea that they had signed for their rental increase. That is one of many examples. I've also had a resort where tenants were arguing. And by tenants, I mean we had live-on-site staff. Staff literally argued over, well, we were supposed to take off this old pink wallpaper on this building. There was an argument between whether the right thing to do is to mud over it and then paint, or if you can just paint directly over the wallpaper. Has anyone ever removed wallpaper or seen it done? You don't mud over it. You certainly don't paint over it. That wouldn't make any sense. You need to take off the wallpaper, then you patch, then you mud, then you paint. That is how wallpaper is removed. Problems like this are why the Robin Hood took so much more in repair. You cannot keep those people in your company. So the lesson that I learned— I've shared this on the channels a few times, but the lesson that I learned is that you cannot build an A-team with B and C players. And if you're picking up someone else's players on a different system, the odds of them working for you are almost zero. I'm sure it's been done successfully by someone somewhere, but I have done this again and again and again. I've acquired PM companies. I've acquired all sorts of, all sorts of properties, management structures, resorts, RV parks. We've retained ownership, or sorry, property management or employees every single time, 100% fire. We will never do it again. I'm sorry if we pick up the building and you're working there. We are in fact going to do our own staffing model. There's just something about it. It's same with inheriting rough— inheriting rough tenants. You find that the longer you own a property, the better the property seems to run. If you're good at property management, you end up getting better tenants. You're more selective on who's in your building. You get a nicer community, and ultimately you make more money, which is important, but also for your employees. like they also would like to make more money. They want to work for a successful company. Uh, you have a responsibility to make sure that everyone's in a position to succeed. You are stacking the deck against that employee if you hire someone and they're not in a position to succeed. They can't grow in their career, they're not going to be appreciated. Eventually you're going to have to let them go. So I found the easiest way to do that on acquisition— just go ahead and eliminate them really early. It's I would say that is the simplest way to run a business. And I wish I learned that lesson earlier. That's cost us a lot of money to learn. So I always try to share that as explicitly as possible. It makes life— exactly. Victor just posted this in the chat on YouTube. But yeah, it makes life easier for everyone when it's just a clean break. Hey, we purchased the company. This is the reason you're being let go. It's not because of your performance. It's much more painful to say, hey, we've audited this work. Your work's unacceptable. Sorry, you're fired for being— a terrible employee, which I've had to do multiple times. You don't pitch it like that, but they get it. They didn't do a good job. You let them go. There's no mystery there and it's never fun. I never got my people on the, on my Instagram lives. There's always someone who's requested to join me in my video. No, this is, this is Christian's live, but always happy to share. By the way, right after this, I'll be up in the main studio, which is getting some upgrades right now. Um, I will be running a new version of a webinar that I did several times last year. Uh, you can join it by going to multifamilystrategy.com/workshop if you would like to see a 90-minute presentation on how I bought all these businesses, all these properties, how you can do it with little to no money. I'll be running that and completely free. You register for it. Spots are limited, but there's still a few spots open. So if you want to do that, uh, check that out. But that was the main thing for me. And so the real question is like, when you're doing these companies, do you have an A-team or do you need to make some strategic fires? We are so fast. I had a conversation with a person in my company today, one of my leadership. I don't wanna, I don't wanna, don't wanna cause other problems in my company by oversharing on YouTube. I had, for one of my companies, I had a conversation with one of my leaders where we made a decision that someone in one of the companies is the wrong fit. Our action steps to have them in a position where they can succeed somewhere else were immediate. I've already made the firing calls today. It was done really amicably. They took it really well and turns out they were already shopping for other jobs because they I didn't know it was coming. That's a pretty common outcome. You'll get all sorts of outcomes with this, but your lag between— I've decided the wrong person is on the bus. I built a certain team, and either the person was the right person, they're no longer the right person, or we just straight up have the wrong person on the bus. You need to open up that seat, get that position done. Uh, this came up in mentorship. I have a mentee, about 28 units in San Diego. He has a partner who owns the PM company. The PM company has some serious problems with their staffing. Here's the problem that they're struggling with and what I suggest the fix would be. So in California, specifically in San Diego, you must have on-site staff. The building is 16 units or greater. Now, if you're in PM, you know that this is stupid. You really don't start needing on-site staff, like full-time on-site, until you hit about 50-ish units. You can do it with less, but It's a stupid California requirement that really doesn't make any sense. They had an employee who they retained and brought into the PM company who works for the partner's preferred PM company. They decided that they need a leasing agent there. She's never done leasing. She had one week of training support and they're like, huh, our leasing's not going very well. There's two things that you really have to do for all your employees. First, you need to ask, is this a me problem? Do we have an operational problem where I have not equipped someone where they could succeed. And I would argue based on the context of this, I think that they have a case of that. You also have someone who never interviewed for that specific role who you're forcing into a position of leasing who has no experience. You would never have independently hired this individual for that role. So no fault to the individual, it doesn't mean they're terrible. I think they were really good at the other pieces of their job, but you now have the wrong person in the wrong role in the wrong company. You've retained them. Mm-hmm. For the wrong reasons. What I would do in that situation, 'cause they're like, well, if we remove them now, we have to find someone else. And what if they're terrible? And like, we right now we have a passable version. So the question that you have to ask yourself early when you're doing companies, rentals, you name it, am I wanting to be an A company? Do I want A players? Like really at the end of the day, is passable good enough? And I think for most of us, hopefully all of us, The answer is no. I don't want to build a passable company. I'm working on how we scale property management from where it's at today to a $25 billion company. We're, by the way, we're ahead of pace from where I thought we're going to be. But when I'm scaling this company with that goal in mind, if we realize the wrong person is on the bus, we kindly have them get off the bus at the next stop. I'm not going to throw them overboard. But it's an immediate decision. Hey, this is gonna come to an end. We get the timeline. You need to move really quickly on this. So my advice to them is, hey, it is time to let the employee go, and it is okay. That's all it has to be. It is a-okay just to say, hey, wrong person. Sorry, we've made some changes. It's us, not you. But this role is not gonna be something you're successful in. When you know that is the case, You need to move on if you feel that you can't be objective about this. And I tend to be very hyperlogical. So being overly emotional is not usually something that Christian struggles with, but the different people— I work with a lot of people who are more emotional. If you are in this, if that just happens to be where you're like, hey, I am having trouble being objective about this. I'm really worried about them, their situation, their family. And these are all important things. You want to be a great employer. Get a second opinion. For the firing that I made today, it was someone who I objectively, I really like them. This is one of the few times for me where I'm like, well, I mean, I think we can make this work. Maybe it is just a management thing. Could we have given them more resources for them to be more successful? I went through all the iterations and I had to have someone on my team. I was like, I don't know if I'm selling myself on them or if it's really, it really is just the wrong fit. They need to go. I don't know what it is. And so I talked to another teammate and they, and they listened to me for a few minutes and they're like, I think it's pretty clear this is the wrong person in our company right now. And I was like, ah, you're right. Sometimes you just need a second opinion. But those decisions in your company, it is the difference. The first time I built a PM company, I kept multiple people, partners and employees longer than I should have. And the company capped out at a valuation of about $250,000. In fact, when I went to sell the company, I discounted it back down to that price and that's what it sold for. When I am building my current property management company, which is a 7-figure company— we have the appraisal, um, that I get my companies— my, like, large business companies, they get appraised every year. So we just crossed the million-dollar threshold. We just passed our 2-year anniversary at Brazos Asset Management. So go Texas! Um, while we're scaling these companies, my goal for that company is an 8-figure company. The decisions that got me from a quarter-million-dollar company that took me 4 years to build to a million-dollar company, the exact same business that took me 2 years to build. The, the prime difference was the ability to fill the roles quickly, to understand what the company needed, and to be okay with pivoting to make sure that we had the right people on the bus. What does this mean for you as an operator? I make way more hiring decisions and way more firing decisions than I want. We are very fast to hire because you always get the best version of them on an interview. So it's not all that helpful When you get a great interview, they may be great, they may just be good at interviewing. You don't know yet. So we don't spend too much time. We do a lot of interviews, but ultimately we're going to go with our gut. We're going to make a very quick decision. I think this person can do it. I think we have the right person. Let's go ahead and move forward. Let's insert them in the company. If we find, hey, I think it's the wrong person, or there's no possible way that they're going to be an A player on the team, we make a quick decision to, hey, we need to keep re-rolling until we get the Now, if you're just joining this channel, I usually talk about creative finance and real estate and all that fun stuff that you guys come here for on the live. So I appreciate you a bunch. If you're like, man, I'm getting the employment version, I hope you find this really valuable. This is one of the things that has actually made me a lot of money and it is really the thing. Robinhood Villagers, from when I removed the wrong employees and one of the wrong partners on the deal, when I staffed the Robinhood the way that it needed to be staffed, when I structured the team correctly, we're up 43% from where we were at the year before. My PM company in Texas is worth 4 times what it was in Washington. Our only practical changes between the two was the staffing model. Everything else is basically— it's a clone. It's a one-to-one. The Robinhood's run much the way it used to be run, uh, but with people who really truly care about the Robinhood. The maintenance lives on site. They love the Robinhood. They love the upgrades they get to do. They treat it like they own it. Our director at the Robin Hood treats it like she owns it. We, I, my biggest cost at the Robin Hood is we kept the wrong director on site for 2 years because we didn't know how to do the maintenance things without her significant other who lived with her and he was the head of maintenance and she was the, it was a disaster. There was no chance that they would ever in a billion years be an A-player for that team. Can they excel somewhere else? Absolutely. But they were the wrong person. It held us back and it held us back for hundreds of thousands of dollars a year, which is millions of dollars of value. It is orders of magnitude different. The amount of cash that we make in the company, the amount that I have to pay for my family and the amount that I have to pay my employees. Every employee who works for the Robin Hood Resort right now makes more than they did under the prior management. There's more profitability, cabins get turned faster, we pay per unit turn there. So people have teams where they have more resources, people care more, they work harder and faster at their job, and as a result, they moved from an average of $18.50 an hour to an average of about $22.50 an hour, which is awesome in Union, Washington, by the way. That's a really good pay for a cabin cleaner in a remote market. It's actually really good. Yeah. I like being able to pay— and my director of course makes a lot more than that in their own salary and the different roles. I don't want you guys to hear that I have leadership on $22 an hour in Washington State. That's not true. Um, but everyone makes more. I make more, my family makes more, my employees make more, my directors make more. Everyone is happier when you put together the right team. So be faster to fire. It— almost every entrepreneur needs to learn this. Um, I— you've probably heard it on other channels before. That's why I share it here. Moving on to some other fun things. Robinhood Village Resort. I'm hosting an event. You guys can check that out at multifamilystrategy.com/robinhood. But I'm hosting an event. I'm gonna be running a bunch of marketing. I'm gonna host a little mini event tomorrow. So watch my Instagram. I'll post a link to this. But I'm hosting an event at the Robinhood going 3 days. At the Seller Finance Resort, I bought that thing $0 out of pocket, $4.5 million seller financed, 4% interest. I'm going to show you how to buy real estate without money over a 2-day, uh, 15-lesson workshop. I have some of the best guest speakers. Cody Davis, my original business partner, is going to be there talking about creative finance and deal structure. Cody just closed on a $7.5 million deal, $0 down, got paid $32,000 to close it. Um, and bought, uh, it is an amazing deal. 52 brand new built units, uh, got paid to buy them. Net cash flow at stabilization will be about $10,000 a month. Today owns them at a little better than breakeven, but for a $0 or less than $0 investment, um, I'll get paid to have cash flow day one with upside. We're going to show you how we're doing these deals. This market right now is insane for these. I've seen opportunities to do the same thing in Texas. I've seen the same thing in Washington State. Um, some of entities are doing deals all over the country that actually look pretty similar to this. So no to low money down. I'll show you how to structure deals. We'll go through how to find them, analyze them, uh, put together creative and conventional finance, line up partners if you have to raise capital. Cody didn't have to raise capital for this deal. He bought it $0 or less than $0 out of pocket. Uh, but we're going to show you how to buy the deals for free for the ones that require down payment, how to put together and structure and present that I'm even going to have brokers who I've done multiple transactions to come out and talk about broker negotiations. If you've ever tried to learn this, it is 2 days. I even have concerts, food, the whole 9 yards. Experience a resort at a seller-financed property and learn from people who've actually done the thing you want to do over multiple days. I'm going to cram the entire thing into that time, so I would love to have you guys there. With that, uh, that's, that's most of what we have going on, uh, for right now. I'm going under contract under 2, uh, for 2 big deals. I'll be entering Lubbock and adding another 84 units to Abilene. We went on a contract for Abilene today, uh, so keep— I'll post you guys, uh, keep you guys posted on the whole story for how that unravels because there's always learning lessons and I want you guys all to learn alongside me. So appreciate you a ton. Uh, Sam mentioned in the chat here on Instagram, but I love this: owner will carry, uh, the rest of the second position. He found a lender that will do 75% down. Check with that lender for your creative finance, check with the lender on the 75% down that they will let you do a seller second for the remainder. Some of them don't let you go to 100% LTV. I have a few lenders that will do 70 to 75% LTV, and they'll allow us to go to what's called a 90% blended loan to value. So I can have a seller second, but I can't go 100%. Some lenders will let you do that. I have private capital where I've gone to 130%, uh, loan to purchase price, but they were still constrained to 90% loan to value, so we had to pair it with appraisal. So, uh, look, look closely at the rules for that first position lender. It's hard but not impossible to let them have you do 100% loan to value. Uh, just double-check that. Love the terms though, uh, 5 years, 2%. And Sam says he will do it. That's awesome. That's awesome. And they are out there, so I absolutely believe that. Um, I do a common model called 50/40/10 that you can also copy. Seller— or the bank does 50%, they love that position, uh, very safe. They're in first position. Seller does 40, you or you and equity partners do the last 10. Uh, that is a perfect structure though for what Sam posted here of, uh, deal debt done, where bank first, seller second, and onwards. Cody asked how many— uh, by the way, welcome Cody— how many seller finance deals does it take to raise eyebrows like you do? That takes a long time of practice in the mirror. First, you have to genetically have the eyebrows worthy of the logo, then you have to be able to move them independently, which I can do. But being expressive is very important. And also, Sam, congratulations on that. Cody, who I just mentioned, just closed on a big seller finance transaction, also coming in at these high, like, no to low down leverage points, or in some cases getting paid to buy the real estate. Cody and I have done a real estate transaction together in— most like, it ended up being a harder project than I thought it was, but on close, uh, we bought it for $1.6 million. Uh, the loan was $1.8 million, so came in over 100% LTV. We got all of our costs, our closing costs, and some of our starting capital for renovations on a building. Uh, so there are some crazy deals out there. The one thing that I will say, and I covered it on the channel, you guys can watch the video with Michael Zuber on YouTube, Um, Brandon Turner is not the only one who's lost real estate, and I, I tried not to rag on him. I tried to be very polite, but also address the fact that they bought a really, truly terrible deal. Um, there are other people who have bought terrible deals assuming that we're going to stay at a ridiculously low cap rate forever. I have never seen as many deals as I've seen now. So, uh, right now, real time, I'm under contract for an 84-unit. I'm going under contract for a 120-unit. One is creative finance, one is conventional finance. These opportunities are open. I passed up a series of very good deals to go under contract for these. Why would I pass up really good deals? I have an ethical issue with raising capital for two fantastic, amazing deals and then having other investors be like, hey, you should invest in this deal. I have a higher return available right over here, but this is still a good deal and you should do it. Yeah. I have an ethical issue with that. So there are— I'm aware of very good deals in the DFW and greater, you know, 2.5-hour radius that are truly very good deals that I would usually do if the other deals I was doing right now weren't so ridiculously stupidly good. So, uh, my encouragement to you is that there are more great deals out there than I'm even willing to do at the same time. Uh, you can find these, and I will say that a few of them are currently listed. You can find them on CREXi and negotiate them. Jericho joined the chat here on Instagram. Hey guys, Jeremy, Indiana guy working on that 20-unit deal. I— there have been— I've seen multifamily strategy-wide a lot of deals happening in Indiana right now. A few people— someone just joined, uh, from Evansville, Indiana, um, and our good friend of the channel Mike Newton, you know, he's been buying Gary and Indiana forever. High cash flow markets, lots of opportunity. There we go. Well, I think we covered what I had to cover. I've answered. If you guys have any other questions in the chat, I'll certainly answer them. But I appreciate everyone being here again. If you guys want to check out tonight's webinar, it runs 90 minutes. I, I retooled this. I've run over the past 5 years. I've done like 100 versions of this. I tweak it every time. I I've done a couple things here that I've never shared before. So if you've ever attended a past webinar, you're more than invited to this. It's multifamilystrategy.com/workshop, uh, so you can check that out. Um, but I'm going to be going through the whole thing, uh, how you're going to structure your deals, uh, what an actual deal looks like. I'll go over all the creative finance and the equity. I'll go over how you get paid to buy deals, uh, very much like Cody just did, actually. Uh, get paid to buy deals that continue to pay you for the rest of your life. But absolutely, absolutely highly encourage you to attend that if you don't know how to do this already. Can be some of the best time you ever spent, and it is completely free. I'm going over the whole thing. As many of you know, I have a mentorship. I'm not even going to invite you at any point there to buy a mentorship from me or do anything. I just want to share how cool creative finance is. So I'll give you the actual models. I think information should be free, and you guys can register there. That is multifamilystrategy.com/workshop. I don't want anything from you. And I just have limited spots. So like, put in your email so I know who you are and I can give you some cool free stuff after the webinar. And that's all I'm asking. So join that, check it out. And I will see you guys all on the next episode.