In today’s episode, Steve will give YOU the blueprint for starting your own real estate business this year. You’ll learn about the two biggest mistakes new investors make, the systems and processes that will allow you to scale, and how to identify the perfect investing strategy for you!
Ashley:
What does it take to grow a thriving real estate business? Build systems that scale and develop the mindset to overcome challenges? In this episode, Steve Rosenberg shares invaluable lessons from his journey that you can apply to your own path, whether you’re building a portfolio, starting a business, or working towards financial freedom. Steve’s going to break down how to create systems that save time and make money. The importance of mindset and navigating failures and how you can turn challenges into opportunities. This episode isn’t just about his story, it’s about the tools and strategies that you can use to achieve your own success. If you’re ready to level up your real estate game and entrepreneurial mindset, this one’s for you. Welcome back to the Real Estate Rookie podcast. I’m Ashley Kehr, and I’m here with Tony J Robinson.
Tony:
And this is the podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. And we are super excited to welcome to the show, Steve Rosenberg. Steve, welcome brother. Super pumped to have you, man.
Steven:
Great to see you guys as always, my good friends and I always enjoy these conversations. So hope you guys had a great holiday, great new year, and ready to kick it off.
Ashley:
So we thought we’d bring on Steve to start off the new year of 2025. Before we get into mindset and how rookie investors can really get a great kickstart to their goals for the year. Tell us just a little bit of background about yourself.
Steven:
Yeah, so my background, probably like many people on this call, I have a regular, we’ll say regular nine to five job. I have a career, still have it. It’s being an airline pilot. I got involved in real estate way back after nine 11 when I got furloughed from the airlines, started investing in real estate. I did flipping, wholesaling, buy and hold, and I parlayed that into eventually owning a property management company that we grew to over a thousand properties and we ended up exiting and selling it to a venture capital firm. I still own real estate to this day. I’m still heavily involved speaking at events, helping coaching people and all that stuff to understand how to grow and scale to where you want to go. That’s the quick version we’ll say.
Ashley:
Did you mention your property management company in there?
Steven:
I did, yeah. So we had a property management. Yeah, we were the fastest growing company in the state of Texas. We had over a thousand properties, all single family properties. We’ve owned multifamily, commercial, all that stuff. But our bread and butter was single family properties and we just had the best systems and model that we could create for it.
Ashley:
Yeah, so to better explain this, I think for you Steve, is to, how you relate to a rookie investor is like you were investing in kind of the slums, very, very not nice neighborhoods at all. And out of necessity, you and your partner had to learn how to be property managers and eventually used all the tools and resources now that you have to kind of build up this large property management company and then sell it for millions. So whether you are just an investor looking to buy your first deal, you want to start your own property management company or whatever your goal may be, Steve has achieved such great success that we’re going to dive into What are some of the things he has learned throughout his experiences that can help you and maybe give you a shortcut so you don’t have to go through all the trials and tribulations and the pain that Steve did?
Steven:
Yeah, it is a good point, Ashley. I mean, listen, we don’t know what we don’t know and sometimes some skill sets don’t transfer. And being an airline pilot knowing systems, processes, there were some things that transferred and some things didn’t. Meaning owning real estate, understanding numbers, understanding the market and real estate has a way of coming like a wrecking ball through your front door to correct your mistakes that you’ve done incorrectly. And I was not immune to that. My business partner and I, we had a lot of houses that we purchased. I don’t want to say we purchased them incorrectly. I think we put the wrong business model around those types of property because every property is four walls in a roof. It doesn’t change. It’s the business model that you run inside of the four walls in the roof, whether it’s a short-term rental, long-term burr, whatever it is, that’s the model.
Steven:
But the four walls in the roof, when you sell it, it’s still four walls in the roof. It’s just the next business model someone else is going to run. And we did not have the correct model, and it very quickly showed us why. And so I am not immune. I’m very vocal about my mistakes because I think we learn more from our mistakes than we will our wins. But I would tell everybody here that starting out, what everyone on this podcast has in common with self-made millionaires is that we’ve all started from zero. We all started from zero and didn’t know what to do, but the difference is the action that was taken from that zero moment. That is really it. When you think about it, like you guys, everybody here, we all started from zero and we made decisions and we took action. There’s a cost for action and there’s a cost for inaction. The question people have to ask themselves is the cost of inaction greater or less than the cost of taking action? And to me, just like you guys, just like people you’ve had to us, the cost of inaction was much, much higher than taking that action.
Tony:
Steve, dropping gyms already, and I definitely want to get into some of the mistakes, but before we do, I guess just as we look at 2025, again, a lot of the folks listening to this podcast, they’re Ricky, who maybe have done a deal or two or they’re maybe still on the sidelines waiting to get started. So what do you think is the most important mindset shift that someone listening to this podcast needs to make to really jump into the world of real estate investing in 2025?
Steven:
That’s a great question. If we go to the root of the problem of the issue that we have is that people, they sometimes use a tactic. And a tactic is something that’s a moment in time. It changes with the environment. So for example, Ashley lives in New York using water skis in the winter is the wrong tactic. So there are things that she cannot do with water skis in the wintertime because it doesn’t work. You would need another tactic, which are snow skis. The reason I bring this up is real estate. There’s tactics in the cycle of real estate. There’s buying, there’s selling, there’s holding different tactics for different seasons in the real estate environment. And so there’s many people out there that are using tactics that maybe were a prior economy, was a prior time as we know, we all know. And that was a tactic.
Steven:
And we all know many people that are still trying to use that same tactic moving forward. And so if you’re using a tactic from the past, assuming it’s going to work moving forward, it’s like actually using water skis in the middle of winter. It’s not going to work. It’s the right idea, but it’s the wrong season to use them. And so first of all, I think we have to understand that real estate is always changing, just like the weather, just like the environment. The key I think, and what I’ve learned from my many mistakes is we have to start with the end in mind and reverse engineer what we want. When people, I’ve coached thousands of real estate investors and business owners, and one of the things that they cannot answer is where are you going? Where is your destination? It’s kind of like if I was going to go to Ashley’s house, I would go to Google Maps and Google Maps would ask for two things. It would ask for a start and it would ask for the destination. And if I don’t give Google Maps that destination, could it give me directions? Well, no. If I pulled over and I’m like, Hey, Tony, can you give me directions? What’s the first thing you’re going to ask me
Tony:
To, where
Steven:
Are you going? I’m like, I don’t know, man. I’m just busy. I’m just buying deals. And you’re going to go, bro, I can’t help you because I don’t know where you’re going. So the challenge many people have is we identify as real estate investors and that’s our identity. And we don’t know the reason we’re buying the real estate is the next step. And I think that we have to understand that owning real estate is owning a business, and that business has to have an end destination of why are you buying that property? Why are you flipping it? Why are you doing burr? Why are you doing this? And does that align to your destination? So my roundabout way is you have to build a destination before you ever get out of the house. And many times, and listen, I did the wrong way. I just started buying deals and I didn’t know where to go and what to buy because I was just buying deals because everybody said, speak just bye. Well, that only works until all of a sudden you run out of gas on the highway and you’re like, what am I doing? It didn’t align with my destination because I never picked it. And that’s where I think a lot of people need to start. You’ve got to start with the end in mind and reverse engineer everything that you’re doing.
Ashley:
So besides figuring out what your end destination is, what are some other common mistakes that new investors are making when they’re trying to figure out their trajectory?
Steven:
Yeah. Well, first of all, I would say they listen to the static. They listen to the noise that’s out there, and they don’t have their own guiding light. And the guiding light should be the numbers. The numbers always dictate the deal, not your emotions, not your gut feelings, not whether you or your wife would live in the house. It is the numbers. The numbers are the deal. And so a lot of times, and again, I know all these because I did ’em wrong, I had my opinion on these deals, and I would talk myself into deals saying, well, I could probably get more for rent. I could probably do that when the numbers clearly did not dictate that. But I was so set on trying to buy as many deals as I could. I was like at the buffet and my plate was overflowing, and I was like, keep piling it on, keep piling it on.
Steven:
And so the mistake we have is we don’t listen to the numbers to actually tell us. And like I said, I did this many times and it bit me very, very hard. And so I think the mistake is you have to have a foundation. So when you look at the foundation of a business, a business owner, there’s five pieces. It’s kind of like if you were going to build a house, you wouldn’t build the house first and then go, Tony, dude, we forgot the foundation. Nobody dug the foundation. You’d be like, well, no, Steve, that’s stupid. You have to have marketing, you have to have sales, you have to have operations. You have to have financing, and you have to have leadership. You have to have those five things as your foundation of your house for your business. That’s the root of everything that you do. And so if you want to go vertical, you’ve got to go down before you go up. And the reason I, again, economic times tactics change. When tactics change, the house starts tilting, and when it starts tilting, that’s when all of a sudden you go, man, I can’t rent this out. I can’t do this, I can’t do that. It’s like, well, you didn’t have the right foundation. You didn’t base it on numbers. So that’s my long answer for that.
Ashley:
Well, to kind of coincide with that is can you give us an example of in your investing journey or even the property management company where you made a mistake like that and how you were able to pivot or
Steven:
Yeah. So we had our management company, and to be completely transparent, our properties were so bad that no management company wanted them. That’s why we had to start our own management company because we had about 35 houses in the ghetto. That cash on cash return was going to be 60%. That never happened because our tenants were staying about eight months and our maintenance costs were three times the amount because when they left, they would take partying gifts with them like wiring, electrical, they take plants, they take light bulbs. I mean, we’d walk back and it’s like the house was the shell and we kept doing it over and over again. That’s the definition of insanity. We kept doing the same thing, thinking this time’s going to be different. And when we started the management company, we started getting on new clients. And what we found was we were our own worst clients.
Steven:
We were the worst clients of the company, and it was our company and our property manager was like, you guys need to be fired. And we’re like, what? We own the company. She’s like, you guys have the worst portfolio. You guys are the worst just because of our vacancies. And I mean we would put the capital expenses in, but it was never going anywhere. And I remember one time we sold a property, we were losing money, the house cost $50,000. It wasn’t even an expensive house. We’re like, okay, we hard. Can you get hurt from a 50,000 house? We went to closing with $10,000 to pay to get out of that deal when it was all said and done. And you know what? We were the happiest people there because it was no longer our problem. Because what I’ll say is when you buy a bad deal, what people don’t factor the finances?
Steven:
Yes, that sucks. It’s the mental stress that laying your head down on the pillow at night going, what am I going to do? Now imagine you have 30 of them and you put yourself in that position. So I just tell people the stress of getting out of those deals. The way we got out of them is I sold them owner financing to investors from Canada that didn’t have the ability to get a loan. So I carried the note, I sold the owner finance and I managed the property. So I had to create a creative way to get out of the deals. They got properties, they were happy. We were happy because they were no longer our problems. We were still making money by managing it, and that was a creative solution. But I tell people all the time, to get out of a bad deal is the worst nightmare.
Steven:
When you put yourself into that deal, you did it. And again, I know because I did it and it is not a good feeling. So I tell people all the time, if there are any red flags, when you’re looking at a deal, you’re much better backing off. I mean, there are millions and millions of houses across the United States. The odds of some being bad deals are pretty high if you know what a good deal is. Now, that property that I sold and went to closing and paid $10,000, I saw the guy a couple years later and I’m thinking, man, this guy has got to be drowning. Like ha, right? So I meet up with him at an event and I’m like, Hey, man. I’m like, how’s that deal? And he’s like, bro, that’s the best producing property I owned. And I’m like, what? I’m like, shut up.
Steven:
He goes, I swear to God. He goes, that makes me the most money. I’m like, there’s no way. I’m like that address. He’s like, yeah. I go. He goes, Steve, you are not running the business correctly. You tried to run it this way. That is not the way you run these types of deals. You have to run it this way. He goes, you were running the wrong business model. That’s why it would never have worked for you. And I was like, huh? He goes, we just did it the way we just have a recipe for doing successful deals in this economy or in this market area of price point. He goes, you are, the way you were doing it was never going to work. You were trying to run a high end property in a low end market, wrong business model. And that was a big aha for me. Like, wow,
Ashley:
That’s got to be the person listening right now that bought Tony’s house in Shreveport that’s saying, oh, this is my best report property. That was
Tony:
Steve. My just real backstory, the second deal I ever bought, very similar to yours, wasn’t in a bad area, but we had some instances there, but we ended up losing, I think all in all about 30,000 bucks on that deal. We also had to write a check at closing to get rid of it taught us a lot of lessons, but I would be curious, the person that bought it, how that deal has worked out for them. Maybe I just had the own business model on that property and that’s why it didn’t work out the way it should have.
Steven:
Yeah. Sometimes we have blinders on. We have blinders that we think our way and not because of ego. We have a way of knowing, think about it this way guys. If you want to become a doctor, you have to go to medical school. If you want to go become a lawyer, you go to law school. As a pilot, I had to go to flight school, but where do real estate investors go? Obviously you guys and BiggerPockets does a great job, but what university do real estate investors go to learn? Hey, there’s this tactic, this tactic, this strategy there. So we go in with blinders on, we don’t know. And look, when I was doing this amazing BiggerPockets and stuff didn’t exist, I wish it did, but when I was doing this, they didn’t exist. It was just a book and other people at the local investing network that everyone’s eating free cheese and getting, this
Ashley:
Must have been a long time ago because BiggerPockets has been around for a while. Wow.
Steven:
It does. It does. Yeah, I know. Take the jab. Go ahead. But you’re right, Tony. We don’t know what we don’t know. And that’s why you guys, I think the BiggerPockets is so great because you guys are opening people up to all these different strategies and the community of understanding, well, I’ve never even heard of this. I’m going to boom. You know what? That may work in my market. Never even thought of it. And so you have to be open to the fact that I may have the best idea. I may not be the smartest person on the block just because this is what I know. It doesn’t mean that’s the only way to do something.
Ashley:
Yeah. Steve, I think you hit two really key points right there. The first one is maybe you have the wrong business model or maybe that business model isn’t even for you. And the second thing was if there’s red flags, it’s okay to back out of the deal. It’s okay to not do the deal. It took me a really long time to be okay with that. The first deal that I ever backed out of, I had put my earnest money deposit in. We had passed the inspection period. There were some things that made me just not want to do this deal anymore. I was getting uncomfortable and instead of, I lost, I think it was $2,500 on my earnest money deposit, and I was like the lad that they kept it because I felt so bad. I was like, this is the least I can do is let them keep it because I was backing out of the deal. But after that was done, after I took that action to say, okay, I am stepping away from this deal. It was the biggest relief. If I would’ve gone through with that deal just out of principle of
Ashley:
Never having to back out a deal, I’ll always close that probably would’ve lost me so much money looking back now at the history of that property now and what would’ve came out of it, how the market would’ve changed and it wouldn’t have been a good deal. It really took me a while to be okay with that. It’s okay to not do every deal. There are times where there are going to be red flags and to back out, and I feel a lot more relief with that decision I made than if I look back now. And yeah, there may be times you do actually have regret like, oh my God, I should have went through with that deal. But that’s going to be way less painful than losing hundreds of thousands of dollars because you did get into that.
Steven:
And listen, I have learned ego and pride are success inhibitors. There’s many deals that I chose not to because I was too proud. And there’s a house by my house, Ashley, where I live, and I have to drive by this house and what the value of this house is today. It just kills me because it’s just gone through the roof. And I’m like, I went to those crappy houses and I did not do this one. And every day I drive by this house and it reminds me that I was too prideful. I thought I knew too much, and I remember the value of lessons. I remember one of my mentors, and he was charging like $30,000 for mentoring, and that was a lot of money. It is a lot of money still. And I was like, man, I’m like, that’s a lot of money. That’s a lot of money to invest with you.
Steven:
And he laughed and he goes, I see. He goes, you think that you’re not going to spend this money? He goes, you’re going to spend it either way. You’re either going to spend it with me in bypassing the mistakes that people have made. He goes, or you’re going to spend that if not double or triple on your own in mistakes, but it’s going to be stretched out for 10 or 12 years. He goes, make no mistake. You are spending that money. And I was like, oh. He goes, you think you have a choice? He’s like, there’s no choice in this conversation. The question is, do you value money or time more? And I was like, that’s a good point. I never thought about that. So that was the eyeopener for me.
Tony:
Yeah, that’s a big mindset shift. But I guess on that same note, Steve, right, you scaled up your own portfolio, you scaled up the property management company, and a lot of the folks in the rookie audience are also looking to scale. I guess, what have you seen as maybe the key to successfully scaling? You already talked about some of the challenges, understanding the right business plan for each individual property, but if someone wants to go from one to five, from five to 10 systemically, what should they be focusing on?
Steven:
Well, I think there’s two things. I think number one, you have to become that person. You have to mentally be that person. I tell people, if you want to build a $50 million portfolio, you have to become a $50 million CEO first. Mentally, you’ve got to walk it, talk it, act like it. You have to become that person. You don’t by chance, by accident, build a $50 million portfolio on the weekends in between football commercials. Listen, you and I myself, we all know how hard it is. You have to be willing to put in the work, but you have to think it. It’s kind of like if you were an Android app and I was trying to shove you into an Apple phone, it’s not going to work. So if you have an employee mentality and you’re trying to act like a business owner, it’s never going to work because it’s like an Android app and an Apple phone.
Steven:
So you have to become that person. The next thing I would say is you have to change your environment. If you want to change, if you want to be someone different, the inputs that you put in will change your output. So if you don’t like the output of your life, if you are already not building a $50 million portfolio, there is an equation. Something’s wrong. And when I say wrong, I tell people all the time, well, if you could do it, why haven’t you done it? That’s a fair question. Okay, you can do it. Then why aren’t you there? And everyone has a reason. I’m like, oh, I see you have excuses, right? Because you are not that person. So sometimes changing your environment, listen, I think BiggerPockets is awesome because they can get in a new environment, in a new pool of people to be around to all of a sudden say, Hey, I’m in this environment now and I can start being around like-minded people and other 50 million CEOs, and listen, it’s kind of like you have to fake it till you make it in the sense that when we go to sleep, we have to lay down and act like we’re asleep before we actually fall asleep.
Steven:
You’re not just walking down the street and you fall over. You have to act like it. So it’s the same. It sounds so dumb, but that’s what we do, right? Well, that’s the same thing with building a 50 million portfolio. You have to walk it, act like it talks like it, and you may say like, well, Steve does a $50 million CEO go to Home Depot. No, however they do. And they say, I will be doing this until June 1st, 2025, and I will no longer be doing this task because I will be outsourcing it. So leveraging and understanding that the key to being successful is understanding the value of leverage. I couldn’t have had a thousand property portfolio if I did not understand the power of leverage of people, knowledge systems, all that stuff. Because if you don’t know it and don’t understand it, you’re never going to do it on your own. And that’s the employee mentality.
Tony:
Yeah, I love the mindset piece. I feel like until we rewire that portion, it’s hard to do all of the actions you need to take. But I guess maybe even taking it one step further, Steve say someone does that, right? They surround theirselves with the right people. They kind rewire the mindset. What tactical things have you found that someone should be doing today to lay that foundation to scale up their portfolio?
Steven:
Yeah, listen, I think the first thing is just taking action, right? It’s really simple. I talk to so many people as you guys do. I, I get thousands of people that reach out to me all the time and they’re asking me questions. What do I think? I’m like, just take action. Just do something like, well, I don’t want to mess up. Well, I guarantee you, you are messing up by not doing something. And so again, is the cost of action more or less than the cost of inaction. And the thing is, you are one decision away from changing your life and that decision is taking action. I would say that the tactical thing is just start looking at properties that are in your area. Start running comps and don’t do two or three. Do two or 300 do a hundred a day. It’s kind of like when you look at all the professional athletes, what is it that they do all the time?
Steven:
They practice the basics. Michael Jordan would practice eight hours a day every day for a two hour game. He was the best athlete ever. Was it because he practiced or did he have natural talent? Probably both. But he wasn’t born with that talent. He got cut from his ninth grade basketball team, which tells me that you have to take action. And so listen, first you got to know, well, Steve, should I do apartment complexes? Should I do shelf storage? I don’t know because I don’t know where you’re going. So again, it’s like, well, what should I do? Depends on the goal. And these can be many stages. They can be one year goals, five year goals, 10 year goals, generational goals. But I think the biggest challenge people have is they don’t take action. Listen, I’m sure you guys hear it all the time. Like, oh, I don’t want to do videos on social media.
Steven:
I’m going to look dumb. I’m like, you have four friends. No one even knows you. Who do you think that is going to criticize you? Do it now while no one knows you. And so everyone is afraid to take action because they think that this social media world, everybody’s watching them, and the is, no one cares. No one cares. If that person goes and does a hundred comps or they do zero. It doesn’t change your life. It doesn’t change Ashley’s life. It doesn’t change my life. It’s going to change their life if they do it. And the problem is, is they don’t take action. That’s at least what I’ve found. I don’t know what you guys see, but that’s the biggest challenge is fear of looking dumb.
Ashley:
Or even they’re sitting there watching everybody else take action. And it only gives you that little bit of motivation before you’re back on the couch scrolling again and looking at someone else do it. That I think is a really detrimental thing about social media is that it’s so easy to vicariously live through others by spending hours and hours, scrolling, watching them do the things that you want to do.
Steven:
And I would say, so Tony, something else that I think that people need to focus on, and this is just my opinion, is I think we need to learn better skills at being a communicator. And communicators are the wealthiest people on the planet. And when I say communication, it could be doing sales, it could be convincing your spouse to go to dinner, getting your kids to clean their rooms, whatever it is. But you’ve got to learn that if you can become a master communicator of communicating the vision to an employee of communicating how to get a deal, how to buy a deal, sell a deal, lease a deal, whatever it is, talking to your contractors, vendors, think of all the people that are very successful. They’re normally, one thing that’s in common is they’re good communicators. Now, some people use that to a detriment and they do the wrong things with it.
Steven:
But if you look at anyone who is successful, the one concept that, and I’ve been studying people the last couple of years with this, and I’m like the one medium is they’re all good communicators in what they do. So do we practice that? Listen, I don’t think you’re good at anything when you’re born except probably eating, sleeping and pooping, right? That’s it. Everything else is a learned skillset. So the focus is actually, like you said, what are you focusing on? Are you focusing on thumbing through social media? They say the average person rolls the height of the eel tower every day on social media.
Ashley:
Oh my God,
Steven:
That’s crazy. So what are you not doing? Listen, there’s called the opportunity cost. So at the root of everything that we do is an opportunity cost, meaning it is costing you something to be on that social media. There is a cost for that. There is a cost for you not looking at those deals. You don’t want to do those a hundred deals. Someone is going to do those deals. And one thing I’ll say is I get a lot of people lately, they’re like, oh, Steve, there’s no deals. I’m like, so you’re telling me there’s no closings going on at title companies? Title companies are just sitting around doing nothing, no transaction. They’re like, well, there’s a transaction, but I’m like, oh, it’s not the transaction that you were used to or that you thought in your mind and you are using an old tactic. So transactions are happening.
Steven:
It’s just not the same as it was, is what you’re telling me. And you are not inclined, lazy, whatever you want to call it, to change tactics, which means you got to go back to school and you have to learn a new strategy or a new tactic to do a deal. And it’s tough. You learn something. I learned the Burr method, so I’m a bur guy. I got a license plate. It says, Burr, what do I do? I got a license plate. I can’t stop doing that. It’s like, well, you could get in your license plate or you could just realize that it is always changing. It’s like, but what do I do with my car? I’m like, that’s your worry. That’s your concern. Someone told me that. They’re like, well, my license plate says bro. I’m like, I don’t even know how to keep this conversation going at this point. I don’t even know what to say. This is a business. This isn’t your image. So again, I dunno if that answered your question, Tony, but that’s a big challenge.
Tony:
One last follow up to that, Steve, because you talked a lot about shifting strategies based on where we’re at in the market cycle. And I’m not asking you to break out your crystal ball, but as you look at 2025 with where we’re at with interest rates potentially coming down, we actually just saw the fed drop rates by I think a quarter point today, but rates could potentially be coming down, inventory could maybe start to creep back up. But what are you seeing strategy wise? We have flipping, we have wholesale link, we have the B strategy, midterm, small multifamily, big multifamily office space. What do you see as the kind of trends and where should rookies maybe be focusing?
Steven:
Lemme just say this, right? I’m going to say something and then we’ll get into that. I think the first thing we have to remember is that when the election just happened, which I think we can all say there is going to be a new economy, and with that economy is going to be a new error, which means you have to have a new mindset. Now, what I’m a big believer in is that with this new mindset and new economy, the challenge I will say whenever I go speak at real estate events or masterminds or speak on stage, especially with real estate investors, and I’m not sure why, but real estate investors have a challenge with identifying what they do. Just like the Berg guy with his license plate, and that’s like a hammer. So all they’re looking for is nails. They’ve got to find a nail for their hammer.
Steven:
That is it. There’s other deals that are crossing their plate, but they don’t see it because they’re a hammer. Then you’ve got another guy that’s a long-term rental, he’s a rake. He’s looking for leaves to rake up, and he’s not looking at anything except he’s looking down for rakes. Everybody is a tool, but if you know all the tools and you have them sitting in a toolbox, when the deal comes across your plate, you can go, you know what? That’s a subject too. I’m going to grab that wrench and I’m going to work that deal. You know what? That’s a flip. I’m going to grab that broom and I’m going to do that deal. So I think instead of identifying a specific tactic, I would say take some time and learn and fill your toolbox with the knowledge to make those smart decisions. I’m sure all of us and many people, friends that we know, we can look at any deal and say, that’s what I would do with this deal.
Steven:
That’s what I would do with this deal. That’s what I would do. Because we have experience, because we’ve taken the time to educate ourselves. And I think one of the things we got to remember is a lot of people, they look to the fast track, and I am kind of going with your question, Tony, is like, when people are looking for the fast track, I think that’s a recipe for disaster, and we will pay more for the fast track. I mean, think about it. If you take a gym membership that’s a hundred dollars a month and you take liposuction, which is $20,000, they basically do the same thing. But liposuction is done in an hour and a gym may take a year, but people will pay more for the liposuction because it’s speed. And so we have the same mentality that we will pay more for that speed, but we don’t think of the consequences as to number one, is this right for me and does this person have good intentions or are they taking advantage of me?
Steven:
And I think real estate has a challenge where it’s really, listen, I know there’s laws and rules, and I get that, and there should be, but it’s really buyer beware. And I think you have to be cognizant that when you get in a deal, and we’ve all gotten in bad deals, all of us, right? Myself included, but it’s kind of on me, right? We’re big boys and girls, we buy a bad deal. We have to own that. And we have to say, you know what? That’s on me. I bought a bad deal, but I was smart enough to understand how to get out of that deal after. And I think the challenge, Tony, is there’s going to be a lot of people pushing things on social media that, oh, this is the way you go. And if you don’t have the education, you’re going for the liposuction, and it may not be what you think it is, and you’re going to go like, dude, I’m fatter than what I’m doing in I don’t know what to do now. This is not work. And it’s like, sorry, buyer beware, that’s on you. So I don’t think one way would work, but I just think education, I have learned that if you have the education, man, and that’s what I think BiggerPockets is great at, is educating people to understand what is the best strategy so that they don’t get caught and they don’t get hurt financially.
Ashley:
And I think too, as a real estate investor, you have to continuously keep learning. Even if you are using the same business model and you have it down packed is if the market changes, like every single day I get a newsletter, it’s got a little ticker at the top as to what the current mortgage rates are, what even the stock market is doing, and then just here’s the economic and news for the day too. So there’s so many different things you have to be educating yourself on and staying on top of, and not even just learning new skills and new strategies, but also to stay ahead as to what are some of the advantages that you can have by learning some things like having an AI leasing agent is now coming into some property management software. So Steve, along those lines, what’s some advice you can give to rookie investors if they are going to be the property manager for their properties, as to how they can kind of stand out and automate systems? What are some techniques or things that you did to kind of stand out as a property manager?
Steven:
Sure. So when you look at property management, there’s this systems, right? Any business is a matter of systems. And being an airline pilot and being trained in systemization and checklists and all that stuff, there’s going to be about eight to 11 systems in property management could be as high as 19, but there’s about eight to 11 standard systems. So you want to make sure that you can do these repetitive tasks over and over again via the system because when you start growing and expanding, you’ve got to understand that you’ve got to have a process for everything that you do because not only are there rules, there’s laws and regulations to protect tenants. And if you are not treating everybody fairly equally to their interpretation, there’s repercussion to this, there’s property code, there’s the IRS, there’s laws, there’s everything that goes into, and your job as a property manager is to run it right down the middle of what the law says.
Steven:
So we had a thousand properties, we had a thousand tenants, we had a thousand owners, and we had about 300 contractors. Everybody has a different definition of happiness and everybody’s an opposing force. All we could do is run it down the line of having an agreement sticking to that agreement, not deviating. The biggest mistake I see landlords make or property managers make is you start deviating from your rules and regulations, and as soon it’s like a pendulum, it just starts swinging and it does not go back and it never ends well. And the challenge is, is those repercussions or ramifications? When you do something wrong, it gets very, very serious because you have the livelihood of somebody living in that property, and it’s not like, well, I just jiggle the handle. That’s what you do, jiggle the handle. It’s like, Nope. There’s what’s called property code, and there’s property code says that.
Steven:
So you’ve got to make a process for everything. If you were to start at the inception of advertising the property, screening the tenant, denying the tenant, accepting the tenant, doing the make ready, putting the tenants in, setting up the rent, making sure the rent is paid, dealing with service tickets, dealing with delinquencies, evicting that tenant, getting the property reread, there’s just a process. And if you were to follow that funnel and say, okay, what would I do here? What would I do here? What would I do here? That’s pretty much what a property management company is. It’s a bunch of processes and steps over and over again. So if somebody wants to do this, listen, it’s not rocket science, but you’ve got to make sure that you have processes. As you know, Ashley, I was very big into virtual assistants. 60% of my company operated in Mexico with virtual assistants for my management company.
Steven:
We got so good that we actually opened up a virtual assistant placement company in Mexico because we got so good at disc profiling and right person, right seat. But it’s because we knew the repetitious tasks that had to be done. We don’t personalize it. That’s why we’re able to grow into multiple cities and do what we are able to do because nobody is individualized. Everybody has to run the same way. It’s like the McDonald’s, the Emit theory. So I guess to answer your question, Ashley, you’ve got to make sure that you standardize everything. It’s got to be written, it’s got to be documented, it’s got to be followed through. Now with AI and virtual assistants, it is so much easier than how we did it. We did it with the cavemen, right? We’re writing an ash and we’re trying to draw it out. Nowadays, you could do so much.
Steven:
I place virtual assistants for people and they’re like, oh my God, I tie them up with the ai. They make the process, they make the procedure, we do a loom video. I’m like, yeah, you have. I’m that old guy. You have no idea how hard I had it. It’s true, but it’s much, much easier. But that comes with a price. Technology goes both ways, which means you can use technology, but if you’re going to be a property manager, you have to deliver technology to the clients what they expect. So you don’t get to use spreadsheets and do snail mail. You’ve got to have a system to fulfill the contract and to give good customer service with the same technology you’re using. So I dunno if that answered the question. It’s not hard. It’s easy. And virtual systems are easy to use if you have the right systems wrapped around them.
Tony:
Steve one, I love that breakdown and love that explanation. One last follow up question for me, because I think inherently people understand the value of having documented systems and procedures. I think where they get bogged down is just the pure volume of things that they believe they have to document. If someone’s got zero documentation, no standard processes, it’s all tribal knowledge, how do they decide where to start first?
Steven:
That’s a great question. And my suggestion would be is what’s on fire? What is just a dumpster fire in your life or in your business? Start with that and start working out from there. You get to the core of the heat of the problem, and I would start with that as the process and just listen. Nowadays, when I coach people and I tell ’em like, listen, you can talk into your phone and say, okay, first thing we’re going to do is we’re going to run an application and we’re going to do this, this. And you just talk into your phone, you send that to a VA or you upload it to AI and say, create a process for this. If you did two processes a month, that’s every two weeks. You’ve got to live your life, you’ve stuff to do. So if you did one process in a week and the next week you’re doing it where you’re finalizing it, making it pretty.
Steven:
So a week to create a week to make pretty a week to create a week to make it pretty, that’s two a month. In one year, you would have your whole business system and procedure drives. Now this goes into working on the business and not in the business. So it’s a matter of saying, okay, I’m going to take two hours. I’m shutting off everything. I’m going to disconnect and I’m going to spend two hours and I’m going to talk into my phone and I’m going to hand this to my virtual assistant. She’s going to load it to ai, and we’re going to create a process for what is on fire and what gets inspected gets res, respected, meaning now you put a couple key performance indicators, two or three, how many leads came in? How many did we talk to, right? How many people did we evict?
Steven:
How much rent did we get? Very simple. People go over the top with this stuff. They’re launching a space shuttle. NASA like, dude, what is all this stuff telling you? They’re like, I don’t know. I’m like, well, then it’s useless. It’s worse having too much information than not enough. So put a measurement tool next to each process. What’s one thing I’d like to know with this process? I’d like to know how many lease applications came in. That’s a good metric. Let’s start with that. So my answer, Tony, is it’s inch by inch, right? It’s due two per month, one every other week. By the end of the year, you will have a business that’s processed and proceduralized that you can hand over to virtual assistants because when you hire a virtual assistant, they’re going to go, what do I do? And you’re like, dude, it’s in my head.
Steven:
You should know this. It’s right here. You should understand what I’m thinking. And they’re like, I don’t get it. They’re like, oh, you got to go. You’re fired. These don’t work. It’s like, so that’s my answer is it’s not as complicated as people make it out to be. Now listen, you can get up to 20 to 25 processes when you get down into the nitty gritty. But for the basic structure of your business of flipping wholesaling, there’s about eight to 11. And that means now if you want to be go gangbusters, you could do it quicker. But if you’ve got a life and you’re trying to get other things done, just do two a month. It’s very simple.
Ashley:
The thing that I like most about the systems and processes and keeping the SOPs is onboarding more team members. And it’s not only if you’re training someone to come on, I have a VA that pays the bills. She goes in, looks at the mail and decides what needs to be paid, where it needs to be filed. But also too, when you have other people that are coming into your business, maybe another VA is they’re able to see what other people are doing and what their responsibilities. So all of the questions aren’t directed at me that they know exactly who to go to. This is the exact things they take care of to. So there’s so many different uses for building out those SOPs. And my first ever SOPI did was how to do a bank reconciliation. And it was you log into the bank account, this is the username, the password, this is the account you’re going to, this is the statement you’re going to download. This is how you file the statement. This is how you open QuickBooks. This is how you reconcile each of things. These are the common expenses that will need to be categorized. And it just went down. And then I replicated that same bank rec for each of the banks that needed bank accounts that needed to be reconciled. So just picking one SOP to start with, it could be
Ashley:
Paying a utility bill. I think it can be so valuable just to start that repetition of building them out.
Steven:
So can I share real quick with Pete Ashley, my old business partner, Pete, he was the integrator. I was the visionary. But my background being an airline pilot, obviously I’m very understanding of processes and checklists, and our dumpster fire was handing over a new, when we’d get a new client or a new tenant putting them in the property, for some reason, these people would get lost in this black hole that nobody knew for weeks. We’re like, what happened to this person? And next thing you know, this guy kind of comes up for air and he is like, you guys suck. And I’ve been knocking on the door for weeks or whatever. We had no idea. So I told Pete, I’m like, we got to create a process and a checklist for this. So Pete says, okay. He goes, I got it. I can do it.
Steven:
I’m like, you want me to do it? He’s like, no, no, man. I got it. I’m the integrator. I’m like, alright, whatever. So he spends three weeks and he’s like a mad scientist and he’s doing, I’m like, what are you doing, man? He’s like, I got this. So he pulls out this process, right? It’s a checklist and it’s 19 pages long. And I’m like, what is this? He’s like, that’s the process. I’m sit down at your desk, check, turn on your computer, check open browser check. I’m like, oh. I said, so Pete, let me explain something to you. I said, when I’m applying an airplane and we are going down the runway, and if we have an engine fail, write at rotation, which is the most critical time when you’re flying a plane for anyone who’s scared of flying, I’m sorry. But that is the most critical time.
Steven:
When we have an engine fail, we have to take off. We have to secure the engine, we’ve got to dump fuel, we’ve got to go through all these processes, we’ve got to come back around and land. That’s three pages. So we can take a plane, lose an engine, come around, land a plane in three pages, and you’re telling me it’s 19 pages to get this person onboarded. And he’s like, huh? He goes, how long should it be? I go one page. So when people are writing these processes and checklists, it’s what will kill you is what you identify. Now you can have an expanded version that’s 19 pages, but that’s when you say, Hey, what does it mean? Load client into software. You check that off saying, I loaded the client into the software. If you don’t know what that means, then you go into the expanded version, which is the standard operating procedure.
Steven:
SOP has Ashley said, and that’s where it’s like two pages long explaining everything. But you don’t need that in the checklist. That’s just loaded client. Yes, I checked that off. That’s acknowledged. So that’s something that I think people need to understand. You don’t want it to be so detailed that you’re just like, this is going to take me 50 minutes. Because what’s going to happen is you’re going to bypass things and it’s the things that will kill you. I forgot to get the guy’s bank account information that would’ve been good to know showing the guy how to mail his rent. I don’t need to tell him that. Right? So those are the things you want to make sure you just put the critical things in the process procedures checklist that could kill you. So just saying you want to do this, but don’t go too detailed. A lot of investors are C profiles in the disc, which are very detailed engineer types, most of them. And so a lot of that, they will go to the nth degree with too much detail, too much information, and that could stifle what you’re trying to accomplish.
Tony:
One follow up from me, Steve, we use a checklist pretty heavily in our business as well. And first, lemme say for anyone in the same about doing a checklist, I would highly recommend the checklist manifesto. I don’t recall who the author is, but he was like a doctor, I believe, but
Steven:
Oul Gawande,
Tony:
There you go. O’Toole Gawande. Great book. But I pulled out one of our checklists right now, and it’s for filling out our monthly reports that we have for our properties. And the checklist itself has eight steps, but next to each step, and it’s very simple what the step says, right? It’s like email slash slack, Tony, that all the reports are completed, but there are the steps there that we outline. But then there’s a Loom video that I recorded that goes into detail on each step, and each loom video is maybe 60 seconds to seven minutes, depending on the length of that step. But if they ever need to remember, okay, well how do I actually do this? Again, they can go back and watch the Loom, but once they’ve done it enough times, they can just knock through all the steps themselves. So that’s how we kind of combine our quote, SOPs with the checklist. Checklist is super high level. Then there’s a video and supporting documentation for the details on that step.
Ashley:
I think between the three of us, we could go into very much detail of this. And
Tony:
So if you’re
Ashley:
Watching on YouTube and you’d like us to bring Steve back, maybe sometime we can do a actual live webinar with Steve or something like that. So I actually go deep into building out these checklists and your SOPs. So comment below in the YouTube video if that’s something you guys would be interested in.
Steven:
I’ve done it before where I’ve actually shown them the airline checklist and actually go in and show you how we run checklists with the airlines and how our SOPs are. And it starts putting things together because flown, but they don’t know how do you guys handle things. So I’ve done that in webinars for people where I’m like, okay, let me show you what a checklist looks like flying a Boeing 7, 7, 7 and how we go through it. There’s 1100 checklists on a 7, 7, 7. So that’s a lot of checklists. I don’t need to know them, I just need to know where to find them. But like you said, Tony, somebody had to create them and make them simple that in the heat of battle, I can get to it. And I’m like, okay, page one of 19, what do I do? Page three. It’s like, we don’t have time for that, dude. Get to the heat of it. Yeah.
Ashley:
Well, Steve, thank you so much for joining us today. Can you let everyone know where they can reach out to you and find out more information?
Steven:
Yeah, you can go to my website, steve rosenberg.com. It’s R-O-Z-E-N-B-E-R-G. You can find me on Instagram, Rosenberg, Steve, or Facebook or LinkedIn or YouTube, all the usual channels. But if anybody has a question, obviously they can reach out to me. I’m always available. I’m always here to help. I think that giving back is something that’s important, and I think more people need to do these things to give back to newer people, that they can learn things from our mistakes. And that’s kind of how we all give back and we all get better. And I learn just as much when I go to events and I talk to people, something I don’t know. So I think I would just encourage all of you, when you will be successful and when you are successful, just get back, help out, be involved in bigger pockets. Really try to be engaged because it’s the law of reciprocity. The more you give, the more you will get back, and I’m a firm believer of that.
Ashley:
Yeah. And if you enjoyed today’s episode with Steve and appreciate his time, he also has a great foundation live like jet.org that you can go to and check that out and maybe make a donation. Well, Steve,
Steven:
Yeah, that would be great.
Ashley:
Thank you so much. Always great to have you on the podcast. We appreciate your time and all of the information, the mindset, the tactical stuff, so thank you so much.
Steven:
Thank you guys. I appreciate you.
Ashley:
I’m Ashley, and he is Tony. Thank you so much for joining us for this episode of Real Estate Rookie, and we’ll see you guys next time.
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