The Co-Founder Interview with Adam Rich, P.E.

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Owning rental real estate, whatever property type it may be, is a great business. The money, the revenue that you're getting from rental properties is being paid by people who really need that property. For whatever they're using it for. So that money tends to sort of just come your way automatically. And the, so that's the revenue side of things. And then the expense side of things, the operations of running rental properties is fairly straightforward and fairly systematizable and process-oriented. And so that's a pretty simple business compared to property management, which is highly complex. The revenue is highly complex. The expenses are highly complex. That's the big contrast.

Welcome to Season 4 of Peter Lohmann's Podcast. This podcast is a show about all things residential property management, from property operations to sales and marketing, to growing and managing your team. I'm your host, Peter Lohmann, co-founder of RL Property Management. For season 4, I have an exciting new guest each week. We go deep into conversation about problems facing professional property managers and the best ways to overcome them. Thanks for listening. Now let's go. Welcome back to Peter Lohmann's podcast. Now, I always say I have a special guest, but today we have an extra special guest. Because it is my business partner, Adam Rich. Adam, welcome to the show.

Hi, Peter. Thanks for having me.

Excited to have you on today. You are not a very public person. You are not putting content out there in the same way that I have been over the last few years. So when people think about RL Property Management and some of the other businesses that we are involved in together, they're mostly thinking about me, to be honest. But there's been a whole other half to the story that most people haven't heard from all this time. And that's why I'm excited to have you on today so that we can get another perspective on the history of RL Property Management and just some insights from you because you bring a totally different perspective and dynamic to the property management business and to thinking about business in general than I do. So Let's just start by having you introduce yourself. I'd love to have you give like a 2 to 5 minute background on yourself, sort of how you came to be where you are today and what you're up to right now.

So a little bit background on me. I grew up in a military family. We moved around mostly around the East Coast as a kid. And then after high school, which I did in New Jersey, which is where I met Peter, I went to Ohio State, did civil engineering as a degree, and focused primarily on structural engineering. And then when I was finished at Ohio State, I got a job working as an engineer at a consulting firm here in Columbus, Ohio. And about a year or so into that, that job, I, uh, Peter finished up college and he moved to Columbus and I got him a job at the same consulting firm. And I worked as a consulting engineer for about 8 years. And then that was about the time when we started RL Property Management.

And then, so we started it together. We got our real estate licenses because we didn't have those. We figured out how to operate under a brokerage with a friend of ours. And then I started, I quit my engineering job and started, and then you were helping nights and weekends in addition to your engineering job. What was that like back then for you when you knew I was working all day in my apartment with no clients and basically no business yet, and you were actually helping me out with like a stipend at the time., and then you would come in, like I said, nights and weekends. What was that like for you over those first 6 to 9 months?

Yeah, so tho— those were busy several months. I remember it was around that time that I, I had asked the consulting firm, consulting engineering firm that I was working for at the time, if I could work part-time. And so I was working. They allowed me to do that. And I was, I was working part-time at, for that consulting firm. At the same time, I was also working, doing a little bit of work for a different consulting firm part-time. And I was, I was helping with the property management business on nights and weekends. As you said, it was a busy time. I remember it was, a lot of hours and kept, kept me busy.

Yeah. And that went on for, I think, about a year. And then you stopped for at least one of those two engineering companies and basically started at RL essentially full-time. So we started, the company opened its doors in 2013. And then I think you came, you came in full-time in 2014.

Is that right? Right. I think it was December of 2014.

Okay. And now looking back on it now, should you have come on board full-time sooner or waited longer? Like what, in retrospect, how do you think about the decision that you made, the timing of it?

So when I think back generally about that time, it's really informative because there's really two things that I think about. One is I didn't have kids at the time. And so it would've been easy to quit my jobs, so to speak, earlier. And also I think back about how I should have quit my job to start a business sooner.

I, oh, like, like before 2013 even.

Correct. I think after 3 to 4 years of working for another company out of college, I should have done my own business at that point.

Whether that was property management or something else or anything, right?

Yeah. I wish I would've done it sooner.

That's really relevant and interesting. I think there's probably a lot of listeners who are thinking about starting a property management business or another type of business and are probably working at a W-2 job or may be in the situation you were, which is they're starting something on the side. But still at their full-time W-2. So can you say more about how your thinking has evolved and matured to lead you to that conclusion of only needing 2 or 3 or 4 years working at another company before going out on your own?

As I was working as a consulting engineer, it took me a few years to realize this, but what I realized about working for a big firm, whether that's engineering or something else, is that generally the folks at the top of those companies, the executives, the managers, they have an ingrained interest to protect their position at the company. And so I realized pretty quickly that it was going to— I was going to have to put in the time to be able to be handed some of those reins. From upper management. And the problem with waiting to be handed those reins is the learning is so slow. And I was wanting to learn how everything worked. I wanted to know every little detail about the business, but I was working on a very micro portion of the business. And I didn't think that that was going to change quickly. And I didn't think that it was going to change rapidly. But if you start a business, you accelerate that learning curve dramatically.

Yeah. I've heard some people talk about this as saying, if you've ever heard someone say, oh, I have 10 years of experience, and then the retort is kind of like, do you have 10 years of experience or do you have 1 year of experience 10 times? Sort of the cynical way of saying that.

Yeah. And the firms I worked for, so I worked for 2 consulting firms before ultimately quitting engineering to work on the property management company, both of them were heading me down the path of the, to become the leadership team. They both sort of put me in leadership training type programs, but it still would've taken a long time, decade or two decades to get to where I wanted to be.

Very interesting. All right, so we're obviously going to come back to the property management business quite a bit, but I want to change tack a little bit and actually rewind the clock slightly from 2013. You and I bought our first rental property together in 2008, single-family rental that we still own here in the OSU area of Columbus, Ohio. And you were the one who sort of started us down that path of real estate investing and started talking about, hey, we should get a rental property and this would be easy and it'd be a good investment for us. How, like, where did that come from? Because this isn't something that you or I grew up around at all. And we were both kind of reading some of the similar books, but I'm curious to hear from you, like, where did this idea originate?

I think it probably originated when I was a kid. As a kid, I was really into thinking about buildings and properties and real estate. During high school, I spent a lot of time in my high school's drafting and architecture class. I would hang out in there as much as I could, as many hours of the, of the school day that the teachers would let me disappear.

Did they have CAD or did they have the old school architecture?

They had old school. We had big drafting tables, just like you would see in the photos from several decades ago.

You think those are still there?

I suspect they probably are. Wow. Yeah. And so I was thinking about buildings. I was thinking about development. Back then as a kid. And then at the same time, I always had an interest in investing. It was money and investing and finances was always something I learned about and read about. And so I think those two things combined when I started working, you know, I started working as a consulting engineer in 2006, so about 2 years before we bought that first rental property. When I started working and making some money, I thought, okay, well, I need to invest this money obviously. And so real estate came to my mind because of that many years of thinking in the past.

Got it. And you are very analytical for those who don't know you. So I have no memory of this, but I assume you must have run the numbers on what it would look like to invest in a rental property versus an index fund versus at the time savings rates like now were pretty high, 5 to 7% interest rate you could get in like a high yield savings account. So you must have done some analysis there and decided, yep, rental property is a good, a good bet here.

That's right. There was really probably a few drivers. One is I think in terms of 50 years on most things, I think really long term. And two, I really liked the control I had over the returns and I benefited from being very familiar with buildings and real estate in general. I grew up in a family that built homes, repaired homes. I learned all that as a kid, so it sort of came naturally to me to think that I could buy a rental property. It seemed almost easy even though I had never done it before.

And you had already purchased— this wasn't your first home purchase. You had purchased the house that you lived in and that I moved into and rented a room from you. Even prior to that. So you bought a piece of property right out of college. Was that 2006 or 2007?

No, I bought that house about 2 months after I graduated college. And ironically, that was 2006. And to look back on that and see maybe how ignorant I was of the fact that we were in a boom, we were in a real estate boom at that time, and the price I paid for that house remained its value for about 10 years thereafter. So it took about— so 2016 was when it started actually getting worth more than I paid for it in 2006.

Got it. Did you get some sort of a crazy down payment arrangement back then in 2006 for that?

I did. I took advantage of the Ohio First-Time Homebuyer Grant Program. And I, if I remember right, I paid 3.5% down and the state of Ohio sort of like secured the loan, the rest of the down payment in some way.

Cool. So that's been like a really high ROI for you because you still— we still own that. I own half of it now, but we own that together still.

Yeah, I sold half of that house to you back at some point just to make things cleaner on our overall investments.

Yep. All right. So last question on this topic. So that was your opinion back then, and that's what started you and I down the path of buying rental properties. And we bought like one a year for a while there before we started the property management company. So now fast forward from 2006 to today, almost 20 years. How has your opinion on single-family homes as investments changed since then?

There's a couple of things about single-family homes that are interesting to me now. One is every transaction that you perform, every real estate purchase that you make, has a very similar amount of effort to pull off. And so if you look at a single-family home, you're simply just not buying very much real estate in any given transaction. So it's pretty inefficient from a transaction standpoint. So that's the first thing I think about. The second thing I think about is single-family homes have a lot of costs associated with them that are also not very efficient. For example, I've joked now that I hate trees. Trees can be quite expensive at a single-family home. If I were to buy a single-family home today, in a perfect world, I would cut down all the trees. I would remove all the landscaping. I would have no mulch. And this is just sort of illustrating the sort of inefficiency of a single-family rental property. You're going to incur these costs which are not shared amongst many units. So those are the two things I think about now when I think about single-family homes.

Yeah. Moses Kagan has a great line on this topic. He says single-family homes present idiosyncratic repair risk, I think is his phrase. Just, you just never know when something's going to break. And because there's only one unit, one stream of rent coming in, it's difficult.

Right. And something else that we've learned, you and I, over the years with property management is one of the problems with single-family homes and managing a bunch of them is that they're all different. The floor plans are different, the finishes are different. And you can't systematize that and it makes things trickier.

Sticking on real estate and single-family homes for a bit longer, the pricing that you and I experienced from 2008 to 2012, do you think we're going to ever see something like that again where you can buy single-family homes or small multifamily homes for an actual discount or actual good price? Pricing relative to rents, relative to risk?

If I remember right, in '08, '09, the stock market ultimately went down 45, 50% or so generally. And I think the real estate in Columbus was not affected as much as other cities. I think there were other cities that maybe their real estate prices were down 50%. I don't think Columbus got that quite that bad, maybe 30%, 25%. But I've gone back and studied the previous real estate dips in the United States, and that one was the anomaly, of course. But generally speaking, real estate valuation dips were in the 10 to 15%. And there's maybe only been, if I remember right, maybe 3 or 4 of those situations in sort of the past 150 years. So I do think there will be a time when there will all of a sudden be a 10 or 15% discount on real estate generally that we could take advantage of. I don't know when it's going to be.

Okay, great. So Just kind of moving back to the timeline for a minute. We talked about the start of the property management company and the audience knows that starting and running a property management company is extremely intense and very all-consuming. And what ended up happening, I think our original thesis of starting the management company was this is a great opportunity to have some cash flow while we look for more deals and are able to be full-time focused on Finding and buying rental properties. And at the time that was still single families. What ended up happening is we were so busy running the management company that we didn't do very many deals over the next quite a few years. So I wanted to ask you, like, was it a mistake to focus so much on growing the property management business because of what it cost us in terms of focus on syndicating or GPing deals or finding deals to do on our own, or however you want to think of that?

I think the answer is yes. And that concept of focus was something that I, you learn these things in life over time. I learned slowly that focus is really important. And yes, I think if we, if I was knowledgeable about the idea of focus back then as I am now, I don't think we would've focused on the property management company. I don't even know that we would've started it.

So I think implicit in what you just said is your belief that real estate investing is superior to running a property management company. Can you unpack that a little bit?

Well, owning rental real estate, whatever property type it may be, is a great business. The money, the revenue that you're getting from rental properties is being paid by people who really need that property for whatever they're using it for. And so that money tends to sort of just come your way automatically. And the, so that's the revenue side of things. And then the expense side of things, the operations of running rental properties is fairly straightforward and fairly systematizable and process-oriented. And so that's a pretty simple business compared to property management, which is highly complex. The revenue is highly complex. The expenses are highly complex. So it's a big— I think those are— that's the big contrast.

And what about the— you talked about operations being a lot easier. What about if we think about like the wealth-building power of rental real estate versus small business? Property management's a small business. How do you, how do you think about that?

I mean, if you, if you're looking at wealth building, you're trying to you're trying to increase the asset value or trying to increase the net worth of these two things. And when you're growing a business, you have to grow the revenue in order to grow the asset value and you have to grow the profit. I think with rental real estate, because the revenue is essentially purchasable, you are less restricted in growth revenue. And if you're careful when you buy the rental real estate, you can make sure that the profit is going to be there. So I think that's the difference.

And I know that you also, not for nothing, you have a personal preference toward straight-up ownership of rental property versus running a property management company and managing assets that we don't own.

Is that right? That's right. And in fact, I've thought a lot about rental real estate and I see, I've watched over the past 10 years this obviously apparent rush towards rental real estate as the values kept going up and up, more and more people were getting into the game. And you've heard me joke over the years about how people sort of get into rental real estate for all the wrong reasons. I view it strictly as an investment, so I don't get emotional about it, but it's an easy thing to get into for the wrong reasons. You can impress your friends, it sounds cool, you can drive your family by the properties, but those are all the wrong reasons. To even touch rental real estate. So, and you've heard me talk about that.

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So that entirely comes from the military.

Oh, interesting.

So growing up as a kid, now remember the military today. Is literally a trillion-dollar enterprise. So think about that.

All right, so one-third of an NVIDIA or whatever.

Well, yeah, it's a, it's a trillion-dollar revenue.

Oh, okay.

Business, the military. And let me tell you, growing up around the military, growing up on military bases, growing up around military officers, the military has spent spent a lot of money over the years preparing documents, preparing training materials, standard operating procedures. You wouldn't believe how many pages have been produced by the military.

Do they know about Notion?

I don't even think the military knows all the documents they have.

Oh man.

You know, it's that classic saying, they've They've forgotten about more documents than you've ever created. I'm sure there's gobs and gobs of documents that would be very useful for the world that have been forgotten about. But I just remember growing up and my dad had these binders all over his office and it was how to do this thing and then another binder of how to do that. And then he would have these books, just these literally military-issued and created books. So written by the military, printed by the military. It was like textbooks, how to fix an engine, how to navigate a ship, like just all these really good training books. And I just remember thinking like, this seems proper, like document how to do something. You can then create an organization that's I'm very well trained.

And does the power of documenting it— like when I think about the value of that, I think of it from a few different angles. One is by documenting it, it forces you yourself to get clear on how to do it, and you actually end up sort of improving and refining your thinking about something as you document it. So that's one part of the value. Another part is obviously training. So you can then have a reference manual for someone who's learning how to do something, say, here, read this. And then they have sort of a foundation as you explain it or demonstrate it that they can refer back to. And then the third piece that I think of is sort of truing up how things are being done in the real world with how they should be done or how we previously thought they should be done. So after a year or two of doing something, it's inevitable that the actual real-world process deviates from what was originally written or envisioned. And the practice of comparing those two things and deciding to either revert back to doing how it was written or update the documentation to match how we now think it should be done, like that I find to be very valuable. I'm wondering if the military is sort of also thinking about it in that way. Is that the sense that you get?

Well, I think the thing to look at to answer that question is the military's training regimen. So if you picture a property management company and you picture maybe you have a leasing agent, but you want to have them move up and be the head of leasing, at your company. If it was the military, that person would be sent to a 6-week school in some other city to learn how to become head of leasing. And during that 6-week school, they would be handed all these documents that the military wrote on how to do that. You know, when we onboard new employees, We might put them through a several-week initial training schedule. The military puts people through a year or two of training before they let them actually do their job.

Any other military ways of thinking about things that have informed your approach to business and small business operations?

I think an interesting thing about the military is the rank structure is very defined. You know everyone's rank, you know how long they've been in the military, and how long they've been in the military and their rank defines their pay. Everyone's pay is known. You could look it up in a table right now and see exactly how much they make. And I think that idea of a very well-defined path towards your promotion future is a really interesting topic that you can utilize in small business, providing your employees with a clear path to what they can grow into.

Yeah. And I, I know some companies are more transparent than others, obviously. And is it correct that like larger companies tend to be more like that? They have very well-defined paths and may even have public, like unions. I think all of those salaries are public. Yeah. I'm wondering if small businesses could take a, take a lesson here from the military. As a way to quiet down some of the stress and drama around pay and benefits and seniority and, well, this person just started and they're making more than me. And, you know, well, I've been here 5 years, you know, just, there's a lot of that that goes on in small businesses. Really?

There is. I don't know much. I don't know anything about unions. I know at some big corporations they are very clear about the path, so the sort of the promotion path, but I don't think they're very clear about the pay. I think the employees might have a sense of the pay at those different levels, but I don't think the companies are publicly sharing that. I think one of the problems with mimicking the military in a small business is that The military has, oh, about 22 ranks. If you worked your way all the way to the top, it's 22 steps or so. And I don't know that you can implement that many steps in a small business.

I mean, I famously remember somebody discovering, maybe it was you or someone forwarded to you, like a list of salaries at one of these engineering consulting firms that we both worked at for a while. It was left on the copier or it got scanned into a shared folder or something like that. Do you remember this? You found it or got forwarded it. And what impact did that have on you when you saw that?

Well, it confirmed for me this well-known statement of you don't— nothing good comes from knowing your coworkers' pay. It's neither good nor bad. You should just not know.

Yeah, it's like Schrödinger's cat or something. You just, it's, it's an unknowable thing. And if you open the box, it's, it's like a dead cat comes out. All right, good stuff. So I want to talk about the, you know, the engineering company that we own that you run. So a couple, 2, 3 years ago you came to me and said, hey, I'm getting a little burnout on property management. I think we've got a good opportunity here to, do something else in, in the world of small business. I've got an interest in engineering and long story short, you, you found a deal for us. We ended up purchasing it and then you left the, the management company to run that engineering firm. So what I, I want to ask you a few things about this, but one of them is what's it like to run an engineering company compared to a property management business? Like what's it feel like?

My wife was reminding me of one of the things I used to sort of talk about back when I was fully integrated into the property management company day to day, which is that I used to comment about how when I was an engineer, the way I was treated by everyone that I interacted with was very positive. And at the property management company, the way that I was treated by people that I interacted with was on average not good.

Yeah. And to put some color on that, I mean, I vividly remember this myself when I started as an engineer, my first day out of college or my first day on the job, right out of college with my electrical engineering degree, showed up at the office. And that what you're describing there was palpable from the second I walked in the office, just the way people treated you, the way my coworkers treated me, the way the clients treated me, the way the vendors treated me. It was like, even though I was a young, know-nothing, snotty jerk, probably at the time, this degree just informed people's approach. They assumed I was smart. They assumed I was competent. They assumed I was high integrity. And as a property management professional, I don't think we enjoy that same base level of respect or assumption of competence and high integrity. And if you've been in property management for decades, you, it's like you don't even know any different. You wouldn't, you couldn't articulate it in this way because you haven't been in a different situation. And so you're just like, oh yeah, that's, that's just how things are in business, or that's just how customers are. That's not how it is everywhere. Very interesting observation. So yeah, please continue.

Yeah, so that's the first thing is just everyone I interact with at the engineering firm is, it's 99% positive, great interactions. The other thing is the business is a lot simpler. We win projects and we do them and we move on. And the office is calmer than a property management company. And I would say those are the big, probably the 3 big differences.

Yeah. And maybe explain a little bit about this engineering firm, like approximate size and what you guys do for your customers.

So the firm is a real estate services firm. So we provide engineering services for all sorts of different real estate needs. We do a lot of work with condominium and homeowners associations, primarily helping them with their budgeting and forecasting of their costs. And then we do a good amount of structural engineering work. So a lot of inspections of buildings to review structural issues. And then we also do a lot of just general building inspections, all the different systems within a building. And we tend to be able to deep dive on system problems versus maybe like a home inspector who would just generally know whether something didn't look right or didn't look like it was working. That's what we do.

And your service area is Central Ohio plus, like you guys go sort of beyond Central Ohio, right?

Yeah, we, we go about a maximum of about an hour and a half outside of Columbus.

You talked about the differences in how it feels to run an engineering company versus a property management business. Any reflections on, I guess what we could call the business model, sort of comparing and contrasting where in property management it's recurring revenue and engineering is project-based? How does that show up for you?

You're right. The property management revenue is very much recurring. Engineering revenue is not. Engineering revenue is typically project-based. So you're constantly having to win new projects. And I do think the recurring revenue at a property management company is more attractive. That is a simpler way to operate. I don't know. I don't know of any— I mean, what else could we talk about with the engineering firm?

Well, there's more seasonality.

Is that right? Yeah. So at the engineering firm, there is seasonality during the winter. Generally, real estate transaction volume drops just because in Ohio it's cold, it's snowy, people don't want to get out and go look at homes and other, and other reasons. So there's seasonality to the engineering revenue. And back when you and I were working for big consulting firms, for engineering, I remember our projected future work was always about 6 months out. So we always kind of knew that for 6 more months we would have paying customers. And with our engineering firm, that drops down to— ours is about 2 weeks. So we know right now for about 2 more weeks we have revenue coming in. And after that, you know, we have to wait a week to find out.

Yeah, that's interesting. And my friend who owns a plumbing company talks about how if he's booked out more than like a day and a half, there's a problem. So they're, they're living right on the bleeding edge of, of sort of capacity and demand. And I guess that's maybe one of the luxuries you have as a, as a larger engineering business, the larger you get, the more booked out you can become because you're so sought after for your expertise and you're dealing in a B2B situation versus B2C. I think the business that I'm in and you're in, most of our listeners are in property management, is closer to B2C than B2B. How do you think about the engineering services business? Is that B2B or B2C? How does that show up?

Yeah, so a little bit about our projects. You mentioned that the bigger engineering firms have this longer revenue window, but they're generally doing bigger projects, whereas our engineering firm projects are very small in comparison and they take less time. So if you were to use that plumbing analogy, the plumbing company analogy, where he's concerned if he's booked out more than a day and a half. We have customers who need things within about 2 or 3 days, and the rest of our customers need things in about 2 to 3 weeks. So that's like our demand window. So it kind of matches our projected revenue window of about 2 weeks.

Another one that I think of is how we get paid. So we just take our money right from the rents. And it, it's essentially negative net working capital, although we do bill in arrears, like we, we bill after the month that we charge the management fee. We could just as easily sort of charge ahead of the month. Whereas in your case, you're billing customers after the fact. Do you run into a lot of trouble with collections or does this, does it, is this a constraint on growth in any way?

Because our projects are so small. We primarily collect payment upfront from customers before we even do the work. So accounts receivable is a pretty minor issue.

Yeah, that's, that's great then. And maybe last question on the, the business models growth. So growing a property management company is something we have a lot of experience with. We took one from 0 to 650 units. We both know what's involved with that. How would you compare and contrast that growth challenge or approach when you start thinking about how to grow an engineering company?

I think they're very similar. As another engineering firm owner told me recently, he said, chasing work and winning work never ends. It never goes away. And I think that's true for my engineering firm, and I think that's true for our property management company.

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Well, for me, this, the thinking about this has evolved over the years. If you look at a, if you picture a scale of extremely frugal to extremely lavish, I'm much more towards the frugal end of the scale. And I think if you would've asked me this 10 years ago, I would've been diehard cut costs, keep costs as minimal as possible. And I think that thinking used to come from reading about people like John D. Rockefeller, and other successful business owners who were very hardcore about that. They didn't want any waste at all. They wanted everything, all expenses to be as low as humanly possible. But as I've evolved and learned more about business, I've swung more towards, I think, your way of thinking, which is that ignore the cost because you're kind of wasting time thinking about that. To some degree and focus, put your focus on growing the revenue and, and adding more customers. I think you still have to have a balance. I think there's a lot of talk in the business world about companies who have a lot of what they call bloat in the expense side of things. And I, I do think that's probably a problem for a lot of companies. So you have to be careful, but you should put more of your focus on sales and growth.

Got it. And so you, you mentioned your approach to this has changed as you've gotten older. I wanted to ask you also about how your approach to risk has changed as you've gotten older. And you, we touched on this briefly when you discussed how you should've started a small business sooner when you didn't have any kids anyway, and But more speaking more generally, as you've thought about risk, business risk, financial risk, how has that changed since we started making our very first investments?

You know, probably, yeah, 20 years ago. It has evolved a lot. If I think back when I was younger, I was only looking at the downside. I spent almost no time thinking about the upside. And that was a big mistake. Today, I think way more about the upside than I do about the downside. And that's the big change that I've had in thinking about risk.

And so how does that show up practically in your day-to-day life as you move about your day, your year, as you come across investment opportunities, whether they're public equities or small businesses or real estate?

Essentially, I've moved up the requirement for upside. So if the upside isn't big enough, I just don't, I don't even pursue that opportunity.

What would be an example of something that you previously may have really looked into or even invested in and today you wouldn't even consider because of that?

So as you know, I'm shopping for real estate, rental real estate all the time. And I came across a 4-unit building for sale in my local area recently. And the list price was reasonable and I would've paid the list price happily, but it was just too small. The upside Again, coming back to that transaction effort, I would've bought that 10 years ago, but today I wouldn't have. And interestingly, 10 years ago I would've tried to haggle the price, but today I would've just paid what they were asking because I felt, I feel like that could get, just get the deal done quickly. So those are the two big things.

All right, well, next time you find one of those, let me know. I'm going to send it to our clients and hopefully one of them can buy it and we can manage it. All right. So I want to ask you about a couple mindsets that you've brought to the partnership and the, and the businesses that we've started and grown. One of these is not checking email. Outside of work. So the idea that you should not have notifications on your phone, the idea that your work email is something that you check at your convenience and not something that you're looking at after hours or on weekends, that is surprisingly still kind of a crazy outlandish thought today. Most of my entrepreneur friends are looking at their email 24/7, and a lot of them even still have notifications on. But you, I mean, 15 years ago you were talking about how that wasn't the way to be, and you got me on that early. And again, I'm curious about where did that come from and has your thinking basically stayed the same there?

I think the reason that I've always felt that way is I really like looking back at history. How things were done 50 years ago, 100 years ago. And of course, 100 years ago, obviously we didn't have email. All we had was mail. And I don't know about 100 years ago, but in more recent years when we only had mail, it would come Monday through Saturday once a day and the world was fine.

To be fair, I think the mail came twice a day back then. Okay. And how, like on certain days? Yeah, I think that's correct. Okay.

That makes sense. So we had to, we didn't have email, so we had to get the mail more often. Yeah. But that's looking back in history, it's pretty, pretty rational to say, hey, the world operated just fine with getting mail, let's say twice a day. And So that's, that's where that comes from. And I just, I'm generally the type of person that likes to work on what I'm working on and not be interrupted. And email is, is a distraction to that.

And you know, the idea that email is a distraction and email is unnecessary to doing good work. There's been some understanding of this in the general business culture in more recent years, but it's 99% of people are not approaching it the way that you are. I mean, you literally check your email once a day. Yeah. So, and I've picked up on a lot of these habits. I'm not quite as hardcore as you are about it. And the way I think about this is like email is correspondence and correspondence isn't work, it's discussions. So yeah, it's like, I think what ends up happening is a lot of work product gets sent through email. And so the, if we're going back to the sort of letters in the old days, that truly, I mean, the mail was correspondence, it was memos, it was letters, but today your email has things like Attachments and calendar invites and all these other types of things can be coming through email, which has made it really much harder to shut off email for even one full day and, and not run into roadblocks and not block other people from moving forward on important priorities. How, what, what can we do about this? Like how do we strike a, a useful balance here?

You're right that email gets used for a lot of things, way more than just correspondence. I have always struggled with this issue of sometimes to do the work that I need to do, I have to be in my email. And that's kind of a pesky thing, a pesky problem. I wish I could have access to this stuff without being in my email.

What? Now in the old days, like with Outlook, very old versions of Outlook, like on dial-up, you could be in Outlook but not connected. So you could have access to all your emails, but there was no sending or receiving happening at all until you manually initiated that.

So you, you and I have used Gmail for decades now. Many decades and we were back in Gmail when it was free, like business accounts were free. And I remember that feature in Outlook because we used to use that at engineering firms. And when I found the ability to pause Gmail using Inbox Pause at the time and now Boomerang, you know, that was a game changer for me. I instantly started using Inbox Pause back in probably 2014 to be able to do that, to be able to turn it off temporarily.

Yeah, I think that's the closest we can get. And I use something similar, it's called Mailman. It delivers new emails into my inbox only at set prescribed times. And there's like some, you can set up a VIP list. So like certain emails will come through, like if you need a code to get into a website, that will automatically come through. But it's, it's certainly like a hacked-together solution on top of this sloppy world of email that has everything from notes from my kids' school to login codes to my bank, to letters from my business partner, to, you know, a resignation letter that it just, it's crazy. So yeah, like what would be your advice for someone who wants to move in this direction? And just is scared or doesn't know how to start, but they recognize that email's a distraction for them.

One of the things I remember at the property management company was I developed a little bit of a fear of checking my email because there was often really big problems coming through that email. And so I didn't, I actually developed a slight fear towards checking my email. And now I think with email, there's that well-known saying that email is a to-do list for you created by somebody else. And there's also this— we now know really well that sort of this task switching. There's massive losses to our mental capacity when we task switch. And I view email and the barrage of different types of emails that you get, your kids' summer camp emails and then your coupons from the local coffee shop that you like to go to, all these little emails, they are distracting and you have to filter through them obviously, and I kind of view that as a waste. I wish there was a better way.

It's like a tax that we all pay on productivity and mental calmness.

I think you are too, same as me. I'm pretty brutal about doing what I can to minimize the emails that come in. I'm ruthless about unsubscribing to stuff that I rationally think is a waste of time and et cetera.

One more mindset question. So really early on in the management company, basically from day one, you always had this perspective that our time was valuable, you and I personally, really valuable. You assigned a very high hourly rate to our time when we had like 3 clients in the, in the way you thought about it and in the way that we priced things and in the way that we dealt with customers. You brought this approach of like, no dog, like our time is worth a lot. And that made a huge impact on me cuz I, that was not intuitive to me. So How did you sustain that belief in the face of very low revenue at the management company and then customers, property owners and tenants who were constantly basically assigning a very low value to our time?

I think that growing a small business requires extreme patience and extreme putting up with pain. And I, that's probably what was going through my mind during those times of feeling like my time wasn't being valued by whatever I was dealing with. But I probably knew that in the back of my head that this was a necessity that we just had to get through. And so that's probably what I was thinking.

Yeah, like those early days, we set prices for things. I mean, everything from our monthly management fee to the maintenance billing rate to some of the other fees that we charged to owners for different things. And the way we set those and the way we charged for trips, certain trips to the property and court appearances and time spent preparing professional opinions on things like, and like the maintenance, you know, marking up maintenance from day one, all of that stuff. Like at the time I was scared. I was really scared to charge for that stuff at all, much less a high hourly rate. And you were insistent. You're like, no, like this is, we're providing a highly valuable thing here. We need to charge for this. And I was scared that The customers would leave or they would refuse or be mad. And I, and at the time I just have this memory of you were like, okay, good. Like, yeah, there, some of them might leave, but that's because they're not recognizing the value. Like we need to stand firm here. That just like really struck me.

I think that mindset that you're describing, that you were hearing me have back then probably came from way back when I was younger. I think I always had this belief that when I was younger that I was going to do big things or I was going to be successful in this sort of traditional sense. And I think as I thought about that for several years, it sort of like ingrained it in my head that I could get stuff done and I could be very effective and efficient at getting stuff done. And so kind of like, don't get in my way. And because I'm doing, I'm like getting things done that are going to be valuable. And so if you slow me down, you're costing me money. I remember In my later years working as an engineer, there was times, there was a few memories of me going to my boss and saying, "What you're asking me to do is wasting my time." It was like, "I'm not going to spend time doing this." This is probably why you and I are business owners now. But I wasn't going to waste my time. And another thing that I think was recent to the memories that you have of those early years in the property management company, in my later years of engineering, I got the opportunity to work with some engineering consultants, some individuals who were world-class experts in whatever they were doing. And these were people that had billing rates, which at the time I thought was insane. And I think that was ingrained in my head that you pay for value, you pay for skill and you pay for effort. So seeing those high rates from some worldwide experts and also just mentally thinking about being efficient and getting work done was always in my head.

Or even just seeing the billing rate that the engineering consulting firm billed us out at.

Well, that was helpful too.

Yeah.

Yeah.

Yeah. Yeah. And okay, so a couple, a couple of thoughts that, that was really interesting. When I talk to other property management business owners, I'll sometimes hear about how they weren't profitable for 2 or 3 years. And you and I were, our business was profitable almost immediately. And I think I need to credit you and what we, what we just discussed for that. And I would encourage property management business owners to know your value and charge accordingly. Don't shy away from it. Don't apologize. Don't make excuses. And I think that that attitude is kind of like you're going to manifest the reality of having a profitable business. By starting with that approach, you can get into this downward spiral where if your business isn't profitable, you start to think that you're not doing a good job, and then that makes it easy to not charge very much, and then it just goes downhill from there. But there's an inverse of that as well, which is that when you charge appropriately, which is going to feel high, you then are profitable. And then because you're profitable, you're like, you, That reinforces the belief that you are smart and successful and professional, and then it makes it easier and, and to even then charge more and continue to do that. And then you're even more profitable and you grow. And so there's, you gotta get on that right path and you got us on that path like instantly. Okay. So last question on this is you mentioned when you were explaining this that you had this idea early on that you were gonna be successful and that you were going to be getting things done. Is there any like teacher or parent that you think helped instill that or that you were modeling?

There really isn't any mentors or people that I think made a big difference in my mindset. I certainly had some folks when I was younger who I looked up to and who helped me in ways. But I really think it was just a personal discovery path. I don't think that there was like one or two really influential mentors that I had. I don't think that was the case.

Fascinating. So this was just an internal belief that you cultivated. Yeah. Awesome. Well, this has been great, Adam. I've learned a few things about you, and I know the audience has learned a lot about you. Really appreciate you taking the time to come on here. For folks who want to follow along more with your journey, whether that's the engineering company or some of your other ventures, where's the best place for them to keep up with that?

Yeah, I mean, I think find me on LinkedIn, Adam Paul Rich, and you can always check out our, our website, for the engineering firm is criteriumlizkay.com.

It's L-I-Z-K-A-Y.

And those would be the two places.

All right, great. Well, and we'll make sure all of that is in the show notes, of course. Thanks again, Adam.

Thanks for having me, Peter.

I hope you have enjoyed this episode. If you like the show and want to get connected to the community, you can follow me on Twitter @pslohm. Lohmann and subscribe to my email newsletter on my website, peterlohmann.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening and have a great week.