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WS220: Jason Pero: Scaling Your Business With The Right People

RES 220 | Hiring The Right People

 

When a business is scaling, the entrepreneur sometimes tends to do all task by himself, thinking it would that be beneficial for the company. However, having that mindset isn’t really authentic and you need to admit you are not an expert in everything. Jason Pero, an investor and the Founder of Pero Real Estate, talks about how crucial to hire the right people, especially when you’re scaling. Moreover, he shares the importance of identifying the top things that the business couldn’t do without you and the importance of delegating everything else to your employees. Learn how to balance your time as Jason makes sure you’re not letting work overtake your personal life.

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Jason Pero: Scaling Your Business With The Right People

Our guest is Jason Pero. Thanks for being on the show again, Jason.

Thanks for having me again, Whitney. I appreciate it.

I’m honored to have you back on. Jason is an experienced investor and if you want to know more about his background and some other stuff he’s been working on, you can go back to show WS127 where he shares a little more about that. He’s a real estate investor from Erie, Pennsylvania who owns and operates over 650 rental units with his wife, Nadia. They have built their portfolio over the past several years owning everything from single-family homes to large 80-plus unit apartment communities. His business while maintaining a day job in medical device sales, which he was able to retire from in 2012. He syndicated a 40-unit and 86-unit deal in quarter four of 2018 and has employed several creative financing strategies over the years, including value at 1031 exchange, capital raising, joint ventures, investor management, business strategies, creative financing and mentoring are all part of his experience and skillset. Jason, it’s a pleasure to get to know you and meet you and talk to you at different events and travel together a little bit. Tell the audience a little bit about who you are again and maybe something you’re working on and let’s dive right in.

You’ve covered most of it, but Nadia and I got started in 2001 before we were even married. We’ve been doing this for several years. The first few years was all by herself. All of her own money. Never took private money or investor money. We did it the hard way, but we built our resume and started building our portfolio. That way over the past several years we have gotten into some of those creative financing strategies. Over the past several months, we’ve syndicated a few deals. We’re working on a 205-unit acquisition, which I’m excited about. It’s a historical property in our area and I’m grateful that the opportunity came along. I’m glad to be here talking with you.

You’ve been doing real estate for a long time. You’re experienced but what’s happening in your business is scaling. Let’s talk about some of those growing pains and how you’ve worked through those.

[bctt tweet=”Continue to learn and try to be better at your craft and what you do.” via=”no”]

A little bit of background on my growth style. I used to have a control freak thing that a lot of us entrepreneurs do that you want to do everything yourself, but what happens is you get to a point where you grow too big and we all have the same amount of hours in a day. We’re all busy, so things start falling through the cracks. I remember walking around with bankers boxes full of receipts and invoices, and that’s what forced me to hire a full-time bookkeeper and an accountant on staff. Even things from the property management and managing the maintenance guys to all of this stuff that goes into the day-to-day management of our business because we do self-manage.

Ultimately, I was taking on the burden of managing the property manager, managing the bookkeeper, managing the maintenance guys. It took some growth inside of me to learn how to delegate and learn how to try and build a team and give up certain responsibilities because quite frankly, there are things that I was okay at but not great at, so why not hire somebody that loves sitting behind the desk and organizing our office? How much time and energy and money does that save? That position pays for itself. We hired a full-time office manager/business manager to keep the wheels on the bus. It sounds simple, but when you’re running 100 miles an hour in many different directions, a lot of times you think, “I’ll take this responsibility or this duty or take on that duty.”

It took an effort for me to humble myself and realize that there are a lot of things that I’m quite frankly not good at. The files would be sitting on a desk for weeks rather than filed it right away and kept it in an organized fashion. That was a big jump for me. Even from hiring a maintenance manager that can keep everything from inspections, turnover, scheduling carpet guys and painters that working with the property manager on timing and scheduling. We have to pay a little bit more, but what we get in return is tenfold. One of the things that were the impetus for this was my partner in my last indication and this one that we’re doing. He’s the co-sponsor co-GP with me. He has several businesses and he has 45 or 50 full-time employees, a huge operation.

There was a point in time where he owned a potato chip business and they had a much larger staff. Not only does he have that life and business experience that I can draw on, but his CFO who also helps us with our underwriting and the books and investor management on the syndication side, she also has a ton of that experience. It speaks to surrounding yourself with the right people, so when I saw that there was a more efficient way of doing things so I can work more efficiently and on the business and not in the business.

I know we always struggle with that and there’s a certain element of where it’s good to work in the business so you don’t lose touch with your employees and how hard they’re working. Don’t lose touch with your tenant base or certain aspects. The owner shouldn’t be filing paperwork or doing some of these other mundane tasks. That was a big growth thing for me. Having those a-ha moments of I need to get out of my own way because I was probably my biggest limiting factor over the years for the sheer sake of trying to keep everything in my own hands and own control.

RES 220 | Hiring The Right People
Hiring The Right People: Continuously have a look and assess your business and look at where you’re spending your time.

 

Those higher positions pay for themselves like changing that mindset. I can’t afford to hire somebody else. Think about the burden that’s relieved and how much more organized you are by those tasks in the office is being taken care of immediately and you know they’re taken care of as opposed to that burden on you thinking, “I better stay light tonight to organize all these papers.” You’re talking about you are the biggest limiting factor. It’s hard to change that mindset. You don’t think by giving this to someone else, you’re going to grow much faster. You can focus on something else. When would I be ready to hire my first person? How did you know that you’re ready to hire somebody? When should I be thinking about that if my business maybe isn’t too at a large scale like yours? What would they be doing?

It probably depends on your investment strategy. For us, our first hire was a maintenance guy. Going back to 2005, we had acquired 56-unit portfolio that was an addition to the 23 we already had. At that point, I realized that there was no way that I could keep organized with calling contractors for painting. My wife and I sadly did a lot of that stuff ourselves and unlike the least handy person in the world. At that time, I realized two things that someone else can do plumbing way better than I can that I don’t need to be messing around with that. I’m a terrible painter and I used to paint, clean and do all this stuff that I wasn’t good at. This was before we had kids. I found that we were spending our free time, instead of enjoying each other’s company and going out to dinner that our nights and weekends were spent painting vacant apartments. We enjoyed that. That’s a badge of honor that we used to do this all ourselves.

If you feel that you’re not on top of your game. Something as simple as paying your bills on time or making sure that your QuickBooks is reconciled and on time so you can have your taxes finished in a timely manner. Maybe that impetus for when you need to hire somebody, you constantly have to look and assess your business and look at where you’re spending your time. If you find that you’re spending time in non-revenue generating tasks, that’s when you need to outsource. Maybe it’s not hiring a full-time employee, you have to self-analyze and say, “Is this the highest and best use of my time? If raising capital for syndication is where I should be spending my time, then why am I spending my time writing checks? Why am I spending my time filing property management material, leases or rental applications?” Any person can do probably two or three things well and the rest is filler and you’re probably going to be average at best at it. Pick those top three things that the business couldn’t do without you.

That might be capital raising. That might be working with the banks and financing the deals. They might be sourcing the deals. Identify those things and focus 80% or 90% of your efforts on that and try and delegate everything else out. Whether that’s hiring or outsourcing, it’s one and the same. To add to that, if you find yourself spending a lot of money with a subcontractor for a given task, it might be painting. Maybe you have a painting company that you enjoy using. If you could provide full-time employment for somebody’s plus benefits and all the great things that come with work and you’re providing gainful employment to another individual. There is merit in a lot of value in building a team that way, and there are pros and cons to it. Some people swear by hiring outside companies, but for us, it’s always been a factor. If we spend so much with flooring contractors a year that I could hire a full-time a flooring installer, then that’s what I should do that.

That’s a great way to look at it. I haven’t heard anyone say that before. Thinking about how much you’re paying this company to lay flooring. The cool part is when you hire that flooring guy, he probably has some other skills where he could help do some other things as well.

[bctt tweet=”Make sure that you’re still spending time with family, friends, and loved ones, and not letting work overtake your personal life.” via=”no”]

That’s been a big focus and a challenge for us as well as hiring the right people. Trying to get somebody that has a growth mindset, that doesn’t want to stick doing the same job for many years. Carpet installers or flooring installers, their backs go bad, their knees go bad. Maybe that’s the only skill they know when we hire them, but the idea would be that they could grow into other positions in the company. I have a growth mindset and my wife has a growth mindset. Try to hire the right people that have the same values and that buy into this long-term vision of what we put out there and they have a stable, loyal company. That’s hard to find these days. It’s a two-way street, having those employees that do the same thing and they’re going to continually learn and try and be better at their craft and what they do.

What are some tips you would give to hiring the right people? What are some ways you have vetted through applicants to make sure this is somebody that has that growth mindset and it’s going to fit well with your company?

First of all, we always have at least two maintenance guys meet with the prospective hire. If it’s that kind of blue-collar position, they have to do a ride along and they have to spend a day in the field with our guys. There’s a lot that you can uncover when they’re working alongside someone that’s with the company. They get comfortable and familiar. They may talk about their bad habits. They may ask all the wrong questions or they may ask all the right questions. They always have to make it through a couple of our trusted employees and I meet with them after that. I’m usually still involved with looking at the resumes on paper.

I am delegating that out to my office manager, but typically having the first time spent in the field with our top guys, seeing if there’s a fit at that. If they feel strongly enough to pass that individual onto me, what I’ll do is dig in and talk about their long-term goals. Talk about life and see if we can uncover what makes them tick and see if they’re a good fit for us. On the white-collar side of the business, the property manager type and the accountant and things like that. You look for those intangible traits, honesty, loyalty, integrity. Are they good to be around?

I remember when I worked in medical device sales. One of our managers said it was the Christmas in Detroit test. That’s if you’re stuck in an airport in Detroit or wherever, somewhere where it’s snowy and you can’t get out, are you okay being stuck with this person for a day? Are they likable and do you get along with them? You’re not at work to make best friends, but you are going to become friends with these people. In a small company, they do become like family. You have to determine, “Do I like this person? Am I going to enjoy working with them and trusting them with important duties in our business?”

RES 220 | Hiring The Right People
Hiring The Right People: When you allow your employee or contractor to figure out the problem, you’re giving them the ability to problem-solve.

 

Are you comfortable being stuck with them? That’s right. You are going to get to know them and it’s got to be a good relationship from both sides. As far as the tasks you are a handing off to different employees. I tell people when they’re thinking about hiring a virtual assistant or somebody like that, think about what you’re doing throughout the day and is this something that you have to be the one doing. Maybe it’s something you can let somebody else do. Through the day, you find yourself doing something that you’re going to hand off to your office manager. How do you know what to hand off?

The answer is everything. The handoff everything. It doesn’t fit those three or four core things that can’t be replaced in the business or the things I’m good at. Everybody can be replaced. If I’m raising capital, I can hire people to raise capital for me or team up with people that do that, which we’ve done because that is the type of thing that can take a lot of time. We only have many hours in a day and you have to live a well-balanced life. Making sure that you’re still spending time with family, friends, loved ones, and not letting work overtake your personal life. I’ve felt everything that’s related to the business as far as finding tenants, retaining tenants, turning over properties and the maintenance, I shouldn’t have any involvement with that at all unless there’s some crisis that I need to be involved in or are aware of, and I’ve worked on that.

It’s taken me longer than I would have liked, but I’ve spent time over the past several years talking to people that had been in the business for many years and figuring out how they got out of their own way. The ones that did it successfully and taking clues from the ones that are the reason they’re retiring is that they got tired of working in the business. That’s not the goal and that’s not why we get into this business. Most of us get into it for passive income, the freedom that real estate investing provides. Nobody invests in real estate thinking, “I want to push paper and renew leases all day long.” That’s a part of the business and that’s stuff that you have to hire for. That’s a long way to answer a short answer which is outsource everything you can.

How did you find to best communicate with your team?

There is some lesson I learned. It was in some business book I read, but it’s not my idea. They call it the 3:00 rule or 4:00 rule. Jim Rohn talked about it on one of his classic personal development lectures. Basically, don’t bother me with anything until 3:30 in the afternoon. Usually there’s this “crisis,” what you’re doing is you’re allowing your employee or contractor to figure out the problem. You’re giving them the ability to problem solve on their own and not having to come to daddy or mommy for the answer for everything. Ultimately what you do is you empower your employees. You show that you trust them. They’re going to make mistakes. We all do but if it’s a true crisis, like a flood or a fire, you’re going to get involved. If there’s a fire, what are you going to do? Pour more water on it? That’s why a fire department’s there, you’re not handling that yourself. There are a lot of things that you get in your own way on.

[bctt tweet=”You have to make a constant effort when you feel grateful for something.” via=”no”]

That’s the one thing is don’t bother me with little things because that’s a huge time suck for everybody. If it’s important, we’re going to talk about it at the end of the day. Let’s download at the end of the day on anything important. If I need to know about it, shoot me a text message, a phone call. Five minutes is enough. If I spent a half hour at the end of the day talking to my team about anything that came up that might alter the course of our plans for the coming weeks, I need to know about it. If it’s something that they handle on their own, no big deal. I’ll see it on the reports at the end of the pay cycle. That’s one thing. A daily touch, but it’s quick. I don’t need to know every play-by-play. Try to do a monthly meeting with our whole team, where we talk about the stuff that’s important issues that we have the tackle in the next month and makes sure that everybody’s swimming in the right direction.

It might be an hour at most. Throughout the month we could course correct and touch base on a weekly basis. That might be a twenty to 30-minute meeting with both the maintenance team and the property managers. As far as the acquisition and syndication stuff, that type of communication with my co-GP, we talk all the time, but that’s because we’d like to be asked and shoot the breeze, but when it’s strict business things, we tend to communicate constantly on the real crucial important things about the deal and the timeline and where we are at with the capital raising and things of that nature. The real important stuff is ongoing, but everything else is very repetitive like once a day, once a week course correction and once a month a big powwow.

That 3:00, 4:00 rule, I’m going to look that up. I’m going to implement that. It’s not like, “Don’t bother me until then.” I need you to think through this and make the best decision that you can. If it’s the wrong one, most of those decisions that they’re making can be corrected easily, or the next time they’re going to understand what you were thinking or why you would have done it differently. I do the same thing with my four and six-year-olds. They come screaming and you’d think their legs cut off, but that’s something minor. You are helping them to think through and be able to make better decisions before they’re asking you. What are some ways that you found that work the best for managing your employees, but also encouraging performance? Are there ways that you give incentives or are there ways that you show that you care about what they’re doing?

We try to create a fun culture and that’s hard to do sometimes in a property management maintenance business. Every so often we’ll do a Happy Hour Friday where 3:00 rolls around and you call the whole team to the office and have pizza, beer and soda, and shoot the breeze like, “We care about you.” Every now and then we’ll throw them a gas card or a subway gift card or something along those lines. A pat on the back to say, “You’re doing a great job.” They know their job isn’t always glamorous to rent apartments, show apartments, deal with tenants and to fix broken things. They’re what keeps the wheels on the bus. We try to pay well. Money’s not everything, but you do try to compensate well, do try to bonus for a job well done. If there’s something that good that happens in our business, we try to reward people as it relates to property management, maintenance. If we put together budgets and financial metrics, “There’s some extra bonus or extra compensation if we’re at X amount of economic occupancy.” If these guys realize that, “If we help Jason keep his apartments full, we’re going to benefit as well.” It’s not them working to make me rich. Everybody gets rewarded in the process, so that’s important.

We try to make sure that when we bring somebody on, I try to take a genuine interest in them as a human being and their family. What makes them tick? You’re not hiring your best friend. You’re trying to create a family, trying to create a nice culture. We always do something nice for them at Christmas. We have a big Christmas party, but that’s once a year so everybody feels good, but you have to keep that magic going throughout the year. It’s the little things that count. Nobody’s going to stay or go from your company if you buy them coffee and donuts for a morning meeting, but if you do it often enough, that is a nice token of your appreciation, but not too often that they expect it and feel entitled to it. You have to make a constant effort when you feel grateful for something. I know Rod Khleif talks about this in our mastermind about your love language. Whatever your love language is, if that is words, then you need to tell your employees how you feel and how you appreciate them. If it’s gifts, coffee and donuts, those go a long way. A free lunch with the boss sometimes goes a long way or a gift card, so they don’t have to pay for their own lunch, goes a long way.

RES 220 | Hiring The Right People
Hiring The Right People: Whatever your love language is, you need to tell your employees how you feel and how you appreciate them.

 

It’s the things like that that add up over time to create that loyalty and creating people that will have your back no matter what. If you’re on a deadline to fill an apartment and they have to put in work on a Saturday or Sunday, then they will if they need to. If they’re on a call, that’s a hard part of the job on a property management company. It’s the ugly part of it, but things happen at 8:00, 9:00, 10:00 on a Saturday night and nobody wants to leave the warmth of their home on the weekend at 10:00 at night. You have paying customers that if you’re going to do this while they expect a high level of service, and if you provide that to them, you have to get guys that will buy into that idea that, “This is important. It’s my responsibility to make this customer happy.”

I appreciate the advice from your experience and your growing company and how you’ve hired employees, when to hire them, what task to give them. How to do that, how to show them you appreciate them. Jason, tell the audience how they can learn more about you and get in contact with you.

The easiest thing is to email me at JasonPero@Yahoo.com or Jason.Pero@PeroRealEstate.com. They can find me on LinkedIn, Facebook. Feel free to reach out if you have any questions or want to talk real estate. I’m always open.

Jason, thank you. I appreciate the audience being with us. I hope you’ll go to Life Bridge Capital and connect with me. I’d love to have a conversation with you if I can help you in any way. Also go to our Facebook group, The Real Estate Syndication Show so we can all learn and grow our businesses together from experts like Jason and we will talk to each of you next time.

Thanks, Whitney.

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About Jason Pero

RES 220 | Hiring The Right PeopleJason Pero is a real estate investor from Erie, Pa who owns and operates over 650 rental units with his wife Nadia. They have built their portfolio over the past 17 years owning everything from single family homes to large 80+ unit apartment communities. Jason built his business while maintaining a day job in medical device sales which he was able to retire from in 2012. He recently syndicated a 40 unit and an 86 unit deal in Q4 of 2018 and has employed several creative financing strategies over the years. Value add, 1031 Exchanges, capital raising, joint ventures, investor management, business strategies, creative financing, and mentoring are all part of his experience and skill set. Jason spends his spare time with family and friends, pursuing fitness goals, reading, and volunteering for various non-profit organizations.

 

 

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