Create a Fortune
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DON’T MAKE A PROFIT, CREATE A FORTUNE Build the Business of Real Estate Wealth Creation Bill Syrios, Andrew Syrios, Amanda Perkins & Ryan Dossey 2 DON’T MAKE A PROFIT, CREATE A FORTUNE Ryan, Amanda, Bill & Andrew TheGoodStewards.com © 2019, Stewardship Properties 1.855.STEWARD This book is a work in progress. What follows includes many links accessible for further study. 3 TABLE OF CONTENTS INTRODUCTION to Bill, Andrew, Amanda & Ryan So, You Want to Create a Fortune? . 6 —YOUR BUSINESS: The VEHICLE of Wealth Creation CHAPTER 1 The I-D-E-A-L Get Rich Slow Scheme. 16 PART 1: YOUR CORE BUSINESS CHAPTER 2 Play the Game of Real Estate Wealth Creation. 36 CHAPTER 3 HOME PLATE: Financing on the Front End. 48 CHAPTER 4 1st BASE: Acquisition, Part 1: Finding the Deal. 58 CHAPTER 5 1st BASE: Acquisition, Part 2: Evaluating the Deal. 77 CHAPTER 6 1st BASE: Acquisition, Part 3: Negotiating the Deal . .99 CHAPTER 7 2nd BASE: Renovation. 121 CHAPTER 8 3rd BASE: Property Management. 138 CHAPTER 9 BACK TO HOME PLATE: Long-Term Refinancing. 150 —YOUR COMPANY: The BUSINESS of Wealth Creation CHAPTER 10 Scaling Your Business into a Company. 163 4 PART 2: BIG-THINKING MINDSET CHAPTER 11 STEP 1: Leaders Embody the Vision. 170 CHAPTER 12 STEP 2: Niche-Focus Breeds Expertise . 191 CHAPTER 13 STEP 3: Mission-Mindedness Sets Priorities . 213 —STILL WRITING THIS SECTION— PART 3: HIGHLY PRODUCTIVE TEAMS CHAPTER 14 STEP 4: Evaluate the Right Roles for the Right People . 236 CHAPTER 15 STEP 5: Delegate Everything Someone Else Can Do . CHAPTER 16 STEP 6: Motivate through a Results-Oriented Culture . PART 4: EXECUTION OF SYSTEMS CHAPTER 17 STEP 7: Advance Strategically . CHAPTER 18 STEP 8: Measure Consistently . CHAPTER 19 STEP 9: Improve Continually . —YOUR FUTURE: The GROWTH of Wealth Creation CHAPTER 20 What Got You Here Won’t Get You There . 5 Why the name Stewardship? Although it was not as clear back in 1989, when our business consisted of one property, the hope was to build a company that would be about more than just making money. Profit is to a business what air and water are to life. We must have them, or we die. Likewise, without profits, a company will fail. How- ever, we don’t live for the air we breathe or the water we drink. They are a means to higher end. Our greater purpose for wealth-building is the increased and unexpected opportunities that come with creating wealth for our entire team—staff, partners, contractors, vendors, lenders, investors—to serve our residents in their housing needs. The name stewardship comes from the perspective that we are all “just passing through this life.” While here, it is most appropriate to consider ourselves not as owners of things or as expert opportunists, but as managers, or better yet, stewards in the service of others. The Psalmist writes, The Lord owns cattle on a thousand hills. This sentiment leaves no doubt as to who owns all the real estate under the cows’ feet as well! Another verse reminds us of what’s at stake: Unless the Lord builds the house those who build it labor in vain. Good stewards take on the task of skillfully managing that which they have been entrusted with for the benefit of all those involved. Applied to real estate—that’s who we are and what we do. It is required of stewards that they be found trustworthy. -The Apostle Paul, 1 Corinthians 4:2 6 INTRODUCTION to Bill, Andrew, Amanda & Ryan SO, YOU WANT TO CREATE A FORTUNE? There are a relatively limited number of ways for a person to become wealthy. Granted this list of ten isn’t exhaustive, but it covers many: 1) Win the lottery 2) Marry a wealthy person 3) Come into an inheritance 4) Become a best-selling author 5) Invent something innovative (or the pet rock) 6) Have “mad skills” as a professional entertainer or athlete 7) Become a famous and highly sought-after actor or actress 8) Be a great stock picker who knows when to buy and sell 9) Gain specialized knowledge in a field—be handsomely rewarded 10) Build a business that becomes very valuable BILL’S STORY: From Hobbyist to Business Builder When I first looked over this list in my mind’s eye over 30 years ago, it didn’t take long for me to eliminate numbers 1 through 9. That left only one option – number 10. But not only did I have a narrow path to creating wealth, I also had another set of problems. My dad was an attorney, my mom was a school teacher, and my chosen profession was campus ministry. In college, I studied to become a history major and didn’t take a single business class. In seminary, I majored in theology and pastoral stud- ies. No business classes were offered there, not even one on how to more effectively take up the offering! Building a business wasn’t in my family DNA, nor had I a day of training in it, nor, frankly, did I have the skillset or any good ideas on how to develop one. I had heard there was yet another way the average person could be- come well off: invest in real estate. At first, I thought maybe this 11th option would “cure” my business deficiencies, allowing me to create 7 a pathway to financial success and independence. As I bought my first investment property, my second, then a third and fourth, I labored under this mistaken impression that building a real estate portfolio was something quite different than building some other “normal business.” If you could transport yourself back to the early ‘80s in Portland, Oregon, you’d see me struggle and bend under the weight of not being business-minded. When it came to operating a coherent investment strategy, overseeing cost-effective rehab, being a common sense landlord, figuring out finances and lending, I was making it up as I went along, and it began to show. Perhaps I could have survived these shortcomings, but then came a nasty national recession. The housing market imploded (the early ‘80s version of the late 2000s) and, with it, the timber industry went into freefall. Oregon’s economy was then largely based on lumber, so in- stead of a recession, the state went into a near depression. Interest rates rose nationally to 15% and Oregon real estate prices fell 20-40%. My job as a campus pastor led me to relocate to Eugene, Oregon and work at the University of Oregon. This move gave me the impetus to unload three of my four Portland properties and “get out of Dodge” with only modest losses. I had to remind myself of a quote often attri- buted to Winston Churchill: Success is never final. Failure is never fatal. It’s the courage to continue that counts. For a time, I went into hiatus from real estate investment to lick my wounds but, try as I might, I could not control my wandering eye. Most every morning I’d find myself perusing the real estate classifieds in our local newspaper (yes, it was pre-internet). Then in 1989, three years after moving to Eugene, I found myself flat on my back with Hepatitis A and two weeks to look at the ceiling. I loved campus ministry, but I was now 35 years old and could see it 8 coming to an end for me. When it did, what would I do next? I re- flected on what I really enjoyed doing and what could be a source of income for my family. I admitted to myself that I was drawn to the thrill of real estate investing. I knew of its wealth-creating potential too, but I also wondered if I could make it a success. A book I was reading at the time, made all the difference. Achieving the self-imposed (but neverthe- less accurate) title of “world’s lousiest landlord” had led me to pick up a book on property management for help. The author was taking me to task for my nonchalant, laissez-faire approach and gave me a new paradigm. He said you must treat real estate investment as the business it is… from day one, property one. Laissez-faire is a French word that means “leave it to itself.” This motto works about as well in a business context as it does for child- rearing! Now I was putting two and two together. If real estate is a business, like owning a restaurant, a veterinary clinic or a pot dis- pensary (hey, it’s Oregon), then laissez-faire must be replaced with a focus on developing systems and finding quality people to run them. Such a mindset was not an issue for my second son (of four), Andrew, who picked up a knack for real estate investing while in college. He and my son, Phillip were business grads from the University of Oregon. Andrew moved from the West Coast to Kansas City, Missouri in January, 2011 to start a real estate investment company from scratch. *FOR YOUR VIEWING PLEASURE: If you’d like to watch a video by Bill on this topic, check out: youtube.com/watch?v=-PzYXzUJnqI&t=1870s 9 ANDREW’S STORY: Gutting It Out Until It Paid Off Beginnings aren’t always easy; starting a business is no exception. But with everything you do, there are always lessons in the setbacks. When I moved to Kansas City in January of 2011, I lived in the base- ment of the office we bought for the company.