Show Summary

Many new rental property investors rely on academic assumptions on things like vacancy, repairs, turnover, etc. However, if you are not spending a lot of effort finding the right tenants and contractors and managing those relationships….your profit may take a huge hit. Pete Neubig joins us for this episode of the FlipNerd.com Expert Interview show to tell us why property management is a ‘people business’. Check it out.

Highlights of this show

  • Meet Pete Neubig, successful property manager and President of the Houston Chapter of the National Association of Residential Property Managers.
  • Learn about the importance of using processes and procedures to find, select and maintain good tenant relationships, and how to stay safe from potential legal issues.
  • Join the conversation on the importance of quality, thoughtful management to maximize profits from your rental properties.

Resources and Links from this show:

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike: Hey, it’s Mike Hambright with FlipNerd.com. Welcome back for another exciting Expert Interview, where I interview awesome guests in the real estate investing industry to inspire you and help you learn. Just a quick reminder of our upcoming REI Power Summit. It’s going to be a very large online event. We have over 50 speakers lined up so far.

It’s 100% virtual. You don’t need to travel, you don’t need to dress up. You don’t need to do any of that stuff. You can watch it from wherever you’re at, anytime you want to. You’re going to have access to it for 12 months. So check out REIPowerSummit.com, coming up here very quickly.

For today’s show, I’m joined by Pete Neubig. He’s a real estate investor and property manager out of Houston. Pete is actually the president of the Houston chapter of the National Association of Residential Property Managers and the winner of a number of awards for his leadership roles. Pete has a ton of experience with rental properties including what not to do, like buying a bunch of properties based on numbers and assumptions that didn’t pan out. I think that probably what I just said resonated with a lot of people.

Lots of rental property investors, especially newer ones, me included, started by making academic assumptions on vacancy rates, maintenance and a number of things like that. Which ultimately are, quite frankly, never accurate certainly with a single house or a small number of them. So there’s a lot more to owning rental properties than just the numbers you estimate up front. And that is what Pete is going to share with you today.

To be successful in the rental business, you need the understanding that property management is a people business. From your tenants, to the people that you partner with, it will make or break your business absolutely. No matter how accurate you think your assumptions are up front. Before we get started with Pete though, let’s take a moment to recognize our featured sponsors.

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Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions, as real estate investing can be risky.

Hey Pete, welcome to the show.

Pete: Thanks Mike, thanks for having me today. I really appreciate it.

Mike: Yeah, it’s such a great topic because you know rental properties are obviously hot right now. It’s literally as you know, being referred to as an asset class now. It’s bringing in traditional investors that don’t invest in real estate and moving money out of the market into rental properties. All those folks, I mean I did it when I was new and I still have to do it on some level.

You have to make assumptions on vacancy, maintenance, repair costs and a lot of things that can very easily not pan out because it comes down to who you’re working with and of course the tenant. The tenant can just take you to the cleaners if they want to. And they do once in a while. So it’s going to be a great show.

Sorry, I’m doing all the talking now. Tell us about you. Let’s learn a little bit about how you got started because I know you haven’t been doing this your whole life. Tell us some more about some of the things you have going on today.

Pete: Sure. Well I got started back in 2001. I always wanted to be an entrepreneur. But I never really knew how to go about it. My family is . . . I have some uncles, grandfather and they were all entrepreneurs. But I went the traditional route which was get good grades in school, go to college and get a job. Sound familiar?

Mike: Yeah.

Pete: I think most of our listeners, most of your listeners . . . ours. Most of your listeners . . .

Mike: My friends are your friends, Pete.

Pete: A lot.

Mike: Yeah.

Pete: Give me that database then. So most of your listeners probably went that traditional route. I was an IT guy for 20 years. I started buying real estate when I was an IT guy and I didn’t really know what I was going to do. So I sought out real estate, got educated, found a local real estate group and bought some books. I actually had the “No Money Down” with Carleton Sheets on the cassette tapes.

Mike: There you go.

Pete: I was all in back in 2001. In 2001, I bought my first property. I actually bought two properties on the same day, one was a duplex and one was a hundred year old apartment complex. So talk about trial by fire. I thought that was my way out. I thought eventually I was going to own 50 or 100 properties. I was going to make enough money from those properties and I was going to be “retired.” Living the American dream.

Mike: And you also probably made the assumption that they were passive, right?

Pete: Yeah. That’s what they teach in real estate school.

Mike: It’s passive. Whenever I use that word “passive” about our rentals, I get a sharp elbow from my wife because they’re not passive. We didn’t even manage them ourselves and it’s still not passive.

Pete: Anything but passive. Especially if you don’t have a really good team around you. It can be passive if you have a good team. Unfortunately, I made all the mistakes that a new investor would make. Unfortunately, I made them like three years straight. Some people just don’t learn as quickly as others.

I would think that most of your listeners, they’re very well educated. They probably have a white collared job for the most part. They’re probably employee based. What I found is that most investors are high Cs, they’re very analytical. So what looks good on paper, then they say, “Great, I’m going to buy it.” Its kind of what you talked about in your intro. I’m that guy, I’m a very analytical guy, being an IT guy, you can imagine it.

So I would look at these properties in basically the lower income section of the town and I’m like, “Holy cow, $40,000. I only got 20% down, 5 grand. They rent for 800 a month. Okay, 10% vacancy, 10% maintenance. I’ll still be making 35% cash on cash return. If I buy 20 of these things, I’m going to make a ton of money.”

Mike: Right.

Pete: I think a lot of people get excited about the numbers and rightfully so. But that’s what they’re taught. Like when I was at the real estate group, when I was reading books, back then we didn’t have the blogs and a lot of the sites like FlipNerd to get educated. So you’re basically just taking what you can read and from other people. A lot of that stuff is all about the numbers. It’s right, they talk about appreciation, they talk about tax deductible, the deduction.

They talk about the cash flow, they talk about the cash on cash return, they talk about the rate of return instead of putting money in the market. A lot of that stuff is true if you buy right and then when you buy it, if you manage the asset correctly. And managing the asset is simple, it’s managing the people inside the asset that becomes challenging at times. Especially on a lower spectrum, your profit margins are higher, in your Class D properties. The reason why the profit margins are higher is because the management of it is much more difficult.

Mike: Right.

Pete: So when my business partner Steve and I, we ended up buying, it was like 25 homes in an 18 month period. It was quite a lot for two guys that were working full time and just trying to make it. Just trying to do the right thing. We loved buying property. It’s kind of like you’re courting your girlfriend, you’re courting a girl to go on a date with you. Just the art of the deal, right? You love the deal.

And then what happens is you have this house and now you’re married to it for however long you have to keep this thing. [inaudible 00:08:55] you’re talking 20 or 30 years potentially. All of a sudden it becomes, it’s the mundane little things that you need to do, day in and day out that most people don’t like that, most investors don’t like to do. Because we like to look at the numbers, buy the deal and “Let’s go to the next one.”

Mike: Let’s go the next deal, yeah.

Pete: Let’s go to the next deal. So some of the challenges that we had was we were going to the next deal and we did not have a good policy and procedures in place. I know everybody, people out there might think, “Why do I need policies and procedures, I’m only going to buy one, three, five, seven doors?” The fact of the matter is you need to have policy and procedures in place to make sure that you don’t make the mistakes that can be made.

Quick example would be making sure an application or an applicant is fit for your home. Whether you’re low income or high income, you should still have qualifications. Just having a heart beat, like getting a mortgage back in the early 2000s, is really not a good qualification.

Steve and I did not have that. I mean if you had cash, we took you. We would run your credit. If it was bad but if you didn’t have a felony, we would take you. So our qualifications were a little too low. One of the things as an investor, when they buy a property, the government sees you as a business. The state sees you as a business. The tenants think you’re this big business man.

You have a business. You need to treat it like a business. We tell all of our clients now that by having a property management company, it has those policies and those procedures. They really take care of the inbound stuff like the applicant. We had a big challenge, we had a 30% eviction rate. Then of course we had to learn about the eviction process real quick when that was going on.

It’s things like policy and procedure on how you’re going to handle applicants. On how you’re going to handle maintenance requests and on how you’re going to handle lease violations. That a lot of people don’t want to be, a lot of investors don’t want to be bothered with. They just want to buy the deal. They want to have mailbox money and they want to move on to the next deal.

When Steve and I were . . . it was during Hurricane Ike down here. We’re in Houston, Texas, so it was down here, we had Hurricane Ike come through. Blew a bunch of roofs off, it was pretty devastating down here. I remember he and I driving to all of our properties and I’m like, “You know, what are we going to do man? We’ve got to get out of this.” It was just really a low time for us as investors.

We were losing money, our properties weren’t really being managed correctly, our fault. So we went to go look for a management company and we found out, we thought we can build just as good of a mousetrap or a better mousetrap. That’s when we started putting policy and procedures together. That’s when we actually created Empire Property Management to manage our own properties. We never anticipated that we would be where we are today which is we managed close to 500 units.

We have a staff of about 16, 18 people and I actually have a real estate company on that to help our investors find deals as well.

Mike: That’s great.

Pete: It’s been a long, sometimes torturous road, but it’s really been fantastic. We are having a lot of fun right now.

Mike: Yeah, maybe you could share some stories on or a story on . . . I think one of the challenges is that by nature you said that a lot of real estate investors tend to be very analytical. Another word for that, and I fit in that boat and my wife does, so I don’t say this word to offend anybody, another word for analytical is cheap.

Right? Especially real estate investors. I’ve bought so many houses and I’ve been classically trained to buy them deep, that it’s hard for me to pay full price for anything, anywhere. Even outside of real estate, it’s tough. You try to . . . I’m like a value play. I really want to get a value.

So where you run into trouble sometimes is by thinking that, “I can just do that myself.” Because I think what happens to some people, I’ve fallen into this boat, I think a lot of people have is that one of the things that you weren’t analytical enough on is your opportunity cost of what else you could be doing. Whether it’s finding the next deal or spending more time with your family, enjoying life.

So I think a lot of people especially early on just assume, “I’ll just manage it myself. I got a maintenance guy, he can deal with stuff.” But stuff happens. Stuff happens in the middle of the night. You’re maintenance man can’t be found, all those things. I think real estate investors that are hearing this or joining us today need to be true to themselves and say, “Yes, I had to pay for property management.”

At first thought, I think the key, which you’re talking about today too, is systems and putting processes in place. If you have the time and you want to do all that, you think you’d be better than somebody else, then do it. But I think if you just assume that you can just wing it and figure it out, it will end up costing you a lot more than the property management in the first place.

Pete: Absolutely. What we tell people is as an investor, a lot of investors they found somebody who helped them find a deal whether it’s a licensed real estate agent or a wholeselling company. But they use a professional to find a deal. They use a professional to do their taxes. Not many investors that I know, once they buy that first house, they hand the taxes off. They don’t go to H&R Block anymore. They hand it off to a professional.

They have a real estate lawyer that they work with, a professional. Then they get this asset that’s 200,000 or 300,000 dollars. And then all of a sudden they think that they can manage themselves without hiring a professional. I think a lot of people think it’s real easy and I guess it can be at times. However as soon as something goes wrong, you can find yourself in a court of law and not knowing what’s going on.

For example, we have a certified property manager on staff. I’m a residential property manager and an RMP designation from NARPM. We’re all licensed agents, so we have a lot of knowledge. We’ve been doing this for over, collectively, 40 or 50 years. My profit manager is over 25 years of experience.

What happens is if you don’t know the fair housing laws, you can get yourself in trouble. Fair housing now has an app that you can put on your phone. As soon as somebody feels that there’s a violation, they could just go right to their app and put in a violation against you. If you don’t know your local codes, we have Texas property code here which, you’re in Dallas, so you can have the Texas property code. I’m sure people in the states have city and state codes that they have to abide by.

The renters have certain rights and the applicants have certain rights. If you don’t know those rights, you can really find yourself . . . all of a sudden for a cup of coffee a day it takes to get a property management company it was well worth it because we look at ourselves as an insurance company. Our insurance is that we keep you out of the court system. That’s mainly what we do. By doing everything on your behalf, the right way.

Mike: Yes. Funny, back to that opportunity costs. I’ll just say, unfortunately, I’ve been sued a few times. It’s very frivolous. My attorney always says,” They’re never going to win this. There’s no chance they’re going to win this.” But I will tell you, that doesn’t mean that I’m not going to spend 12 to 18 months, have to spend a bunch of money with an attorney, have some sleepless nights thinking about stuff, just things like that.

Even if you’re not in the wrong doing, which we pride ourselves on doing everything right. Never harming anybody. So it’s painful personally when that stuff happens because you’re like, “I’m a good person. I didn’t do what they said.” But let me give you another example, we had a rental property one time.

This is a little bit of a lower end property that we typically don’t have. But it’s just one that we bought because it was just like you said, we need to catch one and we caught one. It’s an old house, it’s in an old part of town. Most of the houses on the street, I wouldn’t live like this but don’t have air conditioning. Crazy, we’re in Texas right?

But ours did, it just had window units. I’m sorry, it didn’t have window units. We put a central system in. The woman started filing complaints with the city that she was living in substandard conditions. What it turns out is, so get this, she was leaving the back door open so that her dogs on the enclosed patio could breathe the fresh air. Which was just this big sucking sound of like all of the cold air is going right out that back door.

That was literally the entire problem. But it didn’t mean that we didn’t have to deal with the city on a bunch of issues. I kept sending my HVAC guys down there to fix stuff. I ended up having to go down there myself. You spend all this time on it and it’s just we’re living in a society were everybody is a victim. Even if you’re in the right, it doesn’t mean that it’s not going to eat up a bunch of your time.

Pete: Yeah she was probably trying to get you to pay for her electric bill too, right?

Mike: Yeah.

Pete: Yeah it’s so unfortunate because we are in a litigious society that sues you by the house. Most investors were like, I was still working full time, I had a family and I wasn’t wealthy. I just figured out how to buy a house, 10 or 15 of them. But many renters believe that you are this multi millionaire or gazillionaire so they have no problem. Once you buy that first house, you have a target on your back. It’s unfortunate but it is the case.

A lot of times Mike, you think you’re doing the right thing, you try to do the right thing. But it actually is not the right thing. Just because you think it’s right, the law’s not written that way. All of a sudden you . . . I’ll give you an example. Let’s say for example an applicant comes in, they give you some sob story and you veer away from your policy.

You take her, you didn’t take somebody else. They catch wind of that this person got in your house. Well guess what? She just got a fair housing claim against you and you’re going to lose that fair housing claim because of X. One of the things that we do as a property management company, any property management company, is we have systems in place and policies and that happens, whatever we do, it happens every time.

So when we do have to go to court, if we do, we could say, “Look, this is how we handle it every time.” Right there, that typically lets you win the case, in that case, in that point. But lot of investors, especially when I was doing it, I didn’t know about fair housing. I didn’t know about Texas property code. I didn’t know that I had only three days to solve an AC problem or plumbing issue.

I thought that if I just sent somebody out there, even if it wasn’t solved, it was the right thing to do. The clock is ticking, we get it. But I didn’t know that after three days they actually can get you in small claims court. So there’s a lot of things that you just know like, “Hey this is the right thing to do.” But it can cost you and then you hit on it too. You talked a lot about it. Once you’re having issues, it’s stress. How much is that stress worth? It costs a lot of money to be stressful.

Mike: I want to actually, hopefully talk about how this is a people business. And you need to really consider things that can go wrong and will go wrong with tenants. But it’s also the same with other partners you might work with from contractors and things like that. So I want to talk to you about that a little bit, just stay on the tenant stuff for another few minutes.

Maybe you could share some things on how you manage expectations with people that might be different than what you did early on. Some of the lessons you learned on how to deal with . . . Because a lot of it comes from the expectations, right?

Pete: Absolutely. So a few things and I would recommend any real estate investor whether they use a management company or not can put some of these in place. Hopefully, you get something out of it. First thing is, I talked about the application a lot because it all starts there. It all starts with the person that you put in place. That’s where you have the time to position that person. So always have your qualifications in writing that they can actually have access to.

Whether it’s a website that you have or when have to fill out an application itself. Ours are online, they fill an application online. But before they do that, they scroll down and they see all of our qualifications. They see all of our charges. You want to position them in that case. We always use the same policy and process. Everything you’ve done online, we don’t meet the applicants, but we run their credit background. Their criminal background.

We look at previous rental history. We look at previous employment. We get a photo of their pet to make sure that little Mimi is not a Doberman, but is actually a Shih Tzu. We have a 21 point selection criteria that we look at. That’s the first thing, I highly recommend creating qualifications. Do not deviate from those qualifications. If somebody does not qualify because you don’t take felons, then you don’t take felons. You may say that, “I don’t take felons that are less than 20 years.” But you want to stick by that.

The next thing is you want to make sure that you have a lease that is promulgated by your state legislator. A lot of people write their own leases and I guess that’s okay. I’ve never written up my own lease, I use the one that’s written up by the Texas Association of Realtors because it’s written by lawyers and its in favor of the owner. We make sure that we stand by the lease.

We did not go over the lease with the resident and everybody is like “Really?” I’m not a lawyer. I can’t go over the lease legally. It’s not to my benefit. We do have a lease in video that was put out by Houston Association of Realtors and we made them watch that. It’s boring but I made them watch it and they sign off something. The other thing we do . . .

Mike: But it eliminates somebody coming back saying, “They told me something different than what was in there.”

Pete: Exactly. We actually have them sign off on certain things like that you did watch the video. That you are in acceptance of the charges that we’re going to charge and you are in acceptance of this pet fee that we’re going to charge or whatever it is. Make sure your charges are always charged across the board to everybody. Don’t charge one person the pet fee and the other person you don’t charge a pet fee.

We charge a pet deposit and pet fee. For the investors, I highly recommend it. The pet deposit is a deposit. It can go back to the owner. I’m sorry, the tenant. The pet fee goes to HIP National. Hopefully I put a little [inaudible 00:24:56].

Mike: That took me a second. It’s probably going to end up costing you anyway when they leave.

Pete: Most likely. When a tenant calls about a maintenance issue, okay, what we do to protect our owners, if that maintenance issue is after 30 days, we charge a maintenance deductible. It’s written in the lease, it’s written in our tenant acknowledgements. We have basically a five page tenant acknowledgements. Acknowledging that they’re going to keep the yard and they’re going to do this.

A lot of stuff in the lease but we also make it a tenant acknowledgement as well. That if they lock themselves out, there’s a charge. That they’re going to keep the property in the condition that it was given to them and things like that. We make them sign that tenant acknowledgment. We make them sign an inventory condition form which is very important so this way you have an idea of what they think the house looks like.

We also do a move-in inspection. I highly recommend this. If you’re an investor, we take between 150 to 200 photos, we take a video. We actually have an inventory application that does the inspection. We call it assessment. But we actually have 150 to 200 photos, video and the inspection report that we upload. We actually let the residents see that.

This way when they move out, we send them back that report again saying, “Hey, this is how we gave it to you. This is how we want it back.” We also give them a list of charges that they’re going to have to pay if they always not clean the fridges, clean the house and stuff is not shampooed. We make sure everything is shampooed, the paint is good, the carpet is shampooed and the house is clean. And we want it back that way.

If they don’t bring it back that way, it comes off the security deposit.

Mike: And they know what those charges are upfront, yeah.

Pete: They know the charges are upfront. If they do call about something after 30 days, and it’s cosmetic, we tell them the owner doesn’t approve that. We don’t even tell the owner. We just tell them the owner doesn’t improve that because it’s cosmetic. For example, they took the house as-is, they looked at it, they signed off on it. They say, “Oh I want this wall painted because there’s some scuff marks on there.”

No, we’re not going to hand paint that wall for you. If the owner says, “Hey, I really like these people. I want to paint the wall.” Obviously we’ll do that. But name an investor that you know that’s going to paint the wall for the hell of it.

Mike: Well we have a few minutes left here. Maybe you could talk about how to apply the fact that this is a people business to the side of the contractors you work with, the partners that you work with from the investor perspective. Maybe you can apply it to some of the key partners that are typical.

Pete: Especially if you’re investing in a city that you don’t live in, you definitely need to have partners. But even if you’re an investor that say, I have about 60% of my investors are in Houston. So we have about 40% that live outside of Houston. I think the main thing is you hit on it earlier, that the people that hire property management companies, they value their time because that time can be better spent with their families or investing in other ventures.

Whether it’s a business or a small property. It’s important to have somebody that you trust. So as a property management company, that’s the one thing that you know that will keep you out of legal issues and problems. As a property management company, as an extension of having us in your Rolodex, or on your team, we have team members that do all sorts of stuff from insurance to carpet cleaning to AC and plumbing work.

If you don’t want a property management company, that’s fine. I would highly recommend that you actually have a good realtor that you can work with that can lease the properties for you. This way you don’t have to go show the house all the time or because you can’t show the house, you lose that client. You don’t want to have to run the application because you’re not really sure what you’re looking at, whereas an agent would.

Obviously, you need to have all the trades that go in for that property. You want to make sure that you have great connections that this way they will take care of you. What happens is on the trades, let’s say you have roof problems, you only have one or two houses. That roofer he’s going to answer my calls first because I have 500 doors and I give him business all year long. So he may or may not get to you.

And then of course you don’t have to make the call when you deal with a property management company. All that time that you spend in making calls or meeting people at the house or going to Home Depot and meeting the contractor at Home Depot. You have to cut them a check because they’ll do the job and then he doesn’t finish the job. And then you can’t find him, well all that stuff goes away with the property management company because of all the relationships that we have and because we get volume based discounts as well from all of our vendors.

Mike: Yeah, you were just talking about contractors, but even lenders, agents you might work with to help you find deals or some people actually use agents to help lease properties sometimes. There’s a number of different partners that you need to have. I think it doesn’t need to be as exhaustive as the list that you have that somebody’s signing off on all the things that they’ll do. But I think as an investor it’s important that you find those people and back to the expectation setting part, is to kind of set . . . the biggest problem that people have, really everybody, but certainly contractors and business relationships, is that they have some expectation often it’s just in their mind.

When that level of expectation is not met, they’re disappointed. It’s important to have those conversations with the people you might work with to say, you either tell them what you want or ask them what they’ll give. Just like how will you handle this, what will you do for me, how will we work together on this and how often will we communicate?

Whatever those things might be, I think it’s important to get those things clarified upfront because like you said, it’s not quite like getting married, but you don’t want to wait until after you’re married to find out some things that you didn’t know.

Pete: Absolutely. I think you said it perfect. It’s really setting the expectations and sometimes people are a little scared to have those conversations. For whatever reason, there’s a fear there that if I set an expectation, this roofer may not do the job for me. We have learned that and we set expectations with our owners, our residents and our vendors when we onboard them. We have rules on what we expect and this is what we say, this is what’s in return.

So as any investor, I think one, they should set the expectation. And two, I think that it’s not bad to make a call every once in a while to that roofer when you don’t need anything, just to say “What’s up?” Relationships is a dying art in people with all the distractions that we have with Facebook, texting and so forth. A phone call once in a while just to say “What’s going on,” it goes a long way.

I’ll give you a great example, at Empire we just had a vendor appreciation. We had about 40 vendors come in, we bought them lunch and we had beer, wine and soda. How important do you think that is, the next time I really have a problem, he will go a little bit above and beyond because he knows that he’s appreciated. To investors out there, I’m not saying buy everybody a ham for Christmas, or anything like that.

But if you really want to work on those relationships, whether it’s your property manager, your realtor, or just tradesmen or your insurance person. Once they have that relationship with you, people will go above and beyond for you. They won’t just say, “What’s in the agreement?” They will actually do a little bit more because they just like you.

Mike: It’s important to stand out. One of the things that I’ve always been an advocate of, of course if you deal with a property manager like you guys, you handle a lot of this, even if you have a property manager in other areas, I think there’s a balance here that won’t come back to bite you somehow. But anytime I find a contractor that I work, I go out of my way to help them get more business. Like if somebody asks me, “Hey, do you know a good electrician?” “I know a great guy.” I can’t keep him busy full time.

And I think what tends to happen, this happened over and over again. I have a contractor, especially specialists that we don’t use, like a glass guy that replaces glass and windows. I can’t keep him busy even 5% of the time. But I’ve sent him so much business that when I call him, he’ll say things like, “Hey, I’m actually packed up for two weeks but I really appreciate you. And I’m going to find a way to get this done tomorrow or the next day.” That stuff is invaluable, right?

Pete: Absolutely. If you can get your stuff done, especially roofers are a great example. How many times a day do those guys get backed up? Especially when a storm comes through. Our roofers were backed up like two to three weeks but they would make time to fit our people in. And it’s because of those relationships that we have with them.

Mike: Yeah, well Pete, any final words on the importance of relationships and setting expectations and all the stuff we talked about today?

Pete: I think the main thing is let the number be your guide, but don’t let it be the end all, be all. Create some policy and procedures to get the right person. The golden rule is, if you get the right tenant and you set those expectations up, you’re property will become very, very profitable. If you get the wrong tenant, it becomes a loss really.

Mike: Yeah, especially for people early on. Your first property, the first you intend to buy, 10, 20, 30, 40 or 50. And that first one is a nightmare, then you just stop and you don’t move forward. Of course, there is some truth to having a portfolio that bad things happen sometimes. But there’s enough good stuff to offset it.

So it’s such a shame when people get started in real estate investing and they have such a bad experience on the first time whether it’s a rehab they’re going to fix up and flip. They lose money on it because they did it the wrong way. Or it’s a rental property that they made some bad decisions upfront, they came back to buy them. And they just stop and move on to something else. I hate to see that.

Pete: If you have any of those, accidentally lose money on a deal, just think of it like an education. It’s just the cost of education. Any of us who went to a four year institute knows the cost of education, and there’s no guarantee. Maybe another time I’ll tell the story of when I actually lost a hundred year in an apartment complex. We lost it, the bank took it back.

I lost my life savings when I was 31 years old. It’s a high cost of education but it’s the cost of education. But if I would have thought that I just lost my life savings, I may have not gotten into real estate ever again. And that was one of my first deals.

Mike: Wow, wow.

Pete: If you’re an investor out there and you have lost money or you’re having a tough time, one is cut the cords, sell the property if its not making any money. And two is, don’t think it’s the end-all be-all. It’s not at all like that. It’s just the cost of doing business or the cost of education and move forward. Don’t let that get you down because there is money to be made in real estate.

Mike: Absolutely. Well, Pete if folks want to learn more about you, we didn’t really talk much about your company Empire Industries down in Houston, if they want to learn more about you or some of the great stuff that you’re doing, where do they go?

Pete: Sure. They can call us at 888-866-6727 or they can go to our website, it’s EmpireIndustriesLLC.com. We have a lot of great information on our site and it’s free. I think you can go to our site and you’ll get a lot of positive information.

Mike: Awesome. Pete, thanks so much for joining us today and for everybody out there listening, thanks for joining us again. We’ve got as you know, we’re getting close to over 250 episodes and we’re going to keep them going. So if you haven’t subscribed to us in iTunes, go ahead and do that. Or check us out on FlipNerd.com. But Pete thanks again for being with us today, my friend.

Pete: Thanks for having me Mike.

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