Beyond Management How Entrepreneurs Become Investors in the Businesses Around Them | Peter McKenzie

A Podcast | Peter McKenzie

Pete Neubig: Welcome everybody to another episode of the NARPM radio podcast. I'm your host Pete Neubig, and I say this every week, but every week we just have incredible guests. Today we have Peter McKenzie out of California. And so Peter, he got into the property management game from the investor side of things. So he and I have a lot in common. That's how I got into the business. He's the founder of Rincon. Did I say that right, Peter? Rincon?

Peter McKenzie: Yep. Yep. Yep.

Pete Neubig: Rincon Property Management. He built that in 2014. He launched a maintenance contracting company in 2021. And now he is preparing to introduce a subscription-based cleaning service. I'll probably ask you a couple of questions about that.

Peter McKenzie: Sure. Sure.

Pete Neubig: But Peter believes in his success is building exceptional teams. He prioritizes collaboration, mentorship, and a culture of excellence where every team member plays a meaningful role in a company's growth. And we're going to talk about how he's gotten into other companies, and I'm sure he's looking for a strong leadership team to do that. But Peter has many lives. Not only was he a real estate investor, but he spent 20 years as a firefighter in Ventura, California. Rises to the rank of fire captain. And again, Peter, I don't know if you know this, but my dad was a firefighter for many, many years in the Bronx, New York. So I have an affinity to firefighters. And he also co-founded the Ventura Fire Foundation. So if you think you're a lazy lima bean, you probably are because Peter's got Peter out there where he serves as the president and board chair. Peter McKenzie, welcome to the NARPM Podcast.

Peter McKenzie: Thank you. Thank you for having me. I like the way I sound when you talk about it. It doesn't feel like anything special when you just live it though.

Pete Neubig: Oh man, you're doing great things. So you and I, we got to know each other. We did a Grand Canyon hike together where we got to know each other a little bit better. We have known each other through the circles. And I also got to see Peter speak on this topic that we're going to talk today at the PM Systems Conference back in January. So Peter, he spoke on how entrepreneurs, property management owner, company owners invest in businesses around them. And so he actually has done this. So Peter, talk a little bit about, you started your business, it's running good, and now you had some opportunities to get into other PM businesses, not just the contracting business and now this self-cleaning, this cleaning business.

Peter McKenzie: Yeah. So it was, first off, it happened, I don't want to say it happened by chance, but I wasn't intentionally looking to invest in other management companies. That definitely wasn't something I was actively trying to do. But I think if you've been in this business long enough and you've had some success, you inevitably have people that come to you for help, advice, mentorship. I think it just is a natural thing that occurs. And I think that probably resonates with a lot of people because everyone that, or I should say a lot of the people that I talked to about this topic, they have people in their circle that they're helping out, whether it's one of their team members or someone, a competitor pops up in your market and you're helping them out or anybody from NARPM. I mean, NARPM is great for open sourcing information and helping, that type of thing. So that's where it came from. So I had a couple of guys that I was helping out just kind of out of the, just being nice and doing what we do at NARPM. And then it eventually morphed into an opportunity. So I don't want to say people were trying to take advantage of me, but as you have to get very protective of your time, because if you give stuff away for free, which is what you do when you're helping people and mentoring them, if they start asking more than you're willing to give, it creates kind of an uncomfortable situation. So like I had a one person that I was helping that he just kept sucking up the help in a positive way. It sounds negative, but eventually I got to the point where it's like, hey, I actually have a company to run down here and I'm trying to do all the things in my own company. And I cannot dedicate 10 hours a week to this as much as I wish I had the time available to do. I can't do that because I have obligations to my team, my family and my companies that I'm running. And then that's where the conversation started. Well, what would that look like for you to do that? And the first thing they offered was, well, can we just pay you to be a consultant? And my answer was, I'm not really looking to be a consultant. I'm trying to get away from trading time for money.

Pete Neubig: Like that's I got a Rolodex of 25 people who consult in the industry. I can give you numbers.

Peter McKenzie: Yeah. So I turned that down and basically it morphed into, hey, what if we partner up? What if there's some sort of partnership here? Would that make sense to you? And so I mulled that over for a while and eventually agreed to that. And that ended up being the quasi model for what I've done now three times. So happy to go over what that is and kind of how that looks, but that's essentially how it started. And it actually is a pretty neat model. I think it works great. We're aligned perfectly because I want him to succeed. He wants me to succeed. It all works because we're all rowing kind of in the same direction.

Pete Neubig: So before we get there, we'll talk about the deals that you've done. Where do you need to be in your life or in your property management firm? Because if you're running a chaotic firm and you're, we'll use the term firefighter and you're firefighting fires all day long, is this something that you can do? Where do you think your business needs to be and you personally need to be to be able to even entertain an idea like this?

Peter McKenzie: Yeah, no, it's a great question. I think one of the slides I had was, how do you know if this is not for you? I would say if you don't feel like you have your, I mean, we all have room for improvement. I don't want to act like I'm perfect because I'm for sure not. But if you don't have your management company kind of running smoothly and a team in place to where you yourself feel like you even have capacity or time, it's probably not for you. If you're trying to figure out the basics of property management and how to do the very minimal things, you probably shouldn't export that into another company because you're just going to recreate the same issues you have in your company inside of another company, which arguably is not doing anybody any good, right? So I think you kind of have to be in a good spot with your own company. I think the same thing applies to if you're going to try to go scale or open up in another market, just your same brand, same thing. You got to have your stuff together before you start doing stuff like that. Anyway, did that answer your question? Sorry, I kind of went off track there.

Pete Neubig: I think what you're saying is the company has to be running pretty efficiently and you have to have one seat and that seat maybe be CEO of the company.

Peter McKenzie: Yeah. Oh, good point. So yeah, you need a team. If you're a one-man show, you're hanging on for dear life just to handle your own company, right? So I'm fortunate enough that I have a team, not a hundred percent running things, but my day-to-day role at Rincon is minimal. I'm not doing like day-to-day work anymore. So that is a prerequisite for sure. So now I have the capacity to go out and do other things. Yeah.

Pete Neubig: So you need to be CEO. You need to be doing think work. And if you're putting in 40 hours a week necessary on your business, probably not good to start being CEO or partners in other businesses.

Peter McKenzie: Yeah. I think that's fair for sure. Sometimes I even question if it's a good idea for me, because there's plenty of people in our industry who like, the model I run is that whole like the management company is like the economic engine and then you're going to vertically spin off and integrate all these other companies around it. There's people in our industry that don't think that's a good idea. That dilutes your focus and they focus a hundred percent on the manager company and make that as big as they can. I don't think there's any right or wrong answer, but one of the downsides to what I've chose to do is it can be distracting and that can be good and that can be bad. So.

Pete Neubig: Absolutely. Yeah. I had a business coach once. He told me like, instead of spinning off a new business, right? Because if you create a maintenance division or maintenance company, that is a completely different business than property management. And a lot of us get conflated where, Oh, well we do property management, we do maintenance for that. So let's just create a maintenance company. And it's a completely different business, different set of books, different set of marketing sales, all that good stuff. So you're building all the business. So my business coach, he's like, instead of building another business, go take what you built and go put it in a different city. Right? So go expand that way. So that's another option, right? Because then you have, you just basically taken all the pieces you built and then you just go in, you just do the marketing and the sales in another industry. I'm sorry, another city, which of course there's a lot of like, obviously you have to have money to invest too, because that city is not going to produce income right away. And then you have to figure out how to service that city. Is everything going to come out of the main office? So I don't think there's one, that's why I love business. There is no one right answer. It could be whatever you want. So now, so, okay. So we kind of set up the business side of things. Now, personally, is there, is there anything that you have to like, that you would say you have to be ready personally for this? Is there?

Peter McKenzie: Well, I think, I think you need to, yeah, you need to be good with, I mean, you need to have, it has to be set up on a, the relationship is super important, right? So you got to have some people skills for sure. Like you have to be able to communicate effectively. Like a lot of, a lot of the conversations can be uncomfortable, right? Cause they're, I mean, they're, they're looking, my partners are looking to me to not make a bunch of mistakes and to accelerate their growth, you know, much faster than they would if they just did it on their own. Cause let's be honest, you can do this on your own. Like I'm sure you started, you didn't have somebody telling you exactly how this is done. I've heard you and Steve story before. Same with me. I just was, I was just a fireman. And I'm like, well, I don't like management companies anymore. And I don't like the way they're dealing with my rental properties. I'm going to figure this out myself. Right? So you absolutely can do that. And many people have done it. I would say that's probably the most common way to get started and figure all this out. So you have to have the skills of being a people person and being able to communicate effectively, tell people, Hey, that's that we're not going to do that. That's a mistake. Here's what's going to happen. If you go down that path, trust me, I went down that path. I can tell you from experience conversations like that happen a lot.

Pete Neubig: But yeah, did you talk to your family about it at all? Or do you like, Hey, this is more business thing. It's going to be more of my time or I'm going to be handling it. Or is that what you thought of?

Peter McKenzie: I, so my wife and I, who we've been married for 26, 27 years she doesn't really get involved in the business and it works for us. Right? Like I, I see some couples who work in the business together and that seems crazy to me because that's a lot of time, a lot of conflict, a lot of decisions that are made. So that wasn't a consideration. I'm, I'm pretty much in charge of my like professional time. Now, if I wanted to go start like a business in another area or something that was going to take me out of the house, I think that's for sure something we'd be seriously talking about, but this, the way I set it up is literally it's, it's 60. It's an hour a week of an actual commitment of time to my partner and then a quarterly full day and then a two-day annual planning. That's my like contracted commitment to them. And then occasional phone calls here and there as things come up. So we're not talking about, you know, 10 hours a week or 20 hours a week that I'm dedicating to this thing. So, and I think that's important if you're going to do it. I think that's important that you, you set those expectations up front. So there's no misunderstandings they don't think they're getting a full-time partner, you know.

Pete Neubig: Right. A hundred percent. Are there certain things that you're looking for in somebody? Like, you know, I mean, if, if I, if, if I partner with me for, for help, right? Like, so what, what are you, what are, what are some of the, some of the traits, characteristics that you're looking for in a, in when somebody comes to you and, you know, says, Hey, I want to partner up.

Peter McKenzie: Absolutely. And, and the other thing to note here is like, I'm not, I don't, I don't try to partner that everybody come, everybody that's ever come to me for advice. I'm not throwing this out there as an option, right. Cause right. You know, what I'm looking for is someone who's smart, who has some hustle, right. They've got some, some drive, some, some ambition on their own, and they're not afraid to get their hands dirty. They're not afraid to work hard. I think that's probably the most important thing because I'm going to provide the, the direction, the leadership that the, that someone who's new doesn't maybe have. So I think those, the most important thing for me is, you know, how bad do they want it? How, how smart are they and how hard do they, are they willing to grind?

Pete Neubig: Are you looking for somebody that is more of a visionary and they're better on the marketing and sales, or are you looking more for like somebody who's an operator that can run the operations?

Peter McKenzie: So in my case, I need someone who's going to be in the day-to-day cause I don't do anything in the day-to-day. So if we had two visionaries and there was no one doing the data, that could be a disaster for you real quick. But yeah, what I'm looking for and when I say looking for, I'm not actively looking for this at all, but when I, when, when these present themselves, I'm looking for someone that is the operator who is going to be good at the conflict resolution, be able to think on their own problem, solve those types of things.

Pete Neubig: Are you looking for somebody that has maybe started a PM firm already and they have a handful of doors on their management or somebody that's been a property manager and now they want to break out and they're, they're at zero doors or somebody who's like, Hey, I have no experience at anything at all in real estate, but I want to do this property management thing, but I'm a go getter.

Peter McKenzie: Yeah, no, no. So I, so I've done three and the one was a long time property manager in the market next door to us. He was let go from his position. He actually came to me looking for a job at first through my conversations with him. I basically go, Hey man, like I could pay you three times what you were getting paid up there and you're still not going to be happy. You need to own your own business that you're not the worker guy. You think you are, you're an entrepreneur, go start a management company. You have 10 years of experience. So we did that. He went away and started his own, but then he was, this is the gentleman that was coming to me.

Pete Neubig: Hey, this isn't working. And then he's like, yeah, then he's like, no. And then he's like, I'll give you a percentage of the business.

Peter McKenzie: Yeah. And he was, I think had, I don't remember exactly, but maybe 15 or 20 doors when that, when that happened, maybe a little more.

Pete Neubig: The other, he had experience and he had the hustle and he's smart.

Peter McKenzie: Correct. Yeah. What he didn't have, he came from those old school management companies who charge one fee, who don't use any of the systems we use. They don't understand, you know, virtual team members like VPM. They don't understand software like from one of those dinosaur kind of legacy companies. So when he saw what, what I was doing, that's to get the fast track for that, you know, how can I put that in my company?

Pete Neubig: Yeah. So he's like, I don't want to go A, B, C, D, E. I want to go A to E and then I want to take some steps out. And so instead of me trying to figure out all this stuff out, I go to Peter. Peter's like, oh yeah, this is how you do it. And then he just goes and implements.

Peter McKenzie: Yeah. Yeah. He has since gone down a path with AI in his business that makes me look like I don't even know how to say the ABCs. Like he's taken his AI thing in his business to like a whole new level, which is cool to see as well. Yeah.

Pete Neubig: So, all right. So how long have you been in business with this particular, with the first person?

Peter McKenzie: Well, it's got a couple of years. Yeah. I don't know. I'd have to go back and look, but probably between our second and third year. And my, so that have, he was the first one. And then there's one in Idaho that's, came after him, excuse me. And then I just did another one in Temecula, which is the, it's only been a little over a year with, in Temecula.

Pete Neubig: Okay. So let's go back to the first one here. Cause, so now you, you, you guys had this conversation, you're like, Hey, give me some ownership and then I'll, and I'll outline stuff. So, does vision and exit come into plan, right? We're always taught when you build a business, like always think about the exit. So when you built your, your contract, what, what, what, what were some of the terms that people should look at, look into, or at least know that they should probably put this into the contract?

Peter McKenzie: Yeah. So I had the, the unfortunate experience of starting, I started Rincon with a partner and the, the partnership didn't work out and I ended up buying him out after a few years. And that's when I vowed to never go through that again. Right. So I, anytime I do anything, I'm, I'm, I am, the end is already in the, in the, in the process, right? So the breakup of all of these arrangements is already pre-negotiated. There's buy-sell agreements, the valuation, how we value the company, the formula is already in there. There's very little that we could fight about. I'm sure you could, you know, you could fight about anything really. But if, if one of these was to wind down, it wouldn't be like, Oh no, what do we do? It would be get the operating agreement out. There's the, there's the agreement. That's how we're going to do it. And, you know, we're going to hopefully part ways amicably, but you for sure, in my mind, you need to be thinking about that because the partnership is like a marriage, right? Like there's plenty, well, I was in a bad one that didn't work out. I know plenty of people who've been in partnerships that didn't work out. So you'd be foolish to not think that at some point it's going to end.

Pete Neubig: Yeah. And those are hard conversations because we're not even like, we're not even in business yet. And you're already looking at all the potential negatives, but that's where a lot of experience comes in.

Peter McKenzie: Yeah. Well, when you, and then when you sign, when you drop those agreements and they, they have the spousal conjoiner, I don't know what the term is, but basically like that's the wives have to sign off on it. I don't know if you've gone through one of those, but because if you're married, obviously your, your partner, your, your spouse has legal rights in these things. And so we do all this negotiating and then the wife on both sides has to sign off on it essentially, which is like a little uncomfortable, but yeah, it's important.

Pete Neubig: On this first deal, can you share what was the percentage that you guys ended up negotiating?

Peter McKenzie: Yeah, happy to. So 15%, it was a 15% ownership in his company in exchange for what I already outlined. I think I did actually pay some money for that. I don't think it was much. But yeah, that's how that one, those are the numbers on that one.

Pete Neubig: Now financially, how do you, how do you determine? Cause if you, you know, own 20% of my company, I can run the company to the point where I'm not giving distributions out and I'm paying myself a salary. So how do you protect yourself from that?

Peter McKenzie: Yeah. So that was, that's one of the concerns for sure. So the way I handle it and I'm sure there's a bunch of different ways you could do it, but in the operating agreement, we put in there that the salary paid to the operator is going to follow the NARPM benchmarking study that they did that, you know, the average, cause I guess when NARPM was doing their thing, owner salaries were all over the place. Some people paid themselves nothing. Some people played themselves an inflated salary. So they had to normalize their analysis of numbers by setting these, what they, I guess we'd call like a reasonable salary for the revenue level that you're at. And it's just a chart in their benchmark study. So I basically said, we're going to follow that chart. So the owner salary is going to be directly tied to the top line revenue. And that's what you're going to get paid as a salary. And then we're going to run Profit First, which is a system that Mike Michalowicz, he wrote a book called Profit First on how to manage your cash and when and how to make distributions. So I essentially capped the salary at a reasonable salary because the flip side is they could just go, Oh, my salary is $500,000 this year, and I'm sorry, there's no profit left over. So you get nothing. Well, obviously I'm trying to solve for that not happening. And then the Profit First method is it's a, for people who don't know what it is, it's essentially like the old envelope budgeting model that, you know, maybe your grandmother used where you, you squirrel money away for each category.

Pete Neubig: Yeah.

Peter McKenzie: This is for rent. This is for food. This is for the utilities, that type of thing. Same idea, but in your company. So we're just saving for Profit First, hence Profit First. So whatever it is, if it's 10%, 10% comes off of every dollar and gets put in an account for profit. You save for taxes, you save for the labor that you pay for, all of the things in the business. And then once a quarter, you take what you've saved for profit, you cut it in half, and then that's the profit distribution. And then you leave 50% behind as like an emergency fund. So every quarter we're making distributions and that's where I make my money.

Pete Neubig: Nice. And my guess is the first year there's probably no distributions as you're getting it up.

Peter McKenzie: Correct. Yeah. Yeah. This is not like a- This is a long-term play. Yeah. So now, I mean, now that I'm a few years into it, now that those distributions are, you know, they are, you know, I'm not getting rich off them by any means, but they're nice to get. And they don't, as you know, you ran a management company, like very rarely does our income go down. It's usually, as long as you're growing, it's going up and to the right. So those distributions in theory shouldn't stop and they shouldn't be getting smaller either. So.

Pete Neubig: One of the advantages of having a business is being able to write off your car, your internet, all that good stuff. Is that something that you guys talked about where he could still get some of that, the benefits of that, and it just came out off the salary or is it something like, hey, we're going to allow you to have your phones, your internet off of this company or?

Peter McKenzie: Yeah. So I don't, it's not explicitly addressed, but like, for example, you know, a car came up the other day. Well, we were paying mileage and it was, it was more than probably a car payment at one point. And it's like, hey, I'm, well, one, it's a couple of things to keep in mind. I don't have a majority stake in these businesses. So.

Pete Neubig: That's right. So at 50%, you're not, you don't have to even sign on the bank account.

Peter McKenzie: Yeah. So like, I'm not in a controlling it. I can't control what happens. Right. I think just because we have a good relationship, we talk about certain things and he, you know, they do look to me for some direction and guidance, but I can't say you can't, you know, you, if that's your personal cell phone, the business can't pay for it because I'm trying to protect my profit distributions over here. Like I'm up, that'd be foolish on my end as well. But I also, everyone's been reasonable and there's been nothing crazy that, that goes on. I don't know how, I mean, there's a lot of people who run a lot of frivolous expenses through their business.

Pete Neubig: Yeah. They travel, they travel with the family. They travel with the family, say it's part, it's a business expense. I'm like, really? You got business in Hawaii? So I get that. Okay. So, and I guess having your weekly, it sounds like you're running an EOS model. Is that?

Peter McKenzie: It is. Yeah. No, that's the other, that's the other thing that's in the agreement is we run EOS.

Pete Neubig: So you're having your L10s and your quarterlies. If you start seeing some, something kind of get askew that that's a conversation you put on a challenges list and you kind of.

Peter McKenzie: Absolutely. Yeah. And then the, the, one of the, the hardest thing, one of the harder things about this that I'm doing is I, you know, we're all Type A entrepreneur type people. Like I run my business a certain way. I run my personal finances a certain way. I'm very disciplined. So when you, I get put into these other companies in a non-controlling function and I see somebody that maybe would run their business, not the way I would run it or their personal finances in ways that I would never do. That can be difficult because you're just, from my perspective, I'm like, this is not going to end well. Like this is not a good practice. Sometimes I say it, sometimes I don't, but that is hard because again, I don't control.

Pete Neubig: And these are, there's just some things like you have to let them kind of like fall, right? Like, you know, you can tell your kid don't touch that hot stove so many times, but once they touch it, they're not going to touch it again. Type deal.

Peter McKenzie: That's a perfect example. Like, cause not all the advice is taken, right? Like I, I can say something and if they feel strongly about it and want to go different direction, that's the direction they're going to go. Cause like I said, I don't control the business, but it's, and that's okay. Some people learn that way, right? Like I don't, it's not the end of the world. There's what you like about business and I like it too, is there's a thousand different ways to do this and you can approach all of these problems from different angles and different points of view. And very rarely is one completely right and one completely wrong, you know?

Pete Neubig: Yeah. You touched on something though, personally, right? Like when I, when I used to, when I used to buy apartment complexes, I mean, I was doing like a mini syndication before I knew what a syndication was. I'd go find investors throughout Houston and they would hand me checks of a hundred grand, you know, $150,000 and we'd go buy an apartment complex. And what I always found was one is like, I have this lunch with this person. Unlike what you did was you built a relationship with, with this partner. And then I have lunch and then at the end of lunch, they give me a hundred grand, right? So, and now, and now we're going to buy an apartment complex, like three to five, seven years. So I have one date and then I get married to him for like seven years. And what I found was the people that gave me the least amount of money always had the biggest challenges in their life. And one thing I wish I would have done is I wish I would have run a credit report on some of these people just because they have money doesn't really mean that they, they, they run their life, you know, debt-free, so to speak. So is that something that you would look like? Is that something that you would look into going forward? Like, Hey, I need to see what your personal life looks like. And if it's a hot mess and you've got, you know, five credit cards maxed out, like, I don't, if you can't run your life, you know, profitably, how are you going to run the business profitably?

Peter McKenzie: I think if this was something I was going to do, like at scale, I think I absolutely would do that. Right. Cause you're going to run out of your own circle of people who are people you already trust and know.

Pete Neubig: Right.

Peter McKenzie: Yeah. I think it's a great idea. I personally didn't do that.

Pete Neubig: Cause you have, you have, you know, lots of experience. So let's talk a little bit about the second one. So, so the first one, they were literally, were they in your market? Is he in your market? Or is he like the next market?

Peter McKenzie: Next, right next door. Yeah. Technically not my market, but, but literally right next door. So if Rincon gets- Which that did, that did, that did, we should say that came up in the negotiations because I was thinking if I want to expand Rincon into that market, that could get weird. So I thought we better have this conversation now. So one of the things, so if I intentionally expand into his market, it's going to trigger basically the end of the relationship and a payout. So that was negotiated upfront, not now I put caveats in there. Like if I have a client who has 10 properties here and one in your market, and I just managed that one, that doesn't count. Right. We're talking about like, I'm opening up shop in your market, actively trying to compete against you. Then that's going to be, you know, our relationship is going to change dramatically then.

Pete Neubig: Now, also with the vision, like let's say, you know, did you guys align on vision? Like, is there like, Hey, we're going to, you know, we're going to run this thing forever. We're going to run this thing for five years and exit. Like what, what did, what were those conversations like?

Peter McKenzie: So the one in the market right next to me, not really extensive. Like there's no clear exit at the end. I mean, we have the, the, the 10 year plan, you know, the 10 year vision goal, whatever you call it. That's there, but like how he wants to, and he's, he's quite a bit younger than me. So I think we just never really went there and we probably should, but it's not clear to me how we're going to wind it down or what his exit is. Now, one of my, one of my partners is older than me. It was very clear. I got 10 years left and I'm tapping out. So let's go hard for 10 years and then we'll sell it or figure out what we do from there. So this is a different, different thing altogether.

Pete Neubig: Do you have a concern where, you know, once let's say you're five years in on this and he's now caught up on everything that you're doing and in some cases exceeded with the AI, are you concerned that he's like, now he's going to be upset with like, now I, this guy owns 15% of my business and he doesn't offer the same value that he did when I first started?

Peter McKenzie: So I think that's for sure. That's a possibility. Right. But that's why we have the buy sell. That's why when it, when it stops working, it stops working. Um, well, the other thing I've thought about is my company is like sub 500 doors. So what, what, what if, what if I share everything I know and help them as far as I can help them. And then they, then he grows.

Pete Neubig: Now he's at a thousand doors. Yeah.

Peter McKenzie: Yeah. And like, then it flip-flopped on us. But I mean, that's just the way it goes, I guess.

Pete Neubig: Like, yeah. Oh, and then he, yeah. At that point he'd probably have the cash to buy you out. And then he would just say, Hey, I want to buy, I want to buy you out type thing. Okay.

Peter McKenzie: That's going to be a great, great problem to have. I hope that that happens. Well, I will talk about this is the, my partners are growing way faster than I grew.

Pete Neubig: So correct. Cause they have you there.

Peter McKenzie: So ones that I think, yeah. Oh, that's what I'm saying. Like one of them is at like 110 doors, the other one's right around there. And then the guy who's only about a year old is at 70. It took me a long time. It took me three, four years to get to a hundred doors, right? I was doing it part-time like a hobby thing. So it's a little different, but they grew way faster. They're profitable now. They, all those things are because of what I brought into their business. So it's worth it all day long. I also have another fireman friend of mine who quit being a fireman, moved to Montana and he opened up a one of the, he wanted to do what I was doing. Cause he saw what I, what I had going on. So we, I was helping him as much as I could. And eventually we had the conversation like, Hey, you know, I I'm doing this other deal with these other guys. He chose not to. Um, he goes, no, I think I'm going to just keep all of it myself and go out of it alone. I'm like, cool. Awesome. Well, he's, I think struggling to hit 40 doors and he's been in it over a year.

Pete Neubig: There's value to, to that knowledge that you possess. So, all right. So what did you do differently on the second deal from the first? Or did you, did you say this is working great? It was going to kind of copy and paste.

Peter McKenzie: Honestly, it was copy of the sec.

Pete Neubig: Yeah.

Peter McKenzie: The second one was copy and paste that, that one came, he, that one, he came to me. I already had a longstanding relationship with, he was one of our best referral partners at the management company. He was, he did sales. He didn't do management. He just sold in our market. And then he moved to Idaho and said, Hey, now that we're not going to compete against each other, I want to do what you're doing and will you join me? That one was an easy one for me. Cause I already knew what, how successful he was in his real estate business. So yeah.

Pete Neubig: And then the third one, same deal, 15% in the same contract.

Peter McKenzie: No, no. Yeah. The Idaho one, it's 25%.

Pete Neubig: Okay.

Peter McKenzie: Nice. So now that was from scratch though, that there was nothing there. We started from zero and, um, and then I put in, since it wasn't, there was no company, I contributed 25% of all the capital of startup as well.

Pete Neubig: Got it. Makes sense.

Peter McKenzie: That was that one year.

Pete Neubig: The banking gets a little, it's a little crazy. Cause you have to sign, you have to sign the documents and all that good stuff. Right.

Peter McKenzie: I'm on the bank. Yeah. All of that. Yeah. So it's a little more. And then the last one, cause I know you're going to ask, um, is in my market, it's not my market, it's in California and there was no broker's license, so the guy that I went into business with didn't have a broker's license, he needed mine, more risk for me. There was also, I was required to basically, I front loaded all the cash.

Pete Neubig: That sounds like a 50/50 the deal to me.

Peter McKenzie: It is, it was a 51/49 deal, but, uh, because I put up all the risk or I put up all the capital, I'm taking all of the risk by being the broker of record. Um, and then I'm committing or I've committed like a small salary. So like totally different operation, right? Like it's less passive. It's more, even though I'm not doing day to day work, I'm, I got way more on the line.

Pete Neubig: Yeah. That makes sense. That's a better deal than I, than I got. I, uh, I'm a broker of record for one, somebody here in Houston and, uh, I own 10%. And, uh, but I don't do anything other than kind of coach them and it's not very structured like yours. So I'm going to, I've learned from this. I'm going to probably start doing L 10s and quarterlies.

Peter McKenzie: How do you get paid just when they make a distribution occasionally or?

Pete Neubig: Yeah, we're at, I think we're at like 80 doors right now. And, uh, it's been a year. I have not seen anything. Uh, yes. And so I think I need to sit down and say, okay, what do you know? Let's, let's make this more formal. Cause he's been a buddy of mine for many, many years. He worked with me at, at, at Empire. Um, the original, the first company, him and another guy, uh, went in business with, they get in a, they gifted me 10% for coaching. They ended up selling that business cause it didn't work out well. So I made some money there. Not enough for, for the heartache that I had to wear a referee shirt every time we met, you know? Like, and, uh, and so then, um, one of the buddies got me in a divorce and he started, started from scratch and, uh, he's, you know, he's at, uh, I want to say, I think we're like around 80 doors and it's a, it's a, it's a little over a year now. And so you're right. Like it took me two to two, almost two to three years to get to 80 doors. And I had 30 of them when I started as a little while to get there.

Peter McKenzie: Is that in Houston where you're at? Or where, where's, where are they?

Pete Neubig: Yeah, it's in Houston. Yeah.

Peter McKenzie: Is that weird? Is it any of your old relationships that are working with him or no?

Pete Neubig: No, no, because it's been a minute since then. Right? So we, we sold to Mynd in 19. These guys started their business, I think in 21, they had a non-compete, so they didn't go after anybody from Mynd. They respected the non-compete. Uh, they ended up, uh, just getting a bunch of, you know, I mean, like we all start low income doors from these, from this real estate investment group. And they, uh, they just didn't have the process put in place. One guy wasn't pulling his weight, the other, or they felt they weren't pulling each other's weight. So by the time he came to me, I think those, those relationships that we had from Empire to mine to just, yeah, I think every once in a while, somebody finds them, you know, that was working with them at, at, uh, at Empire. And they're, they're still with Mynd and they, they transfer over. But I mean, maybe, maybe three or four doors at the most, nothing, nothing, you know, so really, you know, he's the one that's doing all the work and I'm just like, Hey, meet this person, do this. Have you thought about this? You know, here's the structure that you have to have. And so very similar to what you're doing, but, uh, I think I'm getting the short end of the stick here. Now I think about it.

Peter McKenzie: I don't know. I, so I've struggled. I actually struggle with that too. Like as what I'm doing reasonable, like, cause in my mind, I didn't do any of that. I probably would have said no to that deal when I was just getting started and younger. I probably would have said, no, I'm gonna figure this out on my own. So for me to go, Hey, you know, how about I own part of your business and I'll share all this stuff with you that didn't, sometimes it didn't feel right. Right. Like, so it had to be, it had to make sense for both sides, but I've struggled with that same thing. Like, is this fair? You know, am I taking advantage of somebody here? But I don't, I'm at peace with it. I mean, I think you either value what, you know, and the knowledge and what you bring to the table, or you don't, if you don't, don't do it. And if you do cool, like you're, we're not, no one's, you know, we're not twisting anybody's arm here. These are adults on the other side of the table who are evaluating whether or not this makes sense for them as well. You know?

Pete Neubig: Yeah. I think I had the same mindset when I was first starting. I don't know if I would have gave up some of my business, but if I had somebody that was, they already had, you know, let's say a thousand units that I wanted to be at, and they're like, Hey, give me 20% of the business. And I'll basically give you the roadmap. That's a, that's hard to say no to, especially if you have a relationship. So I think, you know, what I'm hearing here is you had a relationship with all three of these guys, these partners, and you already knew them pretty well. So this made it pretty simple. You're not going out and soliciting like, Hey, let's do partnerships. Do you think this would work with a non-property management company? Like, let's say somebody was starting an AC company. Would, would this be, would you think this would work? Do you have the same knowledge? Like is business agnostic or do you think it's our knowledge is really in the operations and how to really build a PM firm through operational?

Peter McKenzie: I think it'd be a harder sell for sure. Right? Like if you, if you didn't know, you came to me and you were in a business that I knew nothing about. I just knew about business. It'd be a harder sell for, for me to convince you to, that I was going to be the answer.

Pete Neubig: Yeah, I don't know.

Peter McKenzie: I think it, I think it matters that you're in the industry, but I mean, there's plenty of business coaches that, that coach just any business. Right. Who would you guys work? Who was the guy you guys worked with that?

Pete Neubig: We worked with a group called Action Coach. Uh, Doug, when he was Doug Winnie, when he was my business, it was my business coach. And then Brad Sugars was the owner of the franchise. So he was the franchisor and, uh, what Brad finally realized after years and years of running, you know, uh, uh, you know, uh, Action Coach, he's like, let's take the top performers and let me see if I could, you know, even put more jet fuel on, on them with his knowledge, right? Cause he's a billionaire. He's learned how to really scale. And so we were, you know, our claim to fame is we were the first company. In Action Coach to do a deal with, with Brad and we gifted him 10% for his knowledge and his leadership. And because of where he was, we felt that that was a good, a good deal. And because of him, we, we moved to other markets and, and, uh, you know, we were able to do to sell. I don't know.

Peter McKenzie: So I'll turn the, I'll turn the tides on you. It was that a good deal for you? Would you do it over again? Did, were you happy with it? What did it, you know, how did it all play out now that it's done and over?

Pete Neubig: Yeah. I think, you know, looking back now, I, that, that's a whole of the podcast Pete, or that's a, maybe at broker owner, I'll buy you a drink and we'll talk about this, but to answer your question, high level, looking back now, now it's six years since we sold, I've come to grips with it and I'm happy because I was able to build VPM, uh, the challenge. Go ahead.

Peter McKenzie: Sorry. Go ahead. I was going to say not, not, not if, not of selling Empire and all that, I'm saying the 10% that you gave up to Brad.

Pete Neubig: Um, I would say that I did not have the hard conversation with my business partner, Steve, about the vision. I didn't, I didn't like where I didn't like the new vision where we're going. I never wanted to be a national company. I never wanted to even be a company in Texas. I wanted to run the most efficient property management firm in Houston. And I really thought we could have run a nice life. It's not a billionaire's life, but it could, it could have been, you know, very nice life. And, uh, I was too much of a wuss to have that hard conversation. So no, I don't, I don't think that I would have done it again, but because we did it, it, it pushed us to go into other markets and then we sold pretty quickly. I think we sold like two years later. So, um, and this, I think we, we got more money because we grew more. And so, you know, I think it ended up being okay, but if I, if I were to stay with my original vision of just owning a property management firm, no, I wouldn't have done it because we, we, we didn't need that, you know, but, uh, but the vision was, Hey, you know, we're going to grow and we're going to, we're going to expand this thing. And, uh, you know, Brad had the blueprint for that, uh, in, in this case.

Peter McKenzie: Gotcha. That's why you were asking me so much about the alignment of vision and these deals. Cause it was a little close to home. That makes sense. That makes total sense.

Pete Neubig: Yeah. Is there a, we're, we're kind of up again. We went over because it's such a, uh, an interesting topic, but is there any questions that I should have asked that I didn't know?

Peter McKenzie: Yeah. I mean, we, I'll say this and we can cut it out if it's over, but you struck a chord when you talked about the vision. So right now, and this is not to do with the other companies in my own business. I have an identity issue right now because I started that manager or that maintenance company that spun off. It's a separate company, but there's no real vision for it. And it's presenting a problem because we have these two competing entities and we're like, well, the manager company has a big 10 year plan. Like that's clear. Here's this maintenance company that we just kind of spun off because it made sense and everybody else was doing it type of thing. But now it's a big identity problem because the maintenance company, the management company conflict, they have conflicting interests, even though I own both of them. There's arguably no vision at the maintenance company. And I didn't think it was going to be that big of a deal. Cause it's like, well, they're my companies. I own them both. Like, what's the problem? But what I'm learning as I get older and more experiences, it's a big problem. Like the company, even though I own both of them, they're two totally separate companies with totally different vibes and they're not the same. So the fit, but that lack of vision and that lack of conversation with myself, I guess.

Pete Neubig: Yeah.

Peter McKenzie: Is important, which makes a difference.

Pete Neubig: So I mean, in the EOS model, that's like step number one, right?

Peter McKenzie: Yeah. Which we run EOS and obviously I didn't, didn't, didn't follow the system.

Pete Neubig: It's funny. Cause like I'll, I'll even like, I teach a lot of stuff on like hiring and then I don't, I don't practice what I preach sometimes. So we all, we all fall into it. But hey, if you got anything out of this podcast, you know, that you got to go back in that maintenance company and at least come up with a vision on that one, I'm working through it.

Peter McKenzie: In fact, I was just talking to Phil, who's our fractional CFO, and he mentioned that you guys were connected recently about it, but he's the one that's not about my issues, but just in general, but he's the one that's bringing the issue to light and, and really not letting me get away with not fixing it because it's a problem.

Pete Neubig: Which is, let's give him a shout out. Phil, Phil Mazur and what's his company again?

Peter McKenzie: The CFO Mission.

Pete Neubig: CFO Mission. Yep. And you did another great speech, or talk at the, at the PM systems workflow about fractional CFO. So maybe we get you on here another time to talk about what is, what is. I love that. All right, Peter. If someone wanted to reach out to you, maybe they, maybe they want to partner or, or maybe they want to learn more. What's the best way they can connect with you?

Peter McKenzie: I would say LinkedIn. Yeah. They can send me a message on LinkedIn or, or through our website.

Pete Neubig: Okay. And if you listen to this and you're not part of NARPM, join NARPM, go to NARPM.org. And, or you can give them a call at 800-782-3452. And if you are looking for remote team help, or you just want to have a consult, shoot me an email, Pete@vpmsolutions.com. Peter, thanks so much for being here. We'll see you everybody.

Peter McKenzie: Thanks. Thanks for having me.