Ep #227 – Josh Sterling – From Airline Pilot to Piloting a Multifamily Empire

Here’s some of what you will learn:

Understanding Commercial Blanket Loans
Renovation Pitfalls to Avoid
Agency Financing
The value of real estate education
Why competence builds confidence
What property management to use at what growth level
The value of independent adjusters
How to handle catastrophic events
Understanding tenant / landlord responsibilities
The value of analyzing multiple deals
The value of getting past your first property
Understanding who the bottleneck is in your organization

Book Recommendations: Be Obsessed or Be Average by Grant Cardone
The E-Myth Revisited by Michael Gerber

To learn more about our guest, click here

Join us at a Multifamily Bootcamp, visit MultifamilyBootcamp.com

 

Watch on YouTube!

Full Transcript Below:

Ep #227 – Josh Sterling – From Airline Pilot to Piloting a Multi-Family Empire

Rod Khleif: Welcome to another edition of How to Build Lifetime Cash Flow Through Real Estate Investing. I’m Rod Khleif and I am thrilled you’re here. I know you’re gonna get a ton of value from the young man were interviewing today.

His name is Josh Sterling and he’s got about a $15 million portfolio. He’s based just south of Detroit, which I know has been a real target rich environment for a while. I think it’s tightening up now but…

He started out in single families, moved in to multifamily. I know he’s gonna add a ton of value to us today. Josh, welcome brother

Josh Sterling: Thanks for having me, Rod. I’m excited to be here.

Rod Khleif: Absolutely. So let’s start with your story. That’s a great place to start. Did you always start in real estate? Or talk about how you got into it.

Josh Sterling: Sure. I started with a path I think a lot of people headed down. Grew up out in California, wanted to get as far away from home as possible, went to college in Daytona Beach, Florida to be an airline pilot. Progressed pretty much as planned through school, and into that career field.

It took me about five years in that field to realize a couple of things. I didn’t really like the travel as much as I thought I would. There was no stability there. So I was kind of…

Rod Khleif: You were flying commercially? [overlap talk]

Josh Sterling: I was. Yeah.

Rod Khleif: Okay.

Josh Sterling: For about five and a half years.

Rod Khleif: Wow. Wow… I know now you’ve got a family. You’ve just told me you’ve got a baby on the way…

Josh Sterling: Yeah.

Rod Khleif: You got an 18 month old. That’s commitment.

Josh Sterling: Yes. It’s something new. They don’t come with an instruction book.

[chuckles]

Rod Khleif: No they don’t… So you got out of being a pilot. Tell us what happened.

Josh Sterling: Yeah. It really had become, really, my identity. I’d gone school for that. I’d done everything I thought I was suppose to do, and I found myself just at the mercy of an employer.

The airline industry at the time, this is 08, 09 time frame, was struggling from the recession, and I found myself really not making any money, with not any job stability on the horizon. I didn’t really have any other marketable skills. I had a degree in Aeronautical Science, and there’s not a lot of things you can do with that.

At the time, real estate seemed to make sense to me. It seemed… You rent a house up for $1000 a month, you get a check in the mail for a thousand bucks, and I didn’t understand all the expenses and problems with that, or difficulties you could have there. But it be made sense, and so I ventured into single-family investing in 09.

Rod Khleif: Okay. Perfect time.

Josh Sterling: Looking back, it was quite a pretty good time for it.

Rod Khleif: Perfect time, I was hiding under a rock. Yeah, good for you. Where was this? This was south of Detroit, same area that you’re in now?

Josh Sterling: Yes. I had the benefit with the airlines. I’d been flying all over North America really, but certainly all over the US. tI had seen a lot of different markets… I had bought a home for myself back in the peak of the market, which I still have. It still upside down to this day, down in Florida.

But I had seen that the Midwest market, and specifically… We’re not in Detroit itself as the city, but we’re not far from it. We’re in basically one of the southern suburbs.

I had seen that the cash flow markets up here were… The price to rent ratio is… [bad audio]

Rod Khleif: Fantastic… Okay. You bought houses. When did you buy your first multifamily? Why did you make that transition?

Josh Sterling: We started buying houses in 09, and it took me until about 2012… I probably built up a portfolio of 20, or 25, somewhere in that range, single-families. We started looking into multi just to build scales. Something… It makes a lot of sense. It’s much easier to buy 25 units at once, than it is to buy 25 single-families.

We came across a building that, there was a 24-unit in really, really bad shape. You’d certainly call it a value add play. In fact, it was 42% occupancy.

Rod Khleif: Wow.

Josh Sterling: There were about to lose it for taxes, and everything. It was in a bad shape.

Rod Khleif: What kind of an area?

Josh Sterling: I’d call it a C-plus area. It’s a market actually we still invest in today.

Rod Khleif: Okay.

Josh Sterling: Maybe even merging into the B-minus type area. You’ve got some, for single-family values in that area, to give you an idea, our average in this market is about $150,000-house.

Right now, in that area there’s some 250 and $300,000 houses within a half mile of the building. So it’s a potential to become a stronger area but somewhat rural as well.

Rod Khleif: Okay. Why was it 42% occupied?

Josh Sterling: That’s something I wasn’t sure of at the time either. My question was, “Is it bad management on the seller’s part? Or is there something wrong with this building and this location?” Maybe there’s not a strong rental market here because it is maybe a little rural, or there’s a little bit nicer houses, and it’s more of a family type demographic. I wasn’t sure.

It turns out that I was just bad management.

Rod Khleif: Okay.

Josh Sterling: We got into it and we were able to increase that occupancy. It took 14 months; we ‘refied’ out of the land contract purchase, and we were at 100% occupancy.

Rod Khleif: Aha, you did a land contract. Awesome. Brought your single-family experience to the multifamily. That’s awesome.

Josh Sterling: We really had to. I don’t think there was a bank that I at least knew of, that would’ve financed that at 42% occupancy with that much deferred maintenance.

Rod Khleif: Probably not. Okay. Well good for you. So you refinanced it out. You got the occupancy up. You just went to like a local regional bank.

Josh Sterling: Right. One thing that we’ve been doing that maybe unique, it was certainly unique at the time, is with our single-family strategy, we’ve been doing what I call commercial blanket loan. Where you package anywhere from… You’re probably familiar. But we package anywhere from four to 15 at a time, and we pull cash out in these blanket loans.

They have to be with a portfolio lender that holds that loan on their books…

Rod Khleif: Banker.

Josh Sterling: Exactly.

Rod Khleif: Portfolio bank.

Josh Sterling: Right.

Rod Khleif: Yeah, I did a bunch of that. In fact, that was part of the reason for my demise back in 2008. I will forewarn you, okay. Because what I did was, I crossed-collateralized my apartment buildings with my houses. That’s what pulled the whole mess down in 2008.

Josh Sterling: Oh.

Rod Khleif: Just be cognizant of that.

Josh Sterling: Right.

Rod Khleif: That’s a red flag, for those of you listening. Those loans sound great. You are able to pull money out, you go with the portfolio lender, but when you package deals like that if… It’s the old rotten apple theory. If part of it goes down, the whole thing goes down.

Of course, 2008 was… I don’t wanna scare anybody, 2008 was so hopefully an anomaly. Let’s… Obviously we’re heading into something else here before too long, but 2008 was definitely, definitely ground zero for real estate.

You did that 24-unit. You stabilized it. What was next in the multifamily side?

Josh Sterling: It took another year or so, a year and a half, and we found a 53-unit deal. Now, we’re getting into early 2015. That deal I thought would be much more enjoyable. It was running at mid 90%, low 90% occupancy. It did have a bunch of deferred maintenance but I was looking forward to it because I felt that I wouldn’t have the large value-add struggle.

Rod Khleif: Right.

Josh Sterling: I ended up being quite a bit harder to do that deal because, as you have probably are well aware, occupancy had to come down in order to improve the… [overlap talk]

Rod Khleif: Occupancy comes down when you’re doing renovations. Yep. I just talked about that in my live event this last weekend. People don’t realize that, “Hey, you might be running a great occupancy rate, but if you plan to renovate units, they’re gonna be empty while you’re renovating them. You’ve got to account for that. So you got a little seminar on that notion then.

Josh Sterling: Yeah. I got the seminar without the education ahead of time there.

Rod Khleif: [chuckles]

Josh Sterling: We also had to do quite a bit of improvement to the tenant base… [overlap talk]

Rod Khleif: That requires vacancy as well. You just got to get them out.

Josh Sterling: Absolutely. There was some economic vacancy there to start with.

Rod Khleif: Right. You got to get them out to get then back in… Right. An economic vacancy guys, is you can have a full up apartment building but if only 70% of people are paying, you’ve only got 70% economic occupancy, which is all the only occupancy that matters.

You went through a little seminar, turning it over, repositioning, were you able to get it stabilized? It was just harder, and more expensive than you thought it. Was that it?

Josh Sterling: It was that, I didn’t expect it to cost as much as it did because of the repositioning. But yes, we were able to up numbers on that one. If you’d wanna talk about them, we bought in at 1.65 million. We put about 300,000 into it, which is a little more than planned but quite a bit of deferred maintenance.

Rod Khleif: Oh, sure. It’s probably worth double that now.

Josh Sterling: Yeah. We’ve been going to agency financing on a lot of these deals lately, so in the past six months we ‘refied’ it out at 2.8 million.

Rod Khleif: Nice. Very nice. Yeah, guys, agency financing is Fannie Mae and Freddie Mac financing. It’s typically non-recourse. It’s great debt if you’re gonna hold on to a property long term. And it’s pretty much the belle of the ball for multifamily in real estate if your loan amount’s over a million dollars. So that’s fantastic.

You told me you’re 34 years old, if you were to go back, and give your 20 year old self some advice, what would you tell them? ‘Cause I’ve got lots of listeners that are in their early 20s, and they’re motivated. They want this. What would you tell yourself, and by virtue of that, tell them?

Josh Sterling: Okay. First, when I started out, either there wasn’t the resources available for education that there are today, or I didn’t find them, but either way, right off the bat I would get educated in real estate. If this is the way you wanna go, you’ve got to get educated before you start, whether that’s courses or just blogs…

Rod Khleif: No question.

Josh Sterling: Or forums, or find a mentor, get educated and go from there. I personally wouldn’t have gone the college route…

[00:10:01]

Josh Sterling: Because now, looking back, I don’t do anything… I do still fly myself, but I don’t do anything I went to college for, so I invested quite a bit in that that didn’t seem to return much for me. [chuckles]

But, again, as far as…

Rod Khleif: Yeah, that’s sad.

Josh Sterling: What’s that?

Rod Khleif: It’s sad, but it’s the reality in most cases. I ask the question at my event, I said, “How many of you went to college?” Raise their hand… “Okay, how many of you got all the resources to learn to financially bring yourself to the level of the success that you wanna get to, and all the emotional, psychological strategies you need to get there?” Of course, nobody raise their hand.

[chuckles]

Josh Sterling: Right.

Rod Khleif: Okay. So you would get the training, no question… By the way, let me throw in a plug. I’m gonna be in Chicago, August 24th, 25th, and 26th, and Josh, you’re welcome to come as well, my friend. On me…

Josh Sterling: Great.

Rod Khleif: But yeah, I’ll be near O’Hare Airport, and I would love to see you guys go. We just had our sold-out LA event. It was an absolute success. In fact, if you’re not on the big multifamily Facebook group, go there, and see what people said about the event. I think you’ll be very impressed.

I got a tremendous amount of great feedback and if you’re not on that big Facebook group, go to MultifamilyCommunity.com and be sure you sign up. We just exceeded 13,000 people there. We’ve only had it around for six or seven months so it’s killing it.

Anyway, so back to you Josh. You say to get the training. Absolutely. Dabblers get crushed, you must learn this business, and you can massively accelerate your learning curve by… If you haven’t read my free book, that’s kind of a no-brainer. Just text the word CRUSH to 41411, we’ll get you a free copy. It’s like a textbook for this business.

Learn, whether it’s with me, or somebody else, Learn this business because that’s how you get further faster. And that’s how you don’t make any mistakes.

Anyway, what else would you tell your 20-year-old self, buddy?

Josh Sterling: Once you’ve got an education base there, which took me a long time to get, because I didn’t go through any type of seeking that. I learned it all through making mistakes.

Rod Khleif: Yeah. Me too.

Josh Sterling: Then I would get out there, and I think that’s gonna give you the confidence to actually take some type of action, making moves. I look back at some of the deals I passed on, and I know that I passed on them because I was scared, or I didn’t have the knowledge to do it.

That would be the second piece of advice I think. It’s be educated so that you’re able to strike when you see an opportunity.

Rod Khleif: Competence builds confidence. You have to learn this business, and that’s the only way to learn it. And repetition is the mother of skill. You have to study it over and over again. I had Grant Cardone on the show and he said he studied the business for four years before he took action. But if you get a mentor… [Josh shows a book]

There you go… Grant Cardone’s book. He just flashed it up. For those of you that are just listening to this, Josh just flashed up, “Be Obsessed or Be Average”, one of Grant’s books. I’ve got actually… I’ll flash. I’ve got some of Grant’s “Cardone-isms” on my wall. “Comfort kills”, “I am success”… Grant’s a funny guy. I laugh my ass off every time I talk to him. But he’s a hitter and probably one of the best sales trainers in the world.

But anyway, you’ve got to you’ve got to build your confidence which by virtue will equate to your confidence. And then you’ll have the ability to influence people, and bring investors into your deals. Feel confident enough and congruent enough to convince brokers to take you seriously, sellers to take you seriously, but you got to study. You’ve got to evaluate deals. You’ve got to be out there making relationships. That’s how you own this business.

Great advice, buddy, thank you for that… I know that you manage your own stuff, which a lot of people don’t do, when in fact I don’t even suggest for people, especially when they’re on acquisition mode. I’ve managed my own stuff for four decades, but it’s a lot of work.

Now, you’ve got an infrastructure Josh, but let’s dig in to your property management ‘cause I’m sure we can have some fun talking about some war stories, and some of the things you’ve learned, and maybe some suggestions you can make.

Let’s start with suggestions. At what point did you decide to start managing your own properties and why?

Josh Sterling: We started right out of the gate, doing it ourselves.

Rod Khleif: You did.

Josh Sterling: Back to the single-family house.

Rod Khleif: You’ve never had anybody manage your stuff. It’s always been you.

Josh Sterling: It’s always been me.

Rod Khleif: Okay.

Josh Sterling: I got into an official property management company as a separate entity, out of necessity because I think, what’s very common is especially starting with single and smaller multi, someone’s who’s self managing works themselves into a corner.

You end up with 35. 40 units, somewhere in that range; it’s certainly not more than about 50, and you can’t control that on your own anymore. Now you’ve just created a job.

Rod Khleif: Exactly. Yep.

Josh Sterling: We did exactly that. I worked myself right into a corner where it was borderline miserable. It happened with the big acquisition of that first 24-unit I was talking about, and now we’re running somewhere around 50 units. I had a full time job, and it was just a realization that… [overlap talk]

Rod Khleif: You had a full time job in addition to that?

Josh Sterling: Yes.

Rod Khleif: Oh, good god. Okay.

Josh Sterling: It was kinda stupid.

Rod Khleif: That in itself is a full time job.

Josh Sterling: [chuckles] And it was.

Rod Khleif: Wow. Okay.

Josh Sterling: But that was what gave growth and birth to the property management company. I had to learn systems, and how to implement them, and create them, and hire people. We started growing that to one part-time assistant, to today, we’re at 13 employees.

It’s gotten much easier, the day-to-day, as we’ve grown but it is a ton of work. Has its ups and its downs.

Rod Khleif: I was telling you before we started recording, I mean in the property management business, especially third party property management, you don’t hear from people to tell you how wonderful they think you are.

Josh Sterling: [chuckles]

Rod Khleif: They don’t give phone calls to tell you how great you are. Tenants call when they want something, when they’re not happy. Owners call when they want something, and their not happy. And it’s all good.

I did the same thing you did for a very long time. Out of necessity as well. The only thing I… as you said, “It’s a business. It’s a completely separate business with its own systems, its documentation, its rules, its regs, its pitfalls. Every business has nothing but people and systems, and that is a business that requires lots of systems.

It sounds to me like you’ve got it well in hand, but I will tell you guys, those of you listening, as you start buying multifamily, I’m gonna highly recommend that you get third party management, initially.

Once you get to a point where you’re as big as Josh is, where you can have your own infrastructure, and you’re not doing the work, and you can bring people in to do it for you, for what you’d be paying an outside management company to manage your managers, that’s a different story.

But I would not be dealing with toilets on your own while you’re trying to find deals. That’s my caveat. In my early podcast episodes, I told everybody I’m a big proponent for self-management, which I am, when it’s the right time and not when you’re on acquisition mode. That’s my two cents on that.

Let’s talk about some war stories, Josh. You just told me you just had your first fire. Share your experience of that, because I’ve had a dozen of them. We talked before we recorded and I want you to share the insights that you gained from having that happen because everybody is going to have that happen if they get to this business at some point or another.

Josh Sterling: Exactly. So I had to be, of course, on vacation in California when this happens…

Rod Khleif: [chuckles]

Josh Sterling: Good thing I do have a great team here on the ground and they handled everything amazingly… But I got a phone call that there was a… My director of ops put it, “We’ve got a small issue at one of the buildings.”

Rod Khleif: [chuckles] I love it. That’s the kind of employee you want. Somebody that minimizes… Helps manage your stress level. I love that.

Josh Sterling: I said, “If it’s a small issue why are you calling me?” Then he sent the news article of the helicopter filming the fire.

Rod Khleif: Oh, good god. [chuckles]

Josh Sterling:   So we worked into it. Essentially, what had happened is a building that we had only owned for about three months was… It was actually one of our newest acquisitions had a fire that had started on the balcony.

Rod Khleif: Somebody’s grill or something?

Josh Sterling: You know what, it looked like it was a space heater.

Rod Khleif: Oh, wow.

Josh Sterling: I still don’t even got the official report. But the irony in it is that had it started in a unit, fire suppression at this building would have put it out, so the fire marshal says.

Rod Khleif: No kidding.

Josh Sterling: But on a balcony, they don’t have fire suppression.

Rod Khleif: Of course.

Josh Sterling: It’s a fire that burns 12 units.

Rod Khleif: 12 units got damaged!

Josh Sterling: Yes.

Rod Khleif: Holy cow. That’s a biggie.

Josh Sterling: What’s amazing is, to me was amazing, was really the fire only damaged two or three units, but the…

Rod Khleif: Smoke.

Josh Sterling: Water and the smoke; mostly the water really took everything else out. It gonna be a down the studs gut re-model. We’re just working through that process but I didn’t have any education, ‘cause I’ve never had this happen. Thankfully, I put a couple of calls in after my initial insurance call and a call to my lender because when you get into this agency financing they wanna know everything. They have a department that handles this.

Rod Khleif: Sure.

Josh Sterling: Put a call in to a broker who is a good friend. Referred me to a couple of owners that he was familiar, and had had recent experience. The big take away from this that I’m really, really glad I connected with was to get an independent… we call them an independent adjuster.

Rod Khleif: Right. They can be called independent adjusters or public adjusters.

Josh Sterling: Okay.

Rod Khleif: I’m really glad that you got that advice because it… What they’ll do is they’ll go… Go ahead, please. You finish telling the story… [overlap talk]

Josh Sterling: I may not have a gone that way…

[00:20:00]

Josh Sterling: In fact, I probably wouldn’t have. The first thing was I wanted to make sure was that no one got hurt. Luckily, no one did in this fire.

Rod Khleif: Yeah. Thank God.

Josh Sterling: But then it very quickly becomes money in an insurance issue. If you don’t have somebody on your side here, which is what the independent adjuster does for you, it can make thing very difficult. Ultimately, you can end up getting a lot less out of the claim.

Not only that but this adjuster was able to provide advice, and experience from literally day one. I talked to him when the fire marshal was still out there, and the fire department still had a lot of trucks on the scene, I already had this guy on the phone.

He advice me as far as putting tenants up in hotels, and as far as the Red Cross. You name it, every little thing through getting tenants’ access to units with liability waivers, and then possessions release waivers after the fact. He was just very, very nice to have. Almost somebody on my team that had experienced that I didn’t have.

So if that ever happens, if you’re listening to this, you have something like this come up, or any catastrophic event, I would highly recommend seeking out some type of independent adjuster. It’s well worth what you’re gonna pay him.

Rod Khleif: I’ll add a caveat. Talk to other investors or property owners in the area, and get referrals, ‘cause some are great and some are terrible. But the great ones will make your life much, much easier.

Now, they typical charge a small percentage of the total claim, or they’ll do it on some other financial arrangement but it’s worth every penny. And typically, they’ll get you enough to pay for themselves. Because they’ll go in and with a microscope, clearly delineated every piece of potentially damaged property in your property, and make sure that nothing gets missed. Where, of course, the insurance company is trying to save as much money as they can on the claim.

When I had Hurricane Charlie hit here in Florida, I had 360 damaged houses and apartments. It was… We ended up having to go to court but if I hadn’t had a public adjuster or a independent adjuster, it would have been a complete catastrophe. That’s great tip.

Any other landlord-tenant war stories you wanna share? Any lessons that you learned from that business? I did a whole Facebook Live episode on some of my funniest, and saddest, and craziest landlord-tenant stories. I’d love to hear if you’ve got any.

Josh Sterling: That’s the most recent and vivid one for us because we’re living it right here, right now.

Rod Khleif: Yeah.

Josh Sterling: But we’ve had every landlord war story at well… But we’ve had a lot of them. Like we’ve had slip and falls. We’ve had claims of bedbugs. We’ve had plenty of screening tweaks, let’s say, that we’ve made to our processes over the years so that I feel we’re doing a much better job at screening now.

Rod Khleif: Right. You have to be very, very careful with the screening guys, make sure that you know what’s discrimination and what’s not. And how you can turn down a resident versus how you can’t.

You would be surprised… In fact, I should do a whole clip on that alone, because there are professionals out there that are trying to trip up landlords, to see if they’ll a mess up in their selection process, and they’ll file suit. It’s a cottage business see you really need to know what the laws are as far as discrimination.

Josh Sterling: We’ve actually had a fair housing inquiry. We came out on the right side of that thing, thankfully. But that’s really scary stuff there.

Rod Khleif: It sure is, boy, they can really hurt you, and the key is not just in knowing it yourself, but making sure you’ve documented training your employees in it. Especially, if you’re in a situation like you are, Josh, where you own your business.

I’ve got a good buddy in a Mastermind that I’m in for other real estate asset classes. He owns an office warehouse… and he had warehouse with an office, and a guy came in and said, “Can I use a restroom?” He said, “Well we don’t have a public restroom.” But the guy said, “Please, I really need to go.” And the guy… no good deed goes unpunished.

The guy went in there and took pictures, ‘cause there weren’t any handicapped rails. It wasn’t handicapped accessible. And then, I don’t remember what it ended up, being 20 or $30,000 claim. It’s just crazy that there’s people like that out there, but there are.

As it relates to screening for units as well, there are besides just race. There are a lot of other things that you cannot discriminate against, so just get up to speed on that guys. I promise I’ll do a clip on that on Facebook Live before too long.

Let’s see, property management… Let me just think if I got anything else to ask there… If you were coaching somebody about this business, what would you tell them to learn the first 90 days? Is there anything in particular or would you just say just get out there and study?

Josh Sterling: I think it’s too broad to say get out there and study.

Rod Khleif: Right.

Josh Sterling: I think you’re really need to identify your target. Let’s say it’s gonna be multifamily, and you make that determination. I think you need to learn terminology and analysis, right out of the gate.

Rod Khleif: Good. Good.

Josh Sterling: Because if you’re gonna grow that portfolio, you’re gonna be talking to brokers. That broker is gonna know from the first five minutes you talk to him, if you don’t know what a cap rate is, and you don’t know expense ratios, and rough ballparks of what expenses should be, and things like that, it’s gonna show. And you’re probably gonna have a really hard time getting deals.

You really need to do a bunch of analysis, and really get the terminology down.

Rod Khleif: Yeah, I tell people, especially when you’re talking to brokers. When they send you a deal, when you respond, you need to give them a carefully articulated response.

For example, “After I normalized the expenses, my cash on cash ended up to be X. I really need Y so, and here’s why… And so I am sure that I probably can’t buy it for what I need to buy it to get to the numbers that I need.” That kind of credible response so they feel like you know what you’re talking about, it separates you.

Let me ask you this, Josh, what do you think is the most common                reason people fail in this business?

Josh Sterling: If I had to guess, I would say that a huge percentage of people never actually get off the ground in the first place. That’s probably different than getting in and then failing. I don’t know that I can think of many, if anyone, that’s gotten in and gotten passed that first property hurdle that hasn’t kept going with it.

Rod Khleif: The first property is absolutely… It’s so funny; I’m actually doing a Driving Force clip right now. I do these Driving Force about success and the psychology of success. The one I’m doing today is about taking the first step, i.e. buying the first property.

Once you get past that first property, it’s like dominoes. First one’s the hardest but once you realize you can do it, the chains come off and the fear goes away and they just stack up like dominoes. That’s a great point.

What do you think is a characteristic that people in this business need to have to be successful?

Josh Sterling: You obviously said, like we talked about earlier, they’re gonna need to be the type of person that can dedicate yourself to the education aspect of it… I really don’t believe that characteristic is what does it.

If I look back on the people that I see do this, it’s a… Don’t take it the wrong way but it’s a willingness or appetite for risk. I say that with calculated risk, but you really got to have the balls to go for it. And I see a lot of people that just analyze, and analyze, and analyze. And I did it too when I first started out.

Rod Khleif: Sure.

Josh Sterling: If you don’t actually move forward with something, if you do the same thing as everyone else, you’re gonna get the same results. So you’re gonna have to at some point, just take that little bit of leap, little bit of blind faith.

Rod Khleif: You have to take action. You have to push through the fear. You have to push through the limiting beliefs and the action will mitigate the fear.

Take that first step and the next steps will be revealed. Like Martin Luther King said, in fact, I just found that quote… Hang on one second… And Lao Tzu said that the journey of a thousand miles begins with a single step. You got to take that first step.

The Martin Luther King ‘s quote is, “You don’t have to see the whole staircase, just take the first step in faith.” Sometimes you have to have faith, as simple as that.

There’s so many people that get caught in analysis paralysis, and yes, learn this business, study this business. Evaluate deals. Repetition is the mother of skill. Evaluate tons of deals but, at some point, pull the trigger. Okay?

If a deal checks off all the boxes, pull the trigger. Period.

Are there any books that you gift out to people that are interested in this business that have impacted you?

Josh Sterling: Yeah. Yeah, definitely. I go all the way back. I do like a lot of the Grant Cardone stuff, as I just showed you. I’m not done here but I’m reading the “Be Obsessed Or Be Average” now. I obviously have read “10X”, which I thought was great.

Since I run the management company, and I’ve been really big on building systems lately, I’ve been a lot more in…

Rod Khleif: [bad audio]

Josh Sterling: I’m sorry, what’s that?

Rod Khleif: We’re you gonna say “E-Myth”?

Josh Sterling: I’ve read… “E-Myth” is a great one.

Rod Khleif: Right.

Josh Sterling: I mean, I’m sure “Rich Dad, Poor Dad” is… [overlap talk]

Rod Khleif: Of course. Yeah, I hear that every time. Yeah. That’s like the Bible for this business… By the way guys, “E-Myth” by Michael Gerber is all about systemizing a business like a McDonald’s, for example. It’s a great book to help you realize that really that every business is just systems and people.

Please, what where you gonna say?

Josh Sterling: To expand on that “E-Myth”, that’s where I get a lot of interest. I have a lot of interest in the growing of a business, whether that be that I run the management company, or just… You’re gonna, at some point, have people working for you in this business…

[00:30:02]

Josh Sterling: And that’s something I had no formal training whatsoever in, or no skill in. It’s all being learned from scratch. I’ve gone to a lot of the… “Traction”. “Rocket Fuel”. “Tractions” by Gino Wickman. “Rocket Fuel” is a follow up by him. It’s more about building businesses, and building systems.

Rod Khleif: Executing.

Josh Sterling: Exactly. There’s a book called “Scaling Up” by Verne Harnish. I just got through it. All these types of business books are really where I find that I have more interest in lately.

It’s more about operating something that you’re not the cog in the wheel. You’re not the bottleneck and that’s something…[overlap talk]

Rod Khleif: Most of the time the leader is the bottleneck.

Josh Sterling: Absolutely.

Rod Khleif: In most businesses, the leader is the bottleneck. Good for you.

Josh Sterling: If you don’t know who your bottleneck is, it’s you.

Rod Khleif: It usually is.

Josh Sterling: [chuckles]

Rod Khleif: Yea, that’s very insightful, buddy. I’m really impressed. So what do you think is the biggest quality a leader should have? If you were to pick one.

Josh Sterling: For me, it’s been a… My personal challenge has been being able to let go. I think what I see… In fact, in our business daily, when I talk to my leadership team, we will pick out businesses that we’d work with that I say mail them a copy of the “E-Myth”. Because you see so many businesses operate where the leader hasn’t given away the authority to his team.

I look at it as, you’ve paid high quality people a good amounts of money to be here, let them make some decisions.

Rod Khleif: You have to, and it’s hard.

Josh Sterling: It took a long time for me to get there.

Rod Khleif: Yeah, it’s hard when you’re a control freak like you and I.

Josh Sterling: Yeah.

Rod Khleif: It’s difficult to let it go. You think nobody can do it as well as you can, but you know what’s the reality is? Many times, they can do it better.

Josh Sterling: Yeah.

Rod Khleif: And it took me decades to be okay with that. But that’s the reality. Anytime I’ve got a big decision, I bring the whole team in, and we come up with great ideas. That collective consciousness, the whole Mastermind concept is very, very powerful, particularly in your own organization.

Well listen, brother, you’ve added a ton of value today, man. I really appreciate you being on the show. I’m excited to see where you take this thing. I’ve got socks older than you, and look at you already where you are.

Josh Sterling: [chuckles]

Rod Khleif: $15 million portfolio. Anyway, keep rocking, buddy. Thanks for being on the show.

Josh Sterling: Thank you. I appreciate it.

Rod Khleif: Absolutely.

Josh Sterling: Take care.

Rod Khleif: Guys, if you wanna reach Josh, you can reach him at EpicPropertyManagement.com.

[music]

Thank you for listening to the Lifetime Cash Flow Through Real Estate Investing Podcast. If you’ve enjoyed the show, please take a minute to visit iTunes and leave your comments. For more resources or to connect with us further, please visit our website at rodkhleif.com. Tune in next week for our next show.

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