How to Build Your Own Real Estate Investing Team (From Scratch)

22:09And if it's a giant company and you're like, I actually want to do it this way. And they're like, yeah, you have like six units with us. This other person has 600 unit. We're doing it their way. It's a little bit different. The second thing is sharing a philosophy about property management. I know you and I have talked about this a lot, but I am a long-term investor. I think a lot about maintaining my properties, being proactive about maintenance, being proactive about tenant satisfaction, being proactive about communication. And if they can't do those things, I am out, hard out. Because to me, the hardest thing to find in a property manager is proactive maintenance and proactive tenant satisfaction.

22:55Someone who thinks ahead and says, that's going to break. I need to fix it now before it becomes a problem. It's a hard thing to do when you're managing a ton of units. I totally get that. It is a hard thing to do. Even when I self-manage, it's a hard thing to do. But having someone who is trying to do that at least, and they'll miss things, but trying to do that, super important. Same thing about tenants. Listening to them, realizing, understanding if they're satisfied or not satisfied in the unit, if they're not trying to come up with a solution. Because I want to keep tenants and I want a property manager who cares deeply about the tenant experience and that they're happy in their home.

23:34Like that to me is like so, so important. And when I talk to property managers about that and say that to them, they're like, I love that. But every owner is the opposite of that, which was interesting for me to hear because I kind of assumed people are more like that. But those are kind of like deal breakers for me.

23:52Brandon Turner:No, I think that's great. I've told you before, one of the reasons I really liked my property manager and selected him is because when they talked to me about their business, they never referred to the tenants as tenants. They always referred to them as residents. They wanted them to enjoy living in their residence. They weren't. I feel like there's always this negative connotation sometimes with the word tenant, like somehow you're less than because you're renting. Yeah, I hate that. Absolutely. It should be no negative connotation around it. We don't have a business without them. And so I like the way that they just kind of set the tone with even how they refer to the tenants of the residents within the business.

24:31Brandon Turner:I thought that was great. Good property managers are hard to find. It's going to be a challenge to find them. You're probably going to go through two or three of them before you find one you really like, and then that may not even last forever, right? So the high level things that I'm looking for are, how are you incentivized? Are you incentivized for the wrong things or the right things? In other words, a lot of property managers say that we keep all the late fees. Oh, no, no, no. That tells me that you're incentivized for people to pay late because if they pay late, there's an additional fee and then you keep that fee.

25:05Brandon Turner:Yeah, so bad. No, that's not how I want my business to be set up. I don't want you getting paid more when my tenants pay late. That's absurd. A hundred percent. And like a good property owner, manager, landlord, whatever, if someone's late, you should have a conversation with them. Why are you late? Figure something out. If you're making money off the late fee, you're probably going to let it go for 10 days and be like, all right, I made some money, which just puts the tenant in a bigger hole. Late fees are not a revenue stream. It is not a revenue stream. That sucks. I don't like that. And the same thing with turnover, right?

25:45Brandon Turner:So this is a nuanced thing. This is why you have to ask your property manager how they make their money or what dollar from your tenants goes to who. For a turnover, if you have a property manager who gets paid more money every time they lease somebody up, then they're never incentivized to help you have long-term tenants because they don't make an additional lease-up fee when a tenant moves out. So in other words, your property manager is incentivized to turn tenants out of your unit. And tenant turns are the biggest cashflow killer there is. Probably because property managers charging one month rent to lease up a unit is the worst deal in all of real estate.

26:33It's so bad. It's, I mean, you can find ways around it, but I hate that. But you're so right. You're incentivizing them to have turnover every year. They make more money than keeping tenants. It's terrible. You can't have that. And I've found better property managers will have a renewal bonus where they get a little bit of payment for keeping it. Love that. I will pay you to create mutual benefit. You get money. I win because the tenant stays. The tenant wins because they're staying in a unit they like. You win, you'll get a bonus. And you also don't have to manage a turn. Let's incentivize that behavior.

27:12Brandon Turner:Yes. You want property managers who are incentivized for things that are positive things for you. If you win, they win, right? So they're incentivized to help your business to run more effectively. That's the scenario that you want, not the opposite. Incentive alignment with all of your team members is just so important. If you hire a property manager, you've evaluated them, you think they're good, and you trust them, let them do their job. Give them a leash. Get out of the way. It's a hard job. Stop trying to bring in your guy to go do all the little fixes because it's going to save you$20 or$30 here or there.

27:50Brandon Turner:Let them hire their people. They can get them in there faster. They can get the unit turned faster. Yeah, it might cost you$100 to$200 more than if you hired your guy, but they're going to be done in three days and your guy hasn't showed up yet. Put yourself in their shoes. Just imagine I'm the property manager and Henry hired me. And he's like, I trust you, Dave, to manage my units. And then every time I do something, you get second guest on it to save it. And it's going to totally disrupt my entire process. And the thing that I do for all of my units, which might be 300 units and Henry's are 30 of them, that's not a trusting relationship.

28:25Like the trust has to go both ways. And if they aren't meeting your expectations, that's a different story. But like, you have to know that by hiring a third party, you are not going to have the most efficient cost structure ever. And that's okay. That's kind of the point of hiring someone else is you're hiring it out.

28:43Brandon Turner:All right. We've got more team members that we want to discuss, but we're going to jump into those team members right after the break.

28:52All right.

28:53Brandon Turner:We're back on the BiggerPockets podcast. Dave and I are talking about building your team. All right. Here we go. This is the one. This is the one where people struggle. This is the one that I wish I knew more about before I got started. Good contractors are hard to find. Contractors can be hard to keep. Again, it's this relationship you have to manage over time. They're literally thousands upon thousands of dollars tied to these things. And here's my general take. A lot of contractors are good wrench turners and not necessarily the best business people. and I think that that's where a lot of the hang-up comes in.

29:34Brandon Turner:So with contractors, where have you had the biggest struggle? I have had struggles with contractors all over the board. But I think that the thing that really breaks down is when there are unclear expectations of scope, I think is probably the biggest thing. Where you think you've communicated something clearly. The contractor agrees on a price and a timeline. but there's some disconnect yes between what the contractor thinks is going on to what you think is going on and then everything just melts from there like once that happens everything falls apart because you're pissed because things are late and it's costing when the contractor's pissed is like i did what you said and like i'm sure there's mutual blame there but like that's that's where i feel like the challenge is absolutely that's 100 uh where my head was it is uh expectation versus reality.

30:27Brandon Turner:And I've just learned the hard way over time that you truly have to document as much as humanly possible. If it is a brand new contractor relationship and you are new to investing, like get as much down on paper as you can. Because when you're brand new, you don't know what you don't know in terms of managing your renovation and expectations on what you think you're supposed to get delivered at the end of a project versus what that contractor thinks they're supposed to deliver to you. So like you kind of have to go overboard for your first couple of projects in terms of like over communicating to your contractor about what work you think needs to be done.

31:08Brandon Turner:And so the way I typically handle this is I will write out a scope of work and oftentimes I'll say, hey, I got a budget of X. Now I may not be telling them all of the budget that I have because I don't want them to use it all. But your contractor should have some guide rails around what money you have to spend on this project. Oh, 100%. Yeah. Right. But I agree with you. Don't say it all about. So if I've given them a budget and I've given them at least a high level scope of work, oftentimes what I ask of my contractor is to say, hey, this is the budget that I have. This is the scope that I have.

31:45Brandon Turner:Help me understand what I'm missing through the details of this. Because I could say, yeah, I want to spend$5 ,000 on drywall. They're going to know, well, Henry, I looked at this house. It's 2 ,000 square feet and every room needs new drywall. This isn't even close to enough. And so all the little nuanced things that I'm not thinking about, that's where I need them to help me with the bid. And so if you're brand new, I'd give them a high-level scope of work. and then you give them the budget and the guide rails and then say, what is it that I'm missing in this scope of work in order to get this done?

32:20Brandon Turner:That's just gonna help you understand how to write better scopes of work in the future. But it opens that line of communication between you and your contractor. And do you use this to like evaluate people when you're selecting them? Like you're giving the full scope of work to people before you hire them. Yes, that is a secret I learned as a newer investor because what was happening was I was inviting contractors out to look at a property and a project. And I'd talk to them a little bit on the phone about it, but then they'd get there and I'd either have one of two things. They'd get there and they'd go, this is way more than I'm comfortable doing.

32:58Brandon Turner:And then they're upset because I wasted their time. And then I still had to go get into the contractor out there. Or they'd come out and it'd be the opposite. They say, this isn't enough. This is too small of a job. I'd have to charge you too much for me to make this worth my while. And so for now, I do a high level scope of work. I don't get down to the details. I'm not counting screws and nails. I'm just saying room by room. In this room, paint floors, trim. In the kitchen, new countertops, backsplash, and light fixtures. And it's like super high level, room by room, what I'm wanting to do. And then I send that up front and say, hey, I got a project, 123 Main Street.

33:35Brandon Turner:Here's the high level scope. Would you be willing to come bid this job? So that way they can look at the scope of work and be like, yeah, this is absolutely something I'd be comfortable doing. Or no, I don't want to touch this with a 10 foot pole, or this is too tiny for me. I'm too busy. And then you save yourself a lot of time on the front end. Yep. Absolutely. That's great advice for how to select them. I got to drop some hard truth on the audience here though, about finding contractors. There's no trick. there's no secret there's no secret there's no secret to do you're gonna fall on your face guys sorry there's no magic bullet this is just part of the job where you grind and sometimes i feel like we talk a lot about systems and process on the show as we should it's super important but there are some areas of the business where you just got to put in some effort and finding contractors is just one of those areas it's a it's a hundred percent a relationship game James is giving good tips about he pulls over on the side of the road when he sees people.

34:36You know, that's great. But ultimately, it's about managing a relationship. And then, honestly, the best way to find a good contractor is find one, and then they'll know all the other good contractors. So when you find one, treat them like gold. Pay them on time. I tip contractors sometimes, depending on the situation. But if they do an exceptional job, I tip them. Then they pick up my phone the next time. then when i say hey do you know a plumber they're like yeah i know a great plumber and i'll tell them that you tipped me so they're gonna call you you know like don't nickel and dime a great contractor like that's the game and it's similar to property manager it's similar to deal flow this is a lifelong thing it's part of the journey of financial independence and real estate investing it just if you if you're unwilling to do this you're like go buy turnkey properties and invest passively like this is just part of being an active investor it's not just finding them it's

35:31Brandon Turner:keeping them. And one of the best ways to keep them, you're right, is pay them a fair wage for what they're doing and pay them quickly. The sooner you pay them, the better, because then they'll prioritize your jobs and your phone calls if they know when Henry calls, he's going to have work and I'm going to get paid as soon as that work is done, right? Versus somebody else is going to call, they'll do the work and then they're chasing them for three or four weeks trying to get paid. And then you have to manage that contractor relationship going forward. Because oftentimes what happens with me is I'll have a good one.

36:01Brandon Turner:They're doing good work. I'm paying them for them. And then by job three to five, I start to notice costs for the same thing are creeping up. There's just creeping up a little bit, price over price. I think there's just, sometimes it just happens. They see that, hey, they think, you know, you're the guy with the money. You gladly paid me$3 ,000 for this portion of a job last job. It's$3 ,500 this time. You didn't see it. Maybe it's$4 ,000 the next time. You got to keep an eye on those things as to what they're charging and why. So for me, it's just communication. I'll never tell a contractor, hey, I'm not paying you that for this.

36:44Brandon Turner:I'll say, hey, I saw you charged$8 ,000 for flooring in this house. And two houses ago, you did one very similar square footage, same flooring. and it was about six grand. What was the difference between those two? Right? And they're either going to tell me a difference that makes sense or they're going to make something up or they're going to say, hey, I'll adjust that price. That's as deep as I get. I'm not like, oh, you're trying to gouge me on my prices. I'm not going to work with you anymore. Adjust the price and let's keep it moving. If not, then I'll find somebody else to go do the flooring.

37:12Brandon Turner:But you got to pay attention to those things. So I'm telling you, I've had contractors, when they started working with me, they were driving an F-150 and by job five, I was like, where'd you get that F-350 from? You. This is my truck.

37:29Brandon Turner:In all seriousness, just keep an eye on the bids, track it, ask questions. It's not rude to question a bid. If your contractor makes you feel like you're a butthole for asking them about the bid, you need to move on. This is just, you'll learn. Just don't be afraid. I think that's the kind of thing. It's like, it can be intimidating. Contractors know their business. So like when you're first starting, you're probably going to come at a disadvantage of knowledge about what things should cost. The only way to get better at that is volume. Just take some reps, talk to 20 of them, talk to five plumbers, talk to five HVAC people.

38:06You will start to understand what the true value is and talk to other investors and what they pay for things like that. That's how you really start to understand what the real value is and whether you're willing to pay a little up for higher service or better timing or better communication. You want to go the budget route with caution, but just like that's how you really learn. And you just, you got to do it.

38:27Brandon Turner:Error on the side of over communication always. And then keep all of your bids, whether you go with that contractor or not. Because every contractor bid is data to help you get smarter about how to even understand what kind of work a property needs and how much it's going to cost. So if I were you, I'd keep all your property bids. I'd load them into Claude or ChatGPT and have it break each section down and try to give you like a cost per square foot for every trade and just keep that as a running data set that you have so that when you get more contractor bids, you can kind of just compare it to the other ones and say, hey, in comparison to the contractor bids I've given you in the past, does it seem high?

39:09Brandon Turner:Does it seem low for paint? Does it seem high for interior paint? Does it seem low for flooring? Does it seem high for flooring? If you're keeping track of all those bids, AI can help you better understand not just how to evaluate what a rehab costs, but to validate a contractor's bid. Great advice. I like that a lot. All right. Before we wrap this one up and give them the final bonus, where do you like to find contractors? For me, I found my best contractors, the best contractor relationships I've found is literally through other investors recommending good contractors and through driving for dumpsters, finding people on or like I found roofers and plumbers and cabinet guys just going to jobs and talking to them and seeing if they do work on the side.

39:50Brandon Turner:Those are the two places I found the best relationships. For sure. Yeah. That and agents. Agents have helped me. Yes. Again, networking is by far the best way to do it. The other way I found good relationships is by asking the guys at the pro desk at like Home Depot or Lowe's which which contractors they enjoy working with the most. And they'll they'll have some good recommendations for you. All right. This has been a long episode, but should we do the bonus? Yeah, let's do the bonus. What you got? All right. I just I'll say this quickly. I just think finding people in your own area that can help you give you feedback, maybe even give you contractors, deal flow.

40:27so important. I'm going to give you a little bit of advice about this. I think the ideal mentor or person you should target is two years ahead of you in your investing journey. I think a lot of times people reach out to me all the time, want mentorship, want to go grab a beer, talk about deals. I like doing that stuff. But if you're brand new, my frame of reference, not because I don't want to help, I just can't help you that much. I am doing different things in my career at this point, and I am not the best person. But someone who just did their first house hack, or just did their first BRRRR, and are moving on to their second one, that's someone where you can offer mutual benefit.

41:10And those are the relationships that are most valuable is where you can help each other. Like I want to help someone, and then maybe they send me a deal, they tell me about a great contractor that they work with, you know, something like that. I'm not asking for that up front, but you want to be close to this person in terms of your goals, your stage of investing. You don't want to shoot the moon. And I think a lot of people miss that. And the best way to do that, real estate meetups, I would say, and biggerpockets.com. Go to biggerpockets.com. We have millions of people on there that are trying to do this.

41:42Meetups, BPCon, that kind of stuff. Go find someone you vibe with. It doesn't have to be the perfect person, just someone you enjoy talking about real estate with. That's going to be super valuable.

41:50Brandon Turner:You know, I'd call them almost an accountability partner because then the help that Dave's asking for just kind of comes naturally. If you meet an investor, you vibe with them, you're doing similar things. Maybe they're a little bit ahead of you. Maybe they are a little bit ahead of you, but they still have some experience. Yeah. Just say, hey, once a month, let's hop on a call. Let's talk about what we're working on. 30 minutes and move on. Just establish that relationship. And then in those conversations, that's when you can say, get that feedback. Hey, I looked at A, B, and C or 1, 2, 3. What do you think about this?

42:18Brandon Turner:The relationship that you have with other active investors can literally save you so much money. 100%. And just having someone with a different set of eyeballs look at your deal or listen to what your strategy is going to be because they maybe have done something similarly or they know somebody that's done something similarly and what went well and what didn't go well. Like this can be a lonely business because a lot of your friends don't do this. You need some investor friends, accountability partners that can give you a temperature check on deals or strategy or maybe help you stick to your goals.

42:53Brandon Turner:Because sometimes I'll find something that could be totally profitable, but would derail me from my goals or strategy, which are there because they're leading me towards a lifestyle that I want real estate to provide me and not just chasing the shiny object or the quick dollar over here. Even though it might make me money. Is it the best use of my time? Is it getting me where I want to go? like I need the people that can tell me those things. It also just makes it more fun. Like real estate investing should be fun. It's, and as Henry said, it's lonely. Having a buddy who does real estate with you makes it all more fun.

43:26And like the whole thing in real estate is how long can you stay in the game? And if you can make it fun, you can stay in the game a whole lot longer. So find a way to make it fun. It doesn't have to be all your friends. You've probably heard me rant about how I hate that thing about your network is your net worth. and you should only have friends who are rich. I hate that. But have some friends who are investors. I think it's helpful to have that part of your peer group and find people you like. It's great. It's some of the more rewarding relationships I have in my life. I've met through people in real estate.

43:57It's great. That's very true. Present company included. Oh, yes. Best friends forever.

44:05Brandon Turner:All right. Well, Dave, thank you so much for chit-chatting with me about building a team. Hopefully you guys found good value in this. these are all team members that Dave and I have hired, fired and hired again. So hopefully you can learn from our experience and go out and don't be intimidated by this. This is all something that you, if you're going to be successful, you're going to do it anyway. So hopefully this will help you do it more effectively and efficiently. Thank you so much, Dave, for sharing your inputs and thank you so much, everybody for listening. And we'll see you on the next episode of the body relax and let go of whatever you're carrying today.

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