Lessons from the Trenches

Mike: What’s up everybody? Welcome back to the show. Today I’m here with my buddy, Frank Sanchez. And they have a great business up in New York. And the truth is, is they’ve had some failures too. And we all have that. It’s how you become successful is you have these steppingstones of failure along the way and you learn what not to do and how to do things differently. And we wanted you to have the opportunity to kind of learn from some of the mistakes that Frank’s made and how to move forward. So that’s what we’re going to talk about on today’s show.
Professional real estate investors know that it’s not really about the real estate. In fact, real estate is just a vehicle to freedom. A group of over 100 of a nation’s leading real estate investors from across the country meet several times a year at the Investor Fuel Real Estate Mastermind to share ideas on how to strengthen each other’s businesses, but also to come together as friends and build more fulfilling lives for all of those around us. On today’s show we’re going to continue our conversation of fueling our businesses and fueling our lives. I’m glad you’re here.
What’s up, Frank? Welcome to the show.
Frank: Mike, what’s going on? Good to see you.
Mike: Good to see you, buddy. Good to see you. Yeah.
Frank: I miss you, man. Thanks for having me. I’m excited.
Mike: Yeah, absolutely. Glad you’re here.
Frank: Good stuff.
Mike: I’m excited to talk about this. I know you guys have been through a transition this year and, you know, everybody goes through transitions. I mean, the truth is, is on social media, when people look like everything’s rocking and they never have problems, like . . .
Frank: I love it.
Mike:. . . [inaudible 00:01:34] that’s a lie, right?
Frank: I love it. I love it. Yeah. No, absolutely. I mean, I follow a lot of people that I know personally they don’t show the bad times.
Mike: Yeah. Yeah. And that’s just not the truth. And, you know, in the Investor Fuel Mastermind, in our group that you’re part of, we talk a lot about. Like, we try to allow people to give ownable talk about the challenges they’re having, so we can work through it because there aren’t a lot of, like, safe places like that where people can just kind of be themselves and talk about it. And the truth is, is as real estate investors, like, we all go through ups and downs. As entrepreneurs, we all go through ups and downs. And so it’s an opportunity, right, to learn from your mistakes and it’s also an opportunity sometimes to learn from other people’s mistakes.
Frank: Yeah. I mean, I think in any business also, I mean, you really got to get kicked in your teeth to, you know, move forward. I deal with a lot of private investors, and, you know, the fact that I have got kicked in my teeth and learned from my mistakes and fail forward and are able to, you know, communicate the lessons I’ve learned in the changes I’ve made in the business, you know, helps, actually tremendously. So it’s all good. It’s all good.
Mike: I saw a quote today, I think, and I don’t remember exactly what it is but it effectively says something in effect of, “Success is basically kind of describes those that hung on the longest.”
Frank: Yeah.
Mike: Which is true, right? Especially as entrepreneurs, like, I guess if you’re an entrepreneur and you own a coffee shop or something real small where it’s really just a job, you’re okay making 30, 50K a year or whatever. That’s fine. But a lot of us in this business are, like, there’s never enough. We keep, like, pushing harder. We keep trying new things, testing the bounds of the box, if you will, right? And so you’re going to fail during that time. It doesn’t mean it’s over. It just means you got to pivot.
Frank: Yeah, I hear you. It’s never enough.
Mike: Yeah.
Frank: And my wife goes crazy, like, “When are you going to be happy?” I’m like, “Probably never.”
Mike: Yeah, well, that’s not . . .
Frank: I’m always going to want more and more and more.
Mike: We talked . . . Yeah. And it’s not . . . And then for me, you know, it’ll get to a point. Everybody’s different, but for me, for example, it’s I have to make money, don’t get me wrong, but it’s not really about the money. Once you get beyond the money part, it’s like, it’s a game, like, I want to keep taking it to another level. It’s like . . .
Frank: Yeah.
Mike: If it was like Sudoku, I’m like, “Hey, I’m on the easy one. Now give me the, like, super hard one or whatever.” Like, you just kind of . . . You want to keep pushing the goal line out because it’s that challenge that we thrive on, right?
Frank: Yeah. No, absolutely. I always think internally to myself sometimes, if I didn’t have this, like you said, this game mentality and this drive that just, you know, burns in my belly every morning, like, I would be so bored in life. Like, if I was just going to, you know, your normal 9:00 to 5:00 which is great, people like that, but, like, and then come home, watch TV, have dinner and do it again. Like, I’d be so bored in life.
Mike: No doubt.
Frank: As you know, it’s the only thing that, you know, keeps us guys, you know, moving forward and excited and young.
Mike: So we’re going to talk about some different things, some challenges you’ve had, some of the failures you’ve been through, and hopefully give listeners an opportunity to get to know you better and then also to kind of learn from some of the mistakes that before they make them or maybe commiserate a little bit they’re like, “I thought I was the only one,” and they’re not. But before we dive into that, why don’t you tell us about your background a little bit and learn a little bit more about you?
Frank: Yeah. So I live in New Rochelle, New York. It’s like 30 minutes out of NYC. I live with my wife, my three kids, you know, good family, very fortunate. I started in real estate in 2005 in New York City where I actually met my existing partner, Larry Friedman. We are running a . . . We founded a small brokerage. We had about five agents in 2005. And, you know, speed up 10 years up to 2015, we wound up, you know, building it out to 12 offices over the whole island of Manhattan. We did a bunch of mergers, acquisitions. And our last deal was with Coldwell Banker, so we franchise with them.
And one of our last partners, you know, came on board we had a, you know, very adverse relationship and it wind up going into a Supreme Court lawsuit and, you know, Coldwell Banker was involved and everybody was suing everybody. And it was awful. We, you know, thought we were literally like three months before that had like a deal where we’re going to sell this thing for a very large figure and, you know, I was going to walk away and figure out what else I was going to do. And it didn’t pan out that way. Agents started leaving, you know, the work environment was awful and, you know, we just pulled the parachute before the legal bills got any bigger.
And, you know, we left there, we ultimately were getting, you know, a lot of, you know, high paid offers at some of the other big real estate residential firms in the city. We wind up, you know, joining Keller Williams for a little while. And after like three weeks of, like, meetings and corporate structure, I was like, “Dude, I got to go out of here.” And I literally quit. You know, they gave me a pretty good, you know, bonus, you know, to get out of there and start my business. So I was literally, like, running, like, three of the biggest offices before everything happened back to, like, you know, on the street showing, you know, 20-year-olds $1,500 apartments. So for me to grasp that was, you know, very difficult. It put a lot of strain on my confidence and mentally and all that.
And then just to speed it up, me and Larry were like, “What are we going to do?” So we joined the . . . We bought a HomeVestor franchise in 2015. So we got into this crazy business that we’re all in and, you know, I think, coming from a transactional business, there was a lot of things that, you know, were easy for us to grasp in the business just from our past company. And, you know, we’ve been doing this now, and so we have a company, it’s called SDF Capital, our headquarters are in Mamaroneck, New York.
And it’s been about five years now and we have a pretty good team that I’m proud of. We cover seven counties. And, you know, we do a lot of different exit strategy. So our main exit is rehabs. We do some wholesale assignments and we have a smaller rental portfolio of about, like, 28 doors currently. So, you know, we’re looking to get bigger and, you know, tighten up our operations and, you know, that’s about it.
Mike: You guys are . . . Are you guys do any brokerage stuff anymore at all or it’s all just all investing now?
Frank: I still have my broker’s license, believe it or not. So we are in the markets that are close to us. Everyone on my team is licensed, so we’ll do our own in-house brokerage, but by no means am I, you know, ever going to build another, you know, brokerage company.
Mike: Yeah, yeah.
Frank: Not for me.
Mike: Yep. Yeah,
Frank:I am much happier in this side of the business.
Mike: Yeah. Cool, man. So let’s kind of get into some of the . . . We talked ahead of time some of the things that you guys had some challenges in or just flat-out failures or whatever happened there, some lessons learned, right?
Frank: Yeah, yeah. It’s always lessons learned.
Mike: I know you guys have had a couple of challenges over the past year like losing money on some deals and some of those were in markets and, like, you know, they were kind of far away from you, but you just decided to take it on any way. You didn’t really maybe understand the market as well as something closer to home.
And I think that’s a common thing. I mean, probably now more than ever there’s a lot of real estate investors that feel like no matter where they are, they feel like their market is, like, the most competitive market. And, you know, in Dallas and markets like Phoenix we’re like, “You guys have no idea what you’re talking about.” But anyway, a common thing is like, “Well, I’m going to go start investing virtually in another [inaudible 00:09:24]. And that’s not doable. But share your experience with, you know, kind of getting too far out to where you don’t really understand the market as well as you thought and some lessons learned there.
Frank: Yeah. I think it really came down for us. We had a, you know, a lot of success in our past business even though it didn’t, you know, end so well. So we got some pretty fast success in the real estate investment space and we kind of let off the controls way too early because that’s what we were used to. I mean, in our old business, we were barely there. I mean, we had a team, everything was running without us. We could have went away for a month and nothing would have changed.
So I think we had a little that going on and we had some bad people. We had some bad or good people in the wrong seats and we gave them too much control early on and we completely switched models. When you first start, my advice would be to really just, you know, assign wholesale. You know, when you get into rehab, Mike as you know, it’s a completely different animal and it’s very capital intensive and time intensive. So we stopped doing what was working, which was a major mistake, you know, mainly because we thought we could make more money if we went from the assignment model into the rehab model. So we started taking on bigger projects, you know, homes over 3,000 square feet in markets we had no clue about.
Mike: Right, right.
Frank: So one thing I advise to everyone now is if you are going to roll out a model, do it at a very . . . do it very small. Test the market, test the model and see how it works. We literally shook hands, and this is a true story, and we’re like, “We’re not assigning anymore. We’re just doing rehab and then we’re going to make all the money in the world.
Mike: I guess, that’s when a knife when it cuts your hand and like . . .
Frank: Yeah, exactly. We’re like blood brothers. And this is a story. Our staff could, you know, can sort of back us up, but . . . So that just started a whole bad chain of events and we started buying these big houses at the wrong price points, you know, in markets we didn’t know. And, you know, Connecticut is like going bankrupt right now. And we kind of got caught in that market. Plus me and Larry cannot, like, literally change a freaking light bulb. Meanwhile, you know, we’re overseeing a $250,000 rehab project. So, as you can imagine, every single thing went wrong.
Mike: Yeah. The other problem too is when you rehab far away. I mean, it depends on where you are, but, you know, you usually having to probably find different crews, like different contractors and sometimes your normal contractor is like, “Man, I’m not going. I’m not going that far.”
Frank: Well, yeah, that’s another problem that added to the mess because we were using contractors and like Port Jervis that we were using on every project, so they were, like, driving two hours every day and then driving two hours home. So, when you’re in the car for four hours a day, like, it just doesn’t make sense. You’re not spending enough time on the property.
Mike: Right. Right, right.
Frank: So, yeah, we did that, we finally finished, and, you know, we just couldn’t sell it. We just couldn’t sell it. We lost a lot of money. And what makes it more interesting, we had like five other houses of this caliber going on at the same time. So it’s not like we did it, didn’t learn our lesson, did another one and kept going. It was all happening at the same time. And the market kind of shifted and we lost, you know, upwards to a million dollars which, you know, it’s a hard pill to swallow . . .
Mike: Yeah.
Frank:. . . but, you know, that’s kind of where it’s at. So, you know, I would really just, you know, for us now what we’ve learned from that is really just staying away from these bigger rehabs. I mean, there’s so much opportunity to stay, you know, in the thousands of 1,500 square feet, your ordinary, you know, three bed, two bath, you know, that maybe needs some paint, change the kitchens and just go in and out. Big projects aren’t worth it in my opinion.
Mike: And that’s a lesson for everybody right now. The market is softening everywhere in the country, some areas more than others. But you really should stick around the median price point because, you know, if you were . . . It depends on the size of your market, but if you were to kind of segment your market, like, the majority of your market can afford that stuff that’s at the median price point, and if you get up to something that’s two or three times the median price point, the population that that can purchase a luxury property or a much higher end property is much smaller, right?
So you just . . . If your market is . . . If you’re in a market where the population is declining, like, you’re in some parts of the Midwest or other areas where there’s like a mass exodus, then you probably need to stay below the median price point because, you know, people there are . . . There’s not as many wealthy people there, people looking to kind of have their dream house there, right, so more people that are just kind of looking to get by. So you got to stick to that medium price point in this business. I mean, there are people that I know that are in the luxury business and that’s all they do. I think you’re always one deal away from losing your entire business.
Frank: Yeah. And Mike, I think when you’re doing volume like most of the group we hang out with, it just doesn’t make sense to pick up that kind of project. Just get in and out, turn the money. You know, our number one thing we took away from that now and one of our golden rules is like, if we don’t have two exit strategies, we’re not doing the deal because we are just not taking that risk anymore.
Mike: Right.
Frank: It really takes the risk out of the deal. In my market, if you’re at that median price point where the first time homebuyer is going to buy that property and for some reason, it doesn’t sell or for whatever reason, you know, we can rent it and the rental numbers make complete sense.
Mike: [inaudible 00:15:03] still property cash flow. Yeah.
Frank: Still cash flow and then we’ll refi. It slows up the velocity of the money but you know what? You’re not losing money.
Mike: Taking a couple of $100,000 back on a deal that . . .
Frank: Yeah. We have not lost $1 in 2019 after we lost $1 million. So learn from your mistakes.
Mike: Yeah, yeah.
Frank: I always say if you’re going to make the same mistake twice, maybe you need to be in another business, but . . .
Mike: Yeah. Or work for somebody else, ultimately.
Frank: Yeah. There you go. Yeah. We’re very tight.
Mike: It is funny as an entrepreneur when you work for somebody else and they lose money, you’re like, “Ah, that sucks,” but you still sleep at night like it wasn’t your money. But when it’s your money, like, the learning curve is much steeper and you just go a lot faster, right? You’re like, “Okay. I’m never doing that again like effective, like, right now.”
Frank: Oh, yeah. I mean, it affects your whole . . . your business, your family, your mood. I mean, it was crazy. So, yeah. I mean, it’s just like anyone. I have a lot of friends that are like, you know, they see me on the golf course at 3:00 or they see me picking up my kids and they’re like, “Oh, man, I would . . . ” but they don’t, you know, see what I’m thinking about before I go to bed or the decisions I have to make or the stress that’s on my back.
Mike: Right. Up at 2:00 a.m., like, because you woke up and thought of something, right? Yeah. So let’s talk a little about exit strategy. You mentioned that a little bit. So you went from wholesaling and assigning to saying, “Hey, it looks like the people who we’re selling these to were making way more money than us. We should be doing that too.” And you kind of went all in on rehab.
Frank: Stupid.
Mike: The pendulum probably swung, like, from one end to the other, but the true balance is somewhere in the middle probably, right?
Frank: Well, yeah, that’s exactly what it is, Mike. And I think, you know, where we are now we really found a model that’s working for us. And like you said, it is right in the middle of those two strategies. Assigning for us doesn’t work. You know, we have a big team like I was telling you off-camera before. So the spreads aren’t there. Doing big rehabs, just, you know, don’t make any sense.
So we’re kind of in this wholetail model now, you know, like we’re buying in the medium price point in markets that we know. And we know we’re going to sell where we have good boots on the ground, good brokers, good teams. And, you know, we’re spending this, you know, between 20,000 and 30,000, just paint the place, change maybe some appliances, we’re even keeping cabinets now, redoing the floors, you know, in and out clean, bright, neat, and staging it and that seems to be working for us fantastic.
Mike: Yeah. Yeah.
Frank: Yeah.
Mike: And as the market slows down too I think people . . . I’s more of a . . . Like, if you think of your strategies, it’s like a value play, right? You’re not necessarily going to be . . . The house isn’t on the cover of a magazine, but it’s great for the person at that price point that wants a nice clean house has been refreshed.
Frank: Yeah. We don’t even . . . I tell my brokers don’t go out and say, “Oh, got renovated this, that and the other thing,” because then it’s setting the expectations for the buyers completely the wrong way, and then they start picking apart of the house. I want to be like, you know, I’m a person that’s lived there, you know, 10, 20 years that put a couple of bucks into the place before they put it on the market. We just cleaned it, made it look good, and for me, that’s the strategy we’re sticking to.
Mike: Yeah. So what are the things kind of some of the lessons you’ve learned of how to choose the exit strategy? So sometimes people are like, it’s based off of simplicity of the model. I just want to wholesale and assign everything. Sometimes people really love rehabbing. But the truth is, is it depends on your cash flow situation, how many projects you have going on, maybe even time a year depending on what market you’re in. Like, talk about some of the things that you’ve learned about as your pendulum has kind of swung both ways now, how to choose some lessons that you’ve learned on how to choose that exit strategy based on different situations.
Frank: Yeah. No. That’s a great question. And like you said, we, you know, have a very thorough underwriting meeting. Tuesday is, like, we lock ourselves in the room and go through all the different reports. And yeah, we really try to choose our exit strategy based on our cash flow. So, you know, for example, like, just on Tuesday, we had a property in Orange County and the scope of work came back and it was more than we anticipated, so $60,000. So we looked at, you know, what else we had going on, how much money is going to go out, you know, to complete these other projects, and we had to make a decision to put this thing right back on the market and it’s just going to be a wash. We’re going to make no money.
But last year, I probably would have said, “Hell no, we’re not doing that.” And I would’ve went over my head and spend $60,000 which would have put a strain on all the other projects, all the other workers. So just based on where we were, I think I put this thing on 15,000 more than we bought it for and, you know, I’ll be lucky if I make 2 grand. But for me, that was a winning decision just based on where we were.
Also, you know, we look at our taxes. You know, we were offsetting our taxes with the new tax laws with our friend and the cost segregation. So, you know, if it’s a good rental in a good area that cash flows, you know, we’ll look at things and, you know, say, “We’re able to hold this rental because the month is looking like it’s going to pay for itself.” If the month is not looking like it’s going to pay for itself, then we got to sell that one even though it’s a fantastic rental.
I mean, that happens all the time. I have something in, like, Rye Brook, which I don’t know, it’s 15 minutes from here, like, phenomenal area, like, great schools, like, Upper Westchester. And it’s a two-family and December’s numbers aren’t looking good and all me and Larry want to do is hold this thing, you know, for our future. And you know what? We’re going to have to sell it and it hurts, but we need to do what the needs of the business are.
Mike: Yep, absolutely.
Frank: And that’s something that, you know, we didn’t do for the first few years.
Mike: Right. Right. Put yourself in these situations where you’re like, “Well, we really want to keep it,” without thought of like, “Well, what does that mean from a cash flow standpoint for our business?” or, you know, sometimes you got to feed the monster, right? You’ve got overhead, you’ve got advertising costs, you’ve got people to pay, and you got to . . . Sometimes you have to . . . You can’t put money away for long-term.
Frank: Yeah, it goes the other way too. Sometimes we have a rehab where we haven’t paid our bills and we’re looking at . . . And again, we have two exit strategies for each deal. So this thing’s coming under 20% margin, and then, you know, like you said, we have all these bills to pay and our cost per buy is around 10,000. You know, we’re going to do a rehab to make, you know, 15 grand. It doesn’t make sense, so let’s put that in the rental company. So that’s kind of how we, you know, determine everything. And our rule is we will not take on a rehab that’s like over $50,000 now, like, even if it’s like a prime market, it’s just not happening. We can turn the money a lot quicker doing smaller deals and, you know, make more money on that money.
Mike: Yeah. And it just requires more management too, right? I mean, those big rehabs take longer and there’s just more management of the crews, more things can go wrong. The bigger the rehab, the more problems that could happen.
Frank: Yeah, yeah, yeah. In today’s market, I mean, the buyers are extremely picky, so they’re picking apart, you know, everything on the renovation.
Mike: Yeah.
Frank: So, you know, that’s where it’s at.
Mike: Yeah.
Frank: Try not to take on too many rehabs at a given time too because then it just gets out of control. At one point, we had 16 rehabs going on at one time and you just can’t give the attention to, you know, each property that it deserves.
Mike: Yeah. Especially up in your neck of the woods. So there’s lots of permit issues. Like, everything just takes longer.
Frank: Oh, yeah. We wait for permits, yeah, for months. That’s insane.
Mike: Yeah. So let’s talk about raising money. So you guys have gotten good at raising money and I just know some of what’s happened to you guys there, but a common thing for people that are . . . If you’re used to using hard money and then you go raise private money, like, I common thing is people offer way more than they have to, which over time you realize, “Okay. I don’t need to pay . . . “
Frank: Oh, my God.
Mike: I can’t pay 12 and 2 for hard money, so how about I just pay you 12 and 1?” And you’re like, “But people . . . ” A lot of people that are in the private money space don’t even know what a point is, they don’t even expect that, but you threw that out . . .
Frank: No clue. No clue. And I stay away from, like, anyone that’s in the real estate space that want to throws me money because it’s just too much of a headache.
Mike: Yeah. So let’s talk about some kind of lessons learned from raising money, like . . .
Frank: Yeah, so exactly like you said, when . . . We realized to take the business where we need to and do the volume and, you know, grow a business that’s going to be good for our families. We need some, you know, working capital. That’s one thing HomeVestors never tells you, they just want to take your $50,000 and tell you they’ll give you 100%.
Mike: Just to be clear, you’re not a part of that . . . no affiliation with that organization.
Frank: No, no, no. No, no, no. We left there. You might have to edit that, Mike.
Mike: No, we won’t.
Frank: Yes.
Mike: We can leave it at that, though
Frank: Yeah. No. Anyway, so yeah. So, like you said, when we . . . That was a new space for us when we started this business raising private money. Like, I had no confidence whatsoever with this. We didn’t have to do it in our old business, but we did have some good connections. So I started out, you know, with friends and family, you know, showing them the deals and like you said, we . . . Who makes 12%? I mean, it’s insane. So we started offering this 12% and all of a sudden it’s a domino effect. They tell their friends. My other cousin is like, “How come you’re not telling me about this 12%?” So, all of a sudden, we built this war chest of capital that we’re using to operate the company, which is great, you know, we’re happy, the investors are happy, but 12%, you know, every month is big nut to swallow and to pay out. So that was kind of the lesson there. My advice would be start at, like, 8%. I mean, I know a lot of guys that are doing, you know, 8% and people are extremely, you know, happy with that.
Mike: Yeah. It’s all . . . It comes out of the expectations you set, right? So . . .
Frank: Yeah, yeah, yeah, it’s totally our fault. Yeah.
Mike: Yeah. A lot of folks that have kind of honed their craft on this, they usually, you know . . . Like you said, you don’t want to go find a real estate guy that’s, like, 6%, 8%, like, I don’t get out of bed for that. But if you want to find the people that have money, but they’re not . . . You know, it’s in CDs or something slowly right now or they’re like, you know, they’re just very risk averse but they trust you and they know the market, you know, they’re in your market or whatever, and so they’re like, “Hey, 6%, 8% something like that sounds really good compared to the 1% they’re getting somewhere else.”
Frank: Yeah, totally. Yeah. We have those, we have some doctors, we have some lawyers. I have a dentist friend of mine, guys in the financial industry that have no clue about real estate. They don’t know what it . . . They don’t ask any questions. Yeah, they self-direct their 401(k)s and . . . For me, it was really just, you know, educating people on the opportunities that are out there in the real estate space because I think, you know, one of the biggest reasons and as you know that they are hesitant is because they’re just scared and they’re not educated on it.
Mike: Right. Right. And I think there’s a lot of people too that, you know, they want to flip houses, they want to be in the real estate investing business.
Frank: Oh, yeah.
Mike: But when they see how hard it is or they hear your stories like you have, like, “Hey, you could actually lose money doing this too. It’s not all like HGTV.” They’re like, “Well, so I can just be a lender and I’m pretty much guaranteed to get this return?” which, I mean, you know, you got to be careful with guarantees and things like that, but in effectively, it’s a safer route and they don’t have to touch a paintbrush, they don’t even have to go to the damn place. I mean . . .
Frank: Oh, that’s great.
Mike: Yeah.
Frank: Yeah.
Mike: It’s a way to be involved, but just, you know, passively, right?
Frank: Yeah. Yeah, absolutely. Absolutely.
Mike: Yeah. So, Larry, how about kind of team wise, like, what are some of the lessons that . . .
Frank: Frank.
Mike:. . . you’ve learned with having the right people or the wrong people or hiring family members or people in the wrong seats or like any of those things that, you know, we all have some war wounds from those things? But what have you learned?
Frank: Yeah. I think, you know, having people in the right seats is critical. You know, one thing we weren’t doing and I didn’t believe in it, it’s just my own ignorance, was, you know, the DiSC profile tests. I mean, I’m a huge fan of them. No one can walk through our doors without taking one of those now.
Mike: Yeah.
Frank: You know, we’ve had some turnover. We’ve had a, you know, a property manager that was completely in the wrong seat. She wasn’t detail-oriented and we gave her, you know, too much leash and, you know, she was . . . we weren’t managing her and, you know, that was part of the problem that we got into. I think, you know, we also, you know, had a lead manager that we were kind of having run the office and he couldn’t really get things up and running. We realized like . . . It’s really realizing, like, what their number one skill set and what value they can provide.
So I think it takes a little while for us to grasp that with some of our team and, you know, now we had a kind of, I wouldn’t call it a demotion, but, you know, he wasn’t able to run the entire, you know, operation. So his best value is in the seat, you know, talking to the customers, building rapport, you know, selling our value proposition. And, you know, now he’s like our rock star. So I really think it’s just, you know, focusing on and paying attention to your people and understanding, you know, where they’re going to, you know, succeed, which is not always easy for owners and leaders. I think it’s a skill that you have to, you know, figure out over time.
Mike: Yeah. As a small business, you know, I think . . . I know you’re talking to Gary Harper, a good friend of mine. Like, what they’ll do is that when you lay your business out and you say, “This is my org chart,” even as a small business, I mean, you should have the same structure as a Fortune 500 company, right? You’re going to have, like, dozens of seats of, like . . . Even with marketing, there’s, you know, all sorts of different components of marketing. And what happens when you’re a small business is like it says you want all of them. Like, you are in all these seats, but all those seats do exist.
And so even if you have a small team, you still are like, “Hey, you’re the office manager, but I also need you to, like, help with the marketing and do a few other things.” And so we just throw people in the multiple seats because we can’t afford to go have a 20 or 30-person team, right? And so, by nature, those people that are good at some of those things and they’re not good at other things, but we just need them to do it.
And so I think probably the big difference and what you’re going through now is just realization, kind of actualization of, like, they might be doing that but I know that they’re not the right person for that role, but just knowing that because sometimes, in the past, I’ve hired people and I’m like, “I just need them to do these 10 things,” and I just assume that they do them all equally well or equally poor, and it just is what it is, but the reality is, is it hurts your business if you have some [inaudible 00:30:07].
Frank: Yeah, it hurts and you’re just throwing more stuff on, you know, people’s plates, you know, which is taking away what they were hired to do.
Mike: Yeah.
Frank: And sometimes when it’s a small office, you know, you start running it like it’s the corner deli instead of, you know, like a business. So I think that’s a, you know, something that Larry and I are really going to hone in on. And it’s actually, it’s funny, Mike, and you can probably relate because when I have more success in, like, management when you have a bigger stage, like our other company with 12 offices, I mean, that thing was, like, seamless. I find it harder when you have a small team to kind of, you know, operate. I guess it’s kind of the same comparison like when, you know, people are talking about multifamily versus like single family.
Mike: Yeah.
Frank: It’s kind of the same, you know, metaphor. It’s hard.
Mike: Well, as you grow, that’s one of the realities of this business is you have to grow. And we talked about this in Investor Fuel all the time, like, the best part of the business, like if you want to get to a point where you are a business owner and you’re not self-employed, you have to scale, otherwise, you can’t afford to have a bunch of staff that are helping with things, you have to do it all yourself. And so if you’re doing one or two deals a month or one or two deals here and there, you’re still self-employed, you don’t have a business yet, and so the bigger you grow, you start to have other sets of problems, right? But you probably can become more of an owner at that point with staff that are handling most of the things than you can’t if you’re still small
Frank: Yeah, absolutely. Can’t agree more.
Mike: Well, some great lessons here. Hopefully, some folks got some great nuggets out of this. And I’m sure people that are listening right now are like, “Oh, yeah. Been there, done that. I’ve had that issue before.”
Frank: Yeah. I really, you know, try to share my mistakes with as many people as possible so they don’t have to take the expensive seminars that me and my partner took.
Mike: Yeah. Well, so you guys have been a part of the Investor Fuel family for, I guess, about nine months or so maybe. I think you guys joined last February.
Frank: Yeah, yeah. Yeah. And it’s awesome.
Mike: But would you mind giving a little testimonial about being a part of the group and how it’s maybe impacted your business?
Frank: Yeah, absolutely. I mean, for me, it was, you know, coming out of HomeVestors, it was the perfect time to get involved with, you know, Investor Fuel. I had no clue. Like, if Investor Fuel started when I joined HomeVestors, I would have had everything I needed, you know, from the marketing, from, you know, the systems, from, you know, the resources. So I like your group, Mike. I think your group has some very good genuine guys in there, you know, big players that I’m learning a lot from. And you guys really go all out with everything. I mean, I can’t leave my house without wearing Investor Fuel clothes.
Mike: We’re trying to create some big [ones 00:33:03] out there.
Frank: Literally, just to be specific, like, some of the relationships I got from your group has paid for Investor Fuel literally for probably like five years, and just on little things, you know, even just the conversations you have with the people at dinner like I was telling you offline, like, we got that recommendation for the PPC guy. I mean, the amount of money I’ve made just from that guy, and it’s our best lead source. You know, same with . . . What is it? [Fest Amir 00:33:33]. Fantastic leads, great relationship, and I would have never had that.
So it’s great, man. And I also, you know, even though I’ve missed a couple of meetings, shame on me, but I tell Larry all the time, I’m like, “You know why I still feel valued? Because it’s almost like a concierge service for me.” It’s crazy. Like, if I need something, I just call you guys and within, like, literally the same day, I get all the answers or the resources or the introductions that I need in any category of the business. Like, I just did a deal from Nate. Nate . . . I just started working with him. Shame on me, I don’t know his last name. Facebook guy. You guys use Optimum Assets.
Mike: Oh, yeah.
Frank: I talked to Stinson, I’m like, “Dude, my Facebook guy sucks. You got another Facebook guy?” He’s like within five minutes, he gave me the name, bam, set up my Facebook page, bam, bam, bam, we’re rolling, just got an AO, like, from that.
Mike: Nice.
Frank: So it’s extremely valuable. I think anyone that is in this business, you really need to invest in yourself. And masterminds are great, so you guys do a great job and I appreciate you.
Mike: Thanks, buddy. I appreciate it.
Frank: Yeah, man. Cool.
Mike: So, if folks want to get a hold of you and they want to learn more about what you got going on, I know you guys are going to start doing some more wholesales, they might want to buy from you in your neck of the woods, like, where can they go to learn more about what you guys are doing or connect with you?
Frank: Yeah. So we send out a . . . We have some mailing campaigns, we send out our projects, we keep people up to date on what we’re doing. So they can go to . . . They can email us at [email protected]. And that website also is sdfcapitalllc.com. And I put a lot of stuff on Instagram just, you know, random houses that we’re doing, things we have in contract, progress. And if you guys want to check me out on Instagram, my Instagram name is FrankieSanchez1, that’s FrankieSanchez1 on the IG.
Mike: Awesome, awesome. The IG. So we’ll add those links down below in the show notes there for . . .
Frank: Awesome, man.
Mike:. . . write them down. So I appreciate you sharing your story today and some of what you guys have going on, and I know you guys had to do some digging out here, but I know you’re on the right track. You guys are . . .
Frank: Yeah, we’re on the right track and, you know, we’re excited the business is doing well. So we’re looking forward to the next couple of years.
Mike: Awesome, buddy. Appreciate you.
Frank: Cool, man. I’ll see you in a couple of months, Mike.
Mike: Yeah, yeah. Everybody, thanks for joining us today. Hope you got some . . . One of the best ways to learn is from other people’s mistakes if you haven’t made some of these mistakes. I know there are a lot of people listening here have made these mistakes and more. That’s how it works as entrepreneurs, we got a lot of arrow wounds on our back and you just have to keep playing the game and hang in there. So they say quitters are losers and that is true, so . . .
Frank: There you go.
Mike:. . . if you play the game long enough, you pivot enough, you find your way, you learn enough from your mistakes or other people’s mistakes, and then you can build a business that could ultimately change your life in a lot of positive ways. So appreciate you all for listening in. If you haven’t yet, please subscribe to us on iTunes, Stitcher Radio, Google Play, YouTube, anywhere where you can possibly watch or listen to us at. And of course, you can hear or watch all of our shows at investorfuel.com or on flipnerd.com. So I appreciate you, guys. See you on the next episode.
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