How to Work LESS and Earn MORE by Putting “Profit First” in Real Estate

Ashley:
This is Real Estate Rookie episode 320.

Mike:
What Profit First is, is we flip the formula to be sales minus profit, that equals expenses. In practice what you do is every time there’s a transaction we take a predetermined goal profit, remove it from the business, hide it away and then the remainder is what we run our business off of. It’s the pay yourself first principle applied to business.

Ashley:
My name is Ashley Kehr and I’m here with my co-host Tony J. Robinson.

Tony:
Welcome to the Real Estate Rookie podcast where every week twice a week we’re bringing the inspiration, motivation and stories you need to hear to kickstart your investing journey and today we’ve got one heck of an episode for you guys. We have the author, entrepreneur, coach Mike Michalowicz. He’s written tons of high selling books, super popular in the world of entrepreneurship and real estate investing. We had him back on episodes 30 for actually business, so the BiggerPockets Business Podcast. He was in episode 30, he was on the rookie show for episode 132 and he’s back today for another amazing episode. Mike has authored the book Profit First, he also wrote the book Clockwork and we talk about both of those books in today’s episode and you’re going to hear a lot of great information that applies to both real estate investing and entrepreneurship in general.

Ashley:
Yeah. Last time we had Mike on we talked a little bit about Profit First, which we’ll touch on again and then it was Get Different was his other book that we talked about but today our major focus is going to be on Clockwork. So Mike does a great job explaining as to how to delegate and that you want to give yourself time as an entrepreneur. So we’re going to go through creating not tasks for people to do for you but outcomes. So it’s a very interesting take here that Mike will explain as to why he doesn’t like to assign tasks.

Tony:
Mike will also get into, and I guess more so answer the question of at what point should I hire my first team member? How big does my business need to be before I should think about bringing someone on to help? I’m telling you guys, the answer’s going to surprise you 100%.

Ashley:
At the end of the episode, we have limited time with Mike so we literally just drill him with questions and he gives straight answers. There’s no time wasted in this episode, but at the end Tony and I will go through and recap the episode and why it is valuable for you as the rookie investor.

Tony:
All right. Before we transition over to Mike’s fantastic episode, which you guys are going to love. I want to give a quick shout out to someone that left us a five star review on Apple Podcasts. They go by the username of JR Schmitt 2012 and JR says, “This is the best information out there. Thank you for providing so much useful info, I haven’t made that first purchase yet. But I’m in the middle of moving to a new market and I don’t think I would be as confident as I am without this podcast.” Keep it coming guys. So for those of you that are fans of the rookie podcast or even if you just like me and Ashley, just an eeny, teeny, tiny little bit. If you can take just a few minutes out of your day and leave us an honest rating and review. The more reviews the show gets the more folks we can reach and we’re having an impact with this show and our goal is to impact more people, so take a few minutes and leave that honest rating and review.

Ashley:
So this week’s social media shout out is going to go to Real Simple Real Estate Gal. Andrea is sharing her journey, she has an experience in vacation rentals, fixer uppers, commercial and passive investing. So go ahead and give it a follow.

Tony:
Mike, super excited to have you back on the podcast. You were a guest back on episode I think it was 132 if I’m not mistaken, so we’re super excited to have you back. We talked last time about your marketing book Get Different, today we wanted to focus a little bit more on two books that honestly had a really big impact in my business and that’s Profit First and Clockwork. I want to talk about both, but if you can let’s maybe start with Profit First first and just kind of give us the 30,000-foot view. What does it mean to implement Profit First into your business and then I want to get into the details of how we can do that as real estate investors?

Mike:
Yeah. You got it Tony and thanks for having me back. I think it was episode 132B, if I remember correctly. So Profit First the 30,000-foot view is this. 17% of businesses are sustainably profitable which means 83% of small business, companies doing $25 million in revenue or less are not profitable. They’re surviving check by check, which is interesting because every entrepreneur I’ve interviewed has gone into business in part or in whole for financial freedom. So I investigated why are we not doing this? Is there something wrong with us? But that’s when I came across the traditional formula, the gap formula that says our sales minus our expenses result in profit. The problem with that formula, while it’s very logical does not make behavioral sense. It’s human nature when something comes last to defer it, delay it or never do it’s the Mañana syndrome. So most people wait for the profit at the end of the year, it’s not there and they say, “Oh, shucks.” Or a different choice word and then they try to do it next year and then they go oh, shucks again.
What Profit First is, is we flip the formula to be sales minus profit that equals expenses. In practice what you do is every time there’s a transaction we take a predetermined goal profit, remove it from the business, hide it away and then the remainder is what we run our business off of. It’s the pay yourself first principle applied to business.

Tony:
So Mike here’s my question, because most of the folks listening to this podcast are real estate investors and I think I can understand the concept as a traditional business owner that’s producing widgets or maybe it’s like a service-based business. But for someone that’s, maybe their income is not fixed necessarily but say it’s based on the rent that a tenant’s going to pay and there’s this fixed number that’s coming in every month. How do you kind of make sure that you can protect that profit? Because say I want my profit to be whatever, 20%. Right? But I have a water heater that breaks and now that month I have to dip into that but I don’t have the lever to increase the income. I guess how do you handle that as a real estate investor?

Mike:
Well, what we do is we start off with a lower profit percentage. I don’t suggest people go in super aggressive and then they say within a few months, “I can’t sustain this.” And they start stealing from their profit. So what we do is we start off very low, maybe one or 2% of a profit allocation. But there’s also other accounts accepting Profit First. So one may be maintenance or equipment, we know the hot water heater is going to go the question is just when? They have a lifetime expectancy, so we allocate money toward that. You start prepaying for that inevitable expense effectively. The other lesson from Profit First is when you allocate profit, if you don’t have enough money to pay your bills that says that there’s actually a mismanagement in the business. Maybe the rent isn’t at the right price, maybe it should actually be a little bit higher because if you want to have a 10 or 15% profit you must work within the confines of what’s available. So it starts teaching you to observe and figure out how to operate your business, maybe…
And I don’t know anything about hot water heaters. Maybe you can get a used one at half the price and it has a long enough shelf life or service life that it actually is a better move. So it forces us to think innovatively about operating a healthy business. The thing that Tony and Ashley, that most people do is they say, “I’ll be profitable one day, I have to…” I’m putting air quotes around that, “Have these expenses and one day it’s going to magically flip.” But what happens actually is we start getting this momentum of burden. We keep on keeping those expenses, hoping things will grow and as we increase our revenue the expenses increase at the same rate and we never break out of that paradigm.

Ashley:
Mike, I want to ask how should somebody find out what’s a realistic profit for them? They’re starting this new business or they just bought this rental property. What if they say, “I want to make $1000.” But it’s not realistic, they’re going to put themselves way into the hole. How do you go and figure out what’s that realistic profit that you can take each month?

Mike:
Yeah. So I wouldn’t start with a hard number like $1000 per month or whatever. I would look at a realistic percentage or a goal percentage and what I would do is look at my contemporaries and say what are they doing? Now here’s the key, don’t look at the average normal business because most businesses are not profitable. Look at the elite companies in your industry, the people who are really crushing it. What are they doing? And then back calculate their percentages, learn from them and you may be surprised how much business owners are willing to share. So learn what they’re achieving, make that your target and for some new businesses we actually start there. So they start with a very healthy number and they’re forced from day one to run a healthy business. Now, if you’re already established and you’re not profitable making an abrupt adjustment actually could hurt the business. So in those cases we usually start off with a very low profit percentage, one or 2%. The reason we start that low is it’s inconsequential to the operations, if a $5,000 rent check comes in 1% is 50 bucks.
So we’ll take 50 bucks, put that to profit and if you can run that property off of 5,000 you can run off of 4,950. But that 1% is highly consequential in that you start seeing that, “Oh, my gosh. I can take profit first.” Then over time we incrementally move it up which puts pressure on our expense, makes us pursue opportunities for increasing margins and so forth. So we say start slow and let it grow.

Tony:
Yeah. I love that advice Mike and I’ve taken a lot of what you teach in Profit First and applied it to my business and we’ve got 30 properties or so in our portfolio. So I’ve got quite a few bank accounts right now.

Mike:
Yeah, I can imagine.

Tony:
For people that are listening I’d say find a business bank that you like and Mike actually we use the same business bank if I’m not mistaken. But we use Relay Financial and yeah, I know that they recently rolled out a lot of the Profit First tools and we’ve had a relationship with them for a while and I’ve been begging them like, “Guys, you got a lot of this stuff. It’d be cool if the transfers could happen automatically.” And they just recently rolled that out I think a few months ago, so I appreciate you for pushing that on them as well.

Mike:
Oh, it was my joy. I worked in concert with them in implementing Profit First the right way. They’re the only online banking platform or any banking platform that does it. So a little pluggy if you don’t mind, if anyone wants to check it out go to Bank Like Mike. Because that’s who I bank with, banklikemike.com and it hooks you up with Relay. You can get your account set up right away, you can do accounts for different businesses all within one login. It’s a pretty cool setup.

Tony:
Mike. I want to transition to Clockwork because I think that’s another very important concept for new investors to understand and this is more so for our listeners right now. But I think a mistake that a lot of people make when they become real estate investors is that they only think of themselves as investors as opposed to business owners that are in the real estate investing space. I want to push more people to see themselves as business owners that are just buying real estate and not just isolating themselves. So can you define what it means to Clockwork your business?

Mike:
Sure. So Clockwork is where the business owner moves from the operational components to ultimately what I call the design components. We move from doing the work to designing a vision and how I explain this to entrepreneurs in any space is the number one job of entrepreneurs is to create jobs, not to do the job but to be a creator of jobs. There was an interesting statistic and I don’t recall the source, but it was about 15% of the global population will ever become an investor or start a business, 15%. So in kindergarten there was 30 students in my class, 15% if I run the numbers right is about four people. So four people started a business but here’s the most interesting statistic, less than 20% maintain a successful business. So you take that 15% times 20%, we’re talking about 3% total. Which means one kid, one kid from your kindergarten class is running a successful business and it’s you. Every other person is looking for a good job with a good business, so our job is to create jobs for people looking to work for good companies.
So that’s our job, you’re not an investor. You are building something that supports our economy, hopefully supports you very well and it has an opportunity to support other people. Our mission is not to do the work it’s to design that vision, to design the outcomes we want and empower other people to have a joyous experience in doing the work within our organizations.

Ashley:
Mike, a really hard thing for me has been letting go of control. Let go.

Mike:
You sound human by the way. You sound very human.

Ashley:
So how do entrepreneurs deal with that? They’ve become attached to their businesses and now they have to kind of learn how to let go and how do you balance that?

Mike:
So two things, first of all is to realize there’s two standards in the organization. There’s the owner’s perception, this is my standard and there’s the organizational standard and they’re two different things. But a person who says this is my standard, our organization needs to run at that level will constantly be inserting themselves to pull the business up to that level. What we need to do is to actually see what the organizational standard is by removing ourselves. So if we extract ourselves, it will settle somewhere but our job then is to be designers to figure out how do I take it from where it really naturally is without me and move it up through systems. So first the realization is they are two different things and we have to treat them that way. The second thing is… Well, I’ll give it through an example. I do a lot of presentations and I’ll ask an audience who here has a personal assistant? It always shocks me that it’s the minority who does, the majority of hands that go up respond to when I say who does not have a personal assistant.
Then I say, if you’re raising your hand right now you are the personal assistant and this is the first hire I think any business owner should make regardless of the size of your organization is get a PA. Virtual or otherwise, part-time or otherwise, but it’s not about having an assistant taking care of certain aspects of our business or our personal life for us. It’s our training as an owner that we need in the process of delegation, delegation is not the assignment of tasks, that’s called task rabbiting. Go do this, come back and I’ll give you the next task. What delegation is the assignment of outcomes, I need you to help me facilitate our organization in invoicing effectively and we give them best practices. This is what we’ve done historically but get us that outcome as opposed to task rabbiting do in return. It’s help us achieve X and once a business owner starts understanding the assignment of outcomes as opposed to tasks is when we become true delegators and the business starts growing without us and we can actually remove ourselves.

Tony:
Mike, I want to drill down on that a little bit. I love the idea of the delegation piece but how do I know… I guess two parts to this question. First, how do I know when I can afford to start that delegation? Because for a lot of small business owners the revenue is barely enough and to think about peeling some of that away to give it to someone else probably terrifies a lot of people. So first, how do I know when I can afford to do that? And then second, once I’ve made the decision I’m financially ready. How do I know which task to start delegating out?

Mike:
Those are great questions, Tony. So step one is you are ready now regardless of the size of your business and regardless of the income you have coming in. Because we can delegate to a part-timer, a contractual person, a virtual assistant for one hour a week. Again, it’s the training that we get, we start to learn this process. My first virtual assistant helped me three hours a week, they were offshore $10 an hour. I could afford the 30 bucks and actually even the 30 bucks was a little bit of a pinch but that was a great lesson in how to delegate and start building. Whenever I was delegating work and we weren’t achieving the outcomes that we’d agreed to, then I started focusing on what systems are missing and I started to improve the systems. So it makes you a great observer of your business, there is no excuse not to start today. The technique is through what’s called fractionalization, I think a lot of business owners and this is how I behaved. I said I need someone who’s like me, that’s probably the biggest mistake I’ve made looking for another Mike.
First of all, the world does not need another Mike between me and you. Secondly, it’s very hard to find a clone of you Tony or Ashley or me. We’re only one of us but if we break ourselves into pieces we can look at all the individual tasks we have. The first task to assign out is not the one you like least it’s actually the one that’s the easiest to sign out. Again, we need to learn how to delegate out work. So take that first thing off your plate that is easy for someone else to pick up and achieve the outcome you want. Once we start learning that, then we start getting rid of the stuff that we don’t enjoy necessarily and start assigning that as outcomes. My own organization here, we have 20 plus people. 80% are part-timers and there’s a massive market in my experience of people who are looking for part-time work because they’re not looking for a job to support a lifestyle necessarily.
They’re looking for a job to be an expression of themselves or just to get away from the routine of their life or whatever it may be. There’s a big market out there for part-time and contractual help.

Ashley:
Now when you’re hiring these people, putting together SOPs, so standard operating procedures. What are some tips you can give rookie investors when they’re starting to learn how to actually put together SOPs and run their business like clockwork?

Mike:
Yeah. So I’m going to give you an alternative to SOPs and this is a lesson I had when I met with my publisher, it’s Penguin Books. I went to their offices, this was many years ago as I was writing Clockwork and I met with my editor and there was this big book sitting on his shelf and all these other books displayed. I’m like, “Oh, that big one. Is it the Bible? The first one ever printed.” It was covered with dust. He pulled up and he was like in an Indiana Jones scene, blew it and this dust comes off and on there it said, “Penguin Random House SOPs.” I was like, “That’s everything.” It was like this big, I’m like, “That’s the Bible to the operations.” He’s like, “I’ve never looked at it.” That was this awareness that SOPs, while they’re the procedures that you expect people to follow don’t get consumed well and they take a lot of time to develop. The second challenge with SOPs is we’re in such a dynamic environment now, you can write an SOP and it may not even be valid within days.
As an example, we had a shipping SOP here and the day I released the 12-page SOP for shipping products. UPS updated its website and it no longer worked with my SOP and I was like oh my gosh. So here’s the alternative or the enhancement, I call them captures and what a capture is, is when you or someone else is doing the process to record it. There’s basically three ways we do things now, over computer like we’re doing now this could be recorded. We communicate verbally, maybe one-on-one that can be recorded with your smartphone or maybe we physically move something that can be recorded also with a smartphone. So as you do the process record it and give the instruction set over it. That’s step one, step two is you give it to the person that’s now going to be responsible for this and you say this is the best practice we have so far. Your job is to get us to this outcome, whatever the outcome we agreed to and follow this there.
But also improve it over time, then and this is the biggest component and the most important thing that almost no one does. Once it’s been properly assigned and the outcomes being achieved, maybe a few weeks or a few months later go back to that person now responsible for this and say record a training video, explain this process. The reason we need to do this is is the best student in every room is the teacher. Once a person can teach it, they’re showing they can master it. So it’s a way to show their mastery is by teaching it, secondly should they choose to leave you now have their best practice reserved and preserved.

Tony:
Mike, that was a big game changer for me. We leverage virtual assistants in our business, I have a personal assistant here. I have other team members here locally and that concept, that last little piece of having them redo the captures it blew my mind. But it’s been such an effective practice for them to really like you said understand what it is you’re trying to teach them, so I appreciate that piece.

Mike:
Oh, thank you.

Tony:
Last thing I want to call out before we let you go here, Mike. I know that you recently re-released Clockwork, there’s a revised and expanded edition. First, what prompted that and then what are some of the differences between the original version and the new version?

Mike:
Yeah, thank you. So what prompted it is this reader feedback, areas of confusion. Saying, “I don’t really understand how to implement this.” So those were opportunities to simplify. But one of the big ones was a reader emailed me and said, “I love Clockwork, I’m implementing it, but I can’t tell my employees about this because they’ll think that my objective is to sit on the beach drinking Mai Tai’s or something while they’re working in the sweatshop.” I was like oh my gosh, that’s the exact opposite of what I’m looking to achieve. What I’m looking to do is empowerment of our colleagues. As the business can run itself in our absence, that means our colleagues get to elevate themselves to the greatest of their capabilities. It’s the greatest compliment to our team, so that was another trigger to rewrite it. So every section now in Clockwork has a employee component, not just the business owner or the business leader but every single employee has a part of Clockwork I teach in there. Other concepts have been simplified.
I would say, actually I know that 60% of the book is brand new content and then the other 40% has been reorganized. So it’s 100% reorganized to be faster and more efficient and 60% new from the original book.

Ashley:
Well, Mike. Thank you so much for taking the time to kind of give this overview of Profit First and Clockwork. Where can everyone get copies of these books?

Mike:
Actually, it’s been my joy. If anyone wants to get a copy of these books or at least explore them before you purchase them, they’re on all the major retail platforms. But you can go to mikemotorbike.com. That’s my nickname, I think I told Tony this once before. That’s my nickname from grade school, it’s the only PG nickname I ever had. The other ones are too profane for me to ever buy that domain but if you go to mikemotorbike.com that’ll bring you to my website. No one can pronounce my last name, Michalowicz. When you land there, all the books are up there with free chapter downloads. I used to write for The Wall Street Journal, you can get those articles and I have a podcast too.

Ashley:
What’s the name of the podcast?

Mike:
Entrepreneurship Elevated, basically how to level up as an entrepreneur effectively.

Ashley:
Well, Mike thank you so much. This was a wealth of information and we were really excited to have you back on here. So thank you, everyone is going to get tremendous value from this.

Mike:
Ashley, Tony, it’s been a joy. Thanks for having me.

Tony:
All right. Ash, what a great conversation with Mike Michalowicz. You know guys I’ve enjoyed Mike’s writing for quite some time now and to kind of get him back onto the podcast and be able to dive deeper into two of his books that have had a really big impact on me it’s just really super cool. But Ash and I just want to kind of digest and point out some things that we thought were interesting or insightful or useful for you guys based on Mike’s conversation. So maybe let’s start with Profit First first. So I loved Mike’s definition of what Profit First is and why it’s important, so he said profit in his definition or the way that you calculate profit is the inverse of how you typically do it. Right? Most big businesses go sales minus expenses equals profit. Mike’s saying kind of flipped that on it’s head where you go sales minus profit equals expenses. I don’t know, just how did that jive with you Ash as a real estate investor? Because I know for me it was a little tough to kind of accept that initially.

Ashley:
Yeah. So my first question that I had was how do you figure out how much profit to take? So Mike did a great job of kind of explaining that to me as to the best way to do that and that was to take a small percentage. Start small, you can always increase it later on. I think what did he say? Just start with 1%.

Tony:
1%, yeah.

Ashley:
Of what your revenue is, that 1% and then you can always slowly increase it and it almost becomes a challenge to see how much you can actually increase it. But that was the part that I was like okay, so what if I go in and say I’m going to take $5,000 a month. How do I even pick that number? That becomes realistic. So his suggestion of doing a percentage and just starting that percentage small and just getting in that habit of using this formula of taking that profit first.

Tony:
Yeah. I think we didn’t get to touch on this as much in this conversation but one of the other kind of bank accounts that Mike encourages you to have through Profit First is you have your profit hold account like your profit account. But you also have an owner’s pay account and people oftentimes get those kinds of two things confused. But the distinction between the profit and the owner’s pay is that the owner’s pay account is what you pay yourself for the work you do in your business. The profit hold account is what you pay yourself for owning the business and a slight nuance but big difference there. So the owner’s pay is like if you’re still communicating with tenants, if you’re still writing up leases, if you’re still showing units, if you’re still managing contractors, if you’re still talking to guests, if you’re still doing pricing, if you’re still doing door knocking. The activities in your business, you would pay yourself out of the owner’s pay account. The goal is that as you kind of build your business up the allocation percentage for your profit account starts to get bigger. Right?
So you go from 1% to 5% to 10% and the allocation for your owner’s pay account gets smaller. So you go from whatever 50% or 80% if it’s just you at the beginning down to 50, down to 40, down to 30 and then that money from the owner’s pay account starts to shift towards paying your team members. But also now you’re able to start getting money from your business without you actually doing anything. So I love the idea of starting at 1% and then scaling it up from there.

Ashley:
Tony, what percentage did you start with when you started implementing Profit First into your business?

Tony:
Yeah. So we started off probably too high and then we kind of had to pull it down because we still have an owner’s pay account as well. Right? Because there’s still a lot that we do in our business that we’re still pretty active with. So I think right now our profit is at maybe 10%, somewhere in that ballpark is probably what we pull out and the goal is obviously to keep growing that. But we probably started off with single digits and we’ve kind of pushed it up since then.

Ashley:
Okay. Then we kind of transitioned with Mike to his book Clockwork, so this is our first time talking to him about Clockwork. We’ve had him on before to talk about Profit First, so it’s very interesting to hear more about this new concept that he has basically delegation. How to become a leader, how to hold your employees responsible but also you’re self-responsible too as the leader. I think he has a very interesting take on how he’s actually implementing that. So he gives the example of you’re on vacation or whatever and your employee goes like, “I’m stuck here doing all the work while the owner’s off gallivanting on the beach.” And he says, “I want the opposite effect. I want the employees to feel empowered like he’s gone, we can run the business without him. We know exactly what we’re doing, we have control and feel empowered from that.” So I think that was a really huge takeaway from me is that I want to be able to do the same.
Is completely walk away and everyone else is excited that they don’t need me to micromanage or to do parts of the role and for myself when I’m working on a project I actually do struggle when I need to get somebody else’s approval or permission or things like that. It definitely does give you a sense of empowerment when you feel very confident in the work that you are doing.

Tony:
I think one of the biggest points of that conversation with Mike especially about the Clockwork kind of framework, is that even if you are a real estate investor you are still a small business owner and I think that’s something that a lot of new investors forget. They put on this cap of real estate investor and they think that it means DIY everything and I’m a one man or one woman show and I got to figure all this out. But in reality the goal of what you’re doing is hopefully building a business that supports whatever lifestyle it is that you want. For a lot of people the reason they get into real estate investing is because they want more time and freedom, they want more flexibility but you can only really achieve that if you start to build a business around your real estate. So just first, I think that’s a really critical thing. But one of the concepts that Mike called out that I think is worth discussing a little bit more is the idea of delegation and he talked about the task rabbiting versus outcomes.
I think that’s a big mistake that a lot of entrepreneurs make is that when they bring someone onto their team in whatever capacity, full time, part-time, super part-time. Initially they’re just so overwhelmed with a lot of work they’re just like, “Hey, okay. Go knock this out. Okay, go do this. All right, go do that.” But the danger of that is that you condition your team to always come to you for, “Hey, what should I be doing next?” Mike’s suggestion of delegating outcomes as opposed to delegating tasks means that when you talk to your team member, whoever it is that you bring on. Instead of saying, “Hey, I want you to input this receipt.” What you tell your team member instead is at the end of the month when I go to run my books every single transaction needs a receipt attached to it. So very similar kind of ideas there but slightly nuanced in how you deliver it.
Now that person knows okay, once I finish this receipt I got to go to the next one and now every time a receipt comes in I’ve got to grab that. Then they might start to think okay, what’s the optimal way for me to capture these receipts from Tony or Ashley and get them into our QuickBooks software or whatever accounting software we’re using and they start to optimize that process. So that one really jumped out at me Ash about optimizing that process.

Ashley:
Yeah. I think the hardest part for me when bringing people on board, especially VAs and even employees too is defining what task they should actually do to assign on them and then when Mike says, “Well, it’s not about the task it’s actually about the outcome.” But I still couldn’t wrap my brain around as to what even those outcomes were. So something that really helped me was I was looking at what I was doing every single day and Mike talks about if you’re hiring your first person to delegate things to, it could only be three hours a week or one hour a day or something like that. You don’t need to hire somebody full time and that’s a great thing about virtual assistants is that you can hire them for just a little bit of time. I think my personal assistant VA that I just have to random stuff for me, last month I think she only worked maybe four hours for me, the month before that I think it was like 22 hours.
So it can definitely vary and that’s the nice convenient thing and when you’re trying to figure out these tasks, just start small. Even if it’s something you have to do once a month like pay a water bill that takes you literally five minutes. But those five minutes start to add up every single month and if you can find other five minute tasks you’re doing and fill a whole hour through a VA, that gives you back an hour of your time. Honestly the VA will probably do it faster than you, because they’re focused on doing that task where you as an entrepreneur are trying to do 20 different things at one time. You’re about to go pay the water bill and then you get an email about something else and then you’re like, “Oh, yeah. I still have the tab open for the water bill I better go back to that.” And then you get a phone call, all these different things happening and they can probably get it done faster than you actually can.

Tony:
One of the exercises that I did Ashley this last year that I thought was super helpful for me was that, everyone talks about the to-do list and here’s everything I need to do. I started to create a not to-do list, so anytime I found myself doing something that I didn’t want to do anymore I would capture it on the list. So as I started to bring people onto my team, my assistant, my marketing coordinator, our virtual assistants. I was able to say okay cool, this is something that I can delegate to them. A small example would be, we get invoices sometimes from brands that we work with for content or partnerships or whatever we do with some of these brands and some of them send invoices on a monthly basis. So I have to create an invoice for them. They’ll say, “Hey. Here’s what we owe you, create an invoice and we can get you paid.” Not a super time-consuming thing but it adds up to time over the course of a month and this kind of goes into the next conversation about the software that we use to kind of onboard these people.
But I would basically just create a video of myself creating that invoice and then when that person came on board I just shared that video with them. So I was both keeping track of everything that I didn’t want to do while also trying to easily document how to complete that task would be easier to train someone when they came on board.

Ashley:
As far as that list piece you talked about, I’m reading a really good book. It’s called Getting Things Done: The Art of Stress-Free Productivity.

Tony:
I love that. That’s one of my favorite books.

Ashley:
I’ve been jotting down notes. I actually started reading it very casual and then I restarted it so that I could take notes and everything like that. But that’s a great recommendation for anyone that wants to kind of get their priorities straight and maybe we have to get to David Allen on the show to talk about it.

Tony:
To come on the show, yeah.

Ashley:
Yeah.

Tony:
It’s literally sitting on my nightstand right now. I brought a bunch of books to the office and that’s the one that I left on my nightstand so I can… I like to kind of read through it at night before I’m going to bed right now. It must mean something, right? If we’re both reading that book at the same time, we’re at similar places in our lives where we’re just feeling overwhelmed and disorganized.

Ashley:
Usually all of the books that I purchase are because somebody shared them on social media and I don’t think it was you though, it was somebody else I think that shared that book on social media is the reason I bought it. Yeah.

Tony:
It’s a good one. But yeah, Getting Things Done by David Allen. There’s a whole community and there’s the GTD community and there’s a bunch of YouTube content around Getting Things Done. But anyway a really, really good book I enjoyed that one. I guess let me just share with our rookies some of the stuff that I’ve delegated in my business to both virtual assistants, regular assistants and just team members in general. So the content creation, Ashley and I on the podcast we created a lot of content and kind of taking these 45 minute podcast episodes and turning them into things that we can share on social media. I was initially doing that myself and that was a lot of work, so that was one of the first things that I offloaded. I found a virtual assistant overseas, I said, “Hey. I want you to watch this 45 minute podcast episode. Look for the pieces of the podcast that are maybe most insightful, most educating, most entertaining and turn that into a social media clip.”
I’ve got two VAs working for me right now that do that both for our YouTube videos with the Real Estate Robinsons, for all the stuff that has to do with the Real Estate Rookie. I have one of my actual assistant who’s here at stateside, she manages my inbox for me. So every day she goes through all of my emails and she kind of responds to whatever she can respond to. She’ll delegate to whoever she can delegate to and then only the stuff that she really can’t take care of herself she sends me a little list at the end of every night and says, “Hey, Tony. Here are the five emails from today that you actually need to respond to.” Then she’ll actually call me every day at 6:00 PM and we’ll go through those emails and then a lot of times in a quick 15-minute conversation I can give her the information that she needs to go and action it herself. So if you’ve emailed me recently and noticed that it hasn’t taken weeks to get a response, that’s probably why.
But there’s so many things you can do with your team that allows you to kind of free up your time to focus on what you’re most uniquely qualified for. What about you, Ash? How are you using them in your business right now?

Ashley:
Yeah. So I started a property management company this year just for my properties and for any of my business partners, any of their properties. So I’ve been really working on getting myself removed from that business. So I pulled up a list that I made for a leasing agent VA also kind of property management assistant. But I was going to just go through this quick of all the things that this one VA for $10 an hour will be able to do for me and it’s little things that just they’re super easy to do but they take up time to do. So the first thing is on the sixth of every month email tenants unpaid charges reports. So send them to the tenants that anybody that has a balance due, then the next thing is going to be on the 10th of every month email the attorney the tenant information for overdue charges to start eviction process. So it goes through the list of things to include in the email, who to email and then the follow-up. Okay?
And then the next thing, usually I do a Loom but for this one I did a Google Doc and I inserted screenshots. So I just take a screenshot of my computer and I’d put it in there, so I’m playing with what I like better as to doing it all as written out as Google Doc or do it as a Loom video. So one of the reason I’m trying it as a Google Doc is because I am working with this VA company who said, “Okay. Every day software, the internet something is changing.” And he said it’s way easier to go into a 20-page document and to change the one button that they need to now click instead of going and recreating a whole new video. So I thought that piece was interesting, but then also after talking with Mike it should be the person who is doing that role’s responsibility to go in and remake the video and show how the process should be done now. So very interesting.

Tony:
Can I just comment on that really quick, Ash? Because I love that just before I lose this thought. I’ve struggled with that too, but one of the things I’ve been trying to do is to break up my Loom videos into smaller chunks. So instead of doing one 20 minute Loom video that walks through every single step. I’ll do multiple, like a two-minute video, a two-minute video, a two-minute video, that way if one of those steps changes then it’s a little bit easier to kind of go back and swap it out.

Ashley:
Yeah, I do that too in the really small portions. Some of them are even a minute-long, basically how to click this button like here, go here to find this and then click this. But yeah, that’s a really great point to do that. But it is funny recording the Loom videos and talking to yourself while doing it, it’s very awkward to listen to it back. So then a couple other things they’re doing is like, okay, how to put the tenant into like they’re going into eviction, how to set their portfolio now within our system, then another task they’re doing is tenant gives notice to move out. So they get the email the tenant is moving out through their portal, what are the actions that need to be taken so that everybody on the team knows this tenant is moving out and then sending the tenant form for pre move out inspection. Sending it for the actual move out inspection, the start the unit turnover after move out.
So the steps they need to implement, so our maintenance team knows this turnover is going to be happening, here’s all the information that we need on our side. When are you going to schedule it? What’s the scope of work? Things like that, and then once the unit has been turned over closing out the turnover, listing the unit complete and listing it online. Then what happens when a guest card is received? What happens when a rental application is received and then turning an approved application into a move-in. So those are just things that seem really simple to do, but they take up time especially when they’re not things that consistently happen every month. Thank God we don’t have an eviction every month, we don’t have a vacancy every month. We don’t have something that needs remodel turnover every month. So those are just some of those things that I’ve put together that a VA is going to do for me and then also we have a VA that’s been with us for maybe three or four months now who does all of our payables.
So she actually enters all the bills. One thing I have hated so much is opening the mail. So we actually have a company now it’s called PostScan Mail, I think it is and they actually scan in all of our mail and then it just gets forwarded to her and she puts it into our software and enters the vendor, the amount, what property it’s for and then gets it ready to pay. Then at the end of the week, I just go through, I confirm everything and I hit pay, pay, pay, pay and it’s all bill pay.

Tony:
That’s amazing, I got to get that digital virtual mail thing because the mail in my house is getting out of control.

Ashley:
[inaudible 00:41:07].

Tony:
I want to comment on the… So what we just described is the right way to onboard that VA, right? You give them an onboarding plan, you give them SOPs, you give them instruction. We made the mistake when we first hired our virtual assistants of doing it the complete inverse, we hired three VAs all at one time. We had no formal onboarding process, we had no documented SOPs, we had all the knowledge. Right? There was a lot of tribal knowledge between me, Sara and our third partner Omid. But we had no documented resources. So the majority of our day for the first three months was us just responding to every single little question that our VAs had. But a lot of it was because we didn’t equip them with the right information and you thought that I would’ve learned my mistake the first go round, but I didn’t and a few months later we ended up hiring two VAs.
So those first three they did our guest messaging and they were kind of the front of house, and then we hired two VAs a couple of months later to take on pricing for us and unfortunately, I just let both of those VAs go last week and part of it was on me. But we just did not do a good job of really giving them the right understanding of how to manage pricing. So there’s a right way to do this and there’s a wrong way to do this and if you do it the wrong way it almost becomes more of a burden than a help. So you want to make sure you invest a little bit of time upfront before you bring someone on to at least give that onboarding plan. At least plan the first two weeks, and really make sure that once they check these boxes and I feel good about them doing this on their own. Because if you just kind of throw them to the wolves, both you guys end up in a less desirable situation.

Ashley:
Let’s go into a couple of examples of what everyone can use, so we talked about using Google Docs and then also Loom. So loom.com is a website where you can screen record but also talk, so it will record you talking and what you’re doing on the screen. So especially for somebody that is a visual person this is super helpful, instead of… I’ll read you one of the things on my Google Doc. It’s, “After you have the approved tenant by sending approval under the task menu, then start the move and process by clicking the third button down.” I know it’s not easy, and then I include the screenshot of it. But just being able to say and show at the same time, I think Loom is very valuable in that.

Tony:
And Loom also recently updated their product where they have automatic transcripts and the transcripts are pretty good, and they’ll even add automatic chapters to your Loom video. So they’ve made quite a few adjustments or improvements to the product to make it super easy. But the majority of our SOPs are done through Loom, and it’s been a super quick and easy way to train our team up. Another piece of software that we use is monday.com, but really you can use any type of project management software. So Monday is a big one, Asana, Wrike, I know some people use Notion, there’s tons of tools out there. I personally use Monday, I think Aah you use Monday too, right?

Ashley:
Yeah, I do.

Tony:
Yeah, and it is just a really cool place to a capture all of the tasks that need to be done on a regular basis. But we also store a lot of our Loom videos in a library inside of there as well. We have a section for all of our property details, so like hey, what’s the address? What’s the parcel number? What’s the short-term rental permit number? Who’s the mortgage with? Who’s our electric provider? Just all the details about the property we try and put into this Monday project management software as well. So I think having some kind of home base for that is pretty important as well.

Ashley:
Yeah, and that’s another great task for a VA too. Is every time you onboard a new property, what is the information they need to get? Because a lot of information you can find online and consolidate it like who’s the electric company? What’s the account number for the electric company? What’s the contact number for the electric company? Things like that. So as you are implementing this new property, having the list of all that information you want to know about that property and have them kind of piece it all together for you. We just started doing that recently with apartments down to the fridge model number, any warranty on it, pictures of the outside, the inside of the fridge. We’ve gotten so detailed as to what information we need to know about the property and like for the fridge for example, it just helps us know, okay, how long has the fridge been there? Should we just replace it anyways? If we call the appliance place, here’s the fridge model number so they can better assess like okay, here’s the parts we probably need to take instead of running back and forth, things like that.
The last piece of software I want to give you is Otter, which actually our producers use and it is an AI note taker. So if you just want to talk, you don’t want to type anything out. You can talk and Otter will actually write out your notes for you and then you can kind of go through and format them. But that’s another one to try to create your processes and systems to delegate.

Tony:
Yeah. Well, lots of good information. Hopefully our rookie’s got some value from that, right? It’s slightly a different angle, but I think information that’s beneficial about again, building that foundation for your real estate business and not just focusing on being a, “Real estate investor.”

Ashley:
Yeah. Tony and I have deep regrets, so learn from our mistakes of not hiring soon enough and not hiring correctly. So just take a couple tasks, I will challenge you this week to find one simple task. Go on a website like Upwork and find somebody to do that task for you. Like Mike said, even if you’re spending $5 a week that’s a cup of coffee nowadays. But yeah, just find one little thing you can outsource. There’s other websites too like VPM, Virtual Property Management so they’re more real estate specific. There’s Scale Virtually, they’re a little bit more expensive but there are companies out there that will find you virtual assistants. Tony, I think you said Pace Morby just started one maybe.

Tony:
Yeah, there’s a bunch out there. Virtual Staff Finders, another one OnlineJobs.PH, there’s a bunch of them popping up right now. So I think just spend some time kind of sourcing, interview a bunch, you might have to let go of a couple when you first start. But I think the sooner you do this the better and just the last piece I’ll share is some people think, okay, I need 100 units before this makes sense for me. My recommendation is that you hire especially the first virtual assistant on property number one, because if you can let that person grow as your business grows and they really get familiar with your business when it’s at a small level. Then it becomes easier to kind of add more people as you add more units and hopefully you can get to a point where that first VA that you hired is now the person that’s interviewing and hiring your other VAs and I have friends in my life who are at that level with their virtual assistant staff. So lots of ways to leverage your time better if you set it up the right way.

Ashley:
Well, thank you guys so much for listening to this week’s Rookie Reply. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson on Instagram and we’ll be back on Wednesday with a guest. We’ll see you guys then.