JF2374: Four Steps To Build A Lasting Apartment Syndication Team | Syndication School With Theo Hicks
In today’s Syndication School episode, Theo Hicks talks about building a team that lasts. As we’ve mentioned in the previous episodes, your team is one of the risk points of your deal-making process. Nobody wants the hassle of working with people that are not right for your business, and you don’t want to lose credibility by having a high team turnover rate. Theo gives a step-by-step process of putting together a team that lasts and shares some ways of presenting it the right way to your prospective investors.
To listen to other Syndication School series about the “How To’s” of apartment syndications and to download your FREE document, visit SyndicationSchool.com. Thank you for listening!
Click here for more info on groundbreaker.co
Theo Hicks: Hello, Best Ever listeners, and welcome back to another episode of The Syndication School series, a free resource focused on the how-to’s of apartment syndications. As always, I’m your host, Theo Hicks.
Each week we air a podcast episode that focuses on a specific aspect of the apartment syndication investment strategy. And well, for a lot of these past episodes, we’ve given away some free resources – free PDF how-to guides, free PowerPoint presentation templates, free Excel calculator templates, things to help you along your apartment syndication journey. So make sure you check out those free documents, as well as our past syndication school series at https://www.syndicationschool.com/. And as I mentioned last week, or if you’re listening to this way in the future, the episode about seven episodes before this one, we just had the Best Ever Conference, virtual, for 2021. But nonetheless, still some amazing content.
And what I plan on doing for the next couple of weeks is going over some of my favorite speakers, what they talked about, and then my spin on that and how we can apply that to apartment indications.
So the first speaker presentation we’re going to talk about today was from Liz Faircloth of Real Estate Investher, and she gave us four steps to build a team that lasts. And obviously, your team, as we’ve talked about many times on this show, is one of the three major risk points in apartments indications. So there’s the team, that’s you, and the GP side, your company, but also the property management company managing the deal, your CPA, your lawyer, etc.
And then the other two risk points, of course, are the deal/the business plan and the market. So your goal whenever you are presenting yourself or a deal to your passive investors, is to explain how you are minimizing those three risks. So what are you doing to minimize the chance that your team does something wrong to lose their money, that something happened to the market that makes them lose their money, or something happens in the business plan that makes them lose their money.
So we’ve got plenty of episodes, we’ll go into details on some of the questions that passive investors might ask about your team, things that you can do to present your team properly to your investors, making sure you have a track record, you’re bringing on mentors, things like that. But Liz gave us some very tactical advice, a step-by-step process of how you should approach putting your team together in the first place.
I’ve interviewed so many people on the show, whose best ever advice always involves making sure you find the right partner, especially when it comes to apartment indications, where it takes a long time to get the ball rolling before you even do your first deal. And then once you do your first deal, it still takes time to do your second deal and to scale to a large company. This is like a multi-year process. And if you end up partnering with the wrong person upfront, and you stay with that person or you hire the wrong team members upfront, they’re going to be with you for a while before you start to realize that maybe they weren’t the right fit. And at that point, they might do something that makes your investors lose credibility for you in their eyes.
And so one of the most important things that we stress on this show is the fact that you need to have a team before you start to engage with investors and brokers in looking for deals. Practically, obviously, you’re going to get a property management company to help you look at deals in the first place, but you don’t want to be putting together your team while you’re in the process of talking to investors, while you’re doing deals. Do that all upfront, make sure that you’ve got the right team members, that way you’re setting yourself up for success, you’ll be able to answer those questions that investors and brokers and other property management companies would ask you, and you’ll avoid going through this process for years with bad team members or no team members and losing credibility in the eyes of your investors. But how do you actually do this? How do you build the right team? How do you find team members who will not only be with you for a couple of months or a couple of years, but long-term, will be with you throughout the lifecycle of your company, ideally for forever.
And so Liz gives us a four-step process. It is not rocket science, but it’s something that will take some time, will take some thinking… But as I mentioned before, this will help set you up for success in the long run. Invest time now to avoid headaches later.
So step one is going to be to map out where you want to actually go. So why do you want to be an apartment syndicator? Where do you actually see yourself from an asset under management size of company in the short-term, so by the end of the year, and then more long-term, 3-5 years and further out… Because there’s a huge difference between wanting to have a couple of apartment communities, maybe $10 million under asset, as opposed to having a billion dollars under management, right? The types of people you’re going to need on your team, and the number of people you’re going to need on your team are going to be different. And so you want to create a map of where you see yourself, where you see your company going, and that will define your overall vision for the company. The vision for the company is to have $1 billion under management in 5 years across the country, or in DFW or in the southeast or something.
So once you have your short-term, your long-term goals defined as well as that vision, the next step is to say, “Okay, so this is where I want to go… So which parts of this can I do myself?” So taking a personal inventory. So literally, spend a full day, half a day, on a Saturday, go to a coffee shop—now, I guess, get in your office, and think about all the different things that you personally bring to the table. This is going to be a money and a financial perspective. So what type of assets do you have, but also what are some potential liabilities you have? Do you have any high debts or anything like that? What do you bring to the table from a time perspective? How much time do you have to spend on this business? Do you work a 9-5 and you’re single, so once you’re done with work you can spend all your time in a business, or do you already have a family, and you can only dedicate late hours or early morning? How much time do you have to dedicate to the business? What type of experience do you have that’s relevant to apartment syndications, relevant to what you’re trying to do?
So as we’ve talked about on the show, the two relevant experiences would be your business background and your real estate background. So what’s your real estate investing background? Even it’s something as simple as having bought a house before; that gives you more experience than having done nothing before. Having invested in single families? Have you passively invested? In my business perspective, we’re talking more like high-level, director-level and above, starting your own business, getting promoted.
What about skills? What are your skill sets? What are you good at? Are you a good networker, or are you better at being in front of the computer crunching numbers? What’s your personality like? So this can involve taking a personality test, and figuring out what your personality is like. The personality test that Liz talked about in hers was ranking you on dominance, extraversion, patience and formality.
And then leadership perspective; what is your leadership philosophy? What do you think makes a good leader? Things like that. So basically, you want to create this document that explains what you bring to the table from a money perspective, from a time perspective, from an experience perspective, from a skill perspective, from a personality perspective and from a leadership perspective. And then once you have that, as well as your map, you need to figure out, “Okay, so based off of my map, where I want to go, what can I do? What am I able to do? How can I help this process? What should I focus on?”
And then the flip side of that is, “Okay, what aren’t I good at? What don’t I like doing? Which aspects of this map do I need to bring someone else on for?” And that’s where you determine who you need to meet your goals and your vision. So based off of, again, your vision and what you bring to the table, you’re going to need to find other people who complement your money, your time, your experience, your skills, your personality and your leadership perspective.
So something I really liked from, not 2021 Conference, but 2020 Conference, is once you have this map of where you want to go, “I want to have a billion-dollar apartment syndication company,” then you create an actual corporate structure flowchart of all the different employees that you would need in order to run that side of a business; from Asset Management Director, Acquisitions Director, GPs, say you do an in-house property management company, CPAs, lawyers, things like that; just create a whole flowchart of the company. And obviously, when you first start out, you’re going to be doing a lot of those things, especially on the GP side. But when you have that structure, you can see and envision the different types of people that you will eventually need to hire. So when you first start off, right, you’re doing everything. But then, based off of your personal inventory and maybe spending time underwriting deals, you realize, “Well, I don’t think acquisition is going to be my focus. I don’t think asset management is going to be my focus. I’m better at networking and working with investors. And so the first thing that I need to hire out is an acquisitions manager and an asset management manager.” So I really like that exercise of creating that corporate structure flowchart immediately. That way, you’re always on the lookout for the types of roles that you need to fill.
So at this point, you have your vision, you know what you’re good at and what you’re not good at. And you’ve created this corporate structure flowchart to determine, “Okay, well, in the future, when I have this billion-dollar company, here are roles I’m going to play and here are the other roles I’m not going to play. These are [the people] who I need to bring on.” Now, either day one, as well as on an ongoing basis, you start to bring people and hire people for those positions.
And the two characteristics that Liz says you need to focus on is alignment and diversity. So she said the biggest mistakes that people make when building a team is the lack of alignment and a lack of diversity. From an alignment perspective, she’s talking about your vision, obviously… So if you’re hiring someone who doesn’t want to work for a billion-dollar company, but your goal is to have a billion-dollar company, things aren’t going to work out for your long-term goals, but also your values. That’s something that you probably defined in your personal inventory, but also expectations.
And then another big one, too… She said that— it didn’t surprise me, because I definitely thought of this before, but never really articulated it out loud, which was the entrepreneurial spirit. So especially when you’re first starting out, people get really excited about real estate, the prospect of leaving their job, and just having a full-time company. And I’ve seen—I’ve been in this for about five years now… You’ll see people get really enthusiastic at first, and then they kind of fall off and disappear. It takes a very special person to continue after that zealous phase ends. So making sure that you find a team member who is not going to “gas out” in a sense, or get really excited at first and then after a few months disappear, and not really have that same spirit as you, it’s huge. That’s got to be one of the biggest problems I’d imagine with partnerships, is both partners are very zealous at first, and then the one keeps grinding through once that initial enthusiasm dissipates, whereas the other person kind of disappears and no longer does anything, and no longer wants to be involved. And then the one team member wasted six months of working with this person, and they need to find someone else. So making sure that you have alignment on the values, the goals, expectation, entrepreneurial spirit, I think will save you a lot of time.
And then the other one was the lack of diversity. Do you remember you took your personal inventory, so what you bring to the table, and Liz says, “Of course, it’s okay to work with people who are similar to you.” But if every single person at the company is the exact same as you, every single person in the company only likes underwriting deals, but aren’t very personable and don’t have good networking skills, then of course, the business is going to collapse.
So rather than bring on people that are similar to you, you want to bring people on who have different personalities, different risk tolerances, different skill sets, different experiences; essentially, the people that complement your skills and your gaps. So if you really like underwriting, and you really like crunching the numbers, then don’t hire a bunch of number crunchers. Hire someone who doesn’t like crunching numbers at all, hates underwriting, but really enjoys talking to investors, or really enjoys managing property management companies, or things like that. So they must align with you from a values, goals, expectations, entrepreneurial spirit perspective, but they also shouldn’t align with you when it comes to things like personality, the skill set and experience.
So there’s certain things that you want to be aligned on, but there’s also certain things that you want to be a lot different on. And understanding how to differentiate between those two is very important to making sure you find the right people. And from there, again, you kind of just continuously hire people and fill in the roles of that flow chart as you expand and grow.
We’ve done a couple of episodes on how to know when it’s the right time to find new team members; it really comes down to that dollar per hour activity. So once you have the ability to focus more time on those high dollar per hour activities, then it’s time to outsource those lower dollar per hour activities to other people.
What I really like about this process overall is that it’s a good way to find business partners, and it’s also a really good way to find employees or people to bring on your team that aren’t necessarily going to be your business partners.
So to summarize, step one is to map out where you want to go. Determine your short-term goals, as well as your long-term goals, and use those to define an overall vision for the company. Step two is to take a personal inventory, to literally spend a day or full day figuring out what you bring to the table, and then determine who you need to bring on to achieve your goals based off of what you bring to the table. And then once you know who you need to bring on, go out and start finding people, and making sure that there’s an alignment, that they align with your goals, your vision, your expectations, your entrepreneurial spirit, with those intangibles… But make sure that they also have a diverse personality, risk tolerance maybe, skill set, experience; someone who complements you on your skills and your gaps.
So that concludes this episode. Again, that was from Liz Faircloth of the Real Estate Investher network. And then I think next week, I will be having a conversation with the new Best Ever host, Ash Patel, and then after that, we will transition back into talking about my favorite takeaways from the Best Ever Conference.
So thank you so much for tuning in today. Make sure you check out the other Syndication School episodes so that you can download all of the free resources we have. That’s at https://www.syndicationschool.com/. And until next week, have a Best Ever day.
This website, including the podcasts and other content herein, are made available by Joesta PF LLC solely for informational purposes. The information, statements, comments, views and opinions expressed in this website do not constitute and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. Neither Joe Fairless nor Joesta PF LLC are providing or undertaking to provide any financial, economic, legal, accounting, tax or other advice in or by virtue of this website. The information, statements, comments, views and opinions provided in this website are general in nature, and such information, statements, comments, views and opinions are not intended to be and should not be construed as the provision of investment advice by Joe Fairless or Joesta PF LLC to that listener or generally, and do not result in any listener being considered a client or customer of Joe Fairless or Joesta PF LLC.
The information, statements, comments, views, and opinions expressed or provided in this website (including by speakers who are not officers, employees, or agents of Joe Fairless or Joesta PF LLC) are not necessarily those of Joe Fairless or Joesta PF LLC, and may not be current. Neither Joe Fairless nor Joesta PF LLC make any representation or warranty as to the accuracy or completeness of any of the information, statements, comments, views or opinions contained in this website, and any liability therefor (including in respect of direct, indirect or consequential loss or damage of any kind whatsoever) is expressly disclaimed. Neither Joe Fairless nor Joesta PF LLC undertake any obligation whatsoever to provide any form of update, amendment, change or correction to any of the information, statements, comments, views or opinions set forth in this podcast.
No part of this podcast may, without Joesta PF LLC’s prior written consent, be reproduced, redistributed, published, copied or duplicated in any form, by any means.
Joe Fairless serves as director of investor relations with Ashcroft Capital, a real estate investment firm. Ashcroft Capital is not affiliated with Joesta PF LLC or this website, and is not responsible for any of the content herein.
The views and opinions expressed in this podcast are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action. For more information, go to www.bestevershow.com.Follow Me: