Ever wondered how the worlds of technology, finance and real estate investing intersect? Our guest for this episode, Richie Hecker, has spent two decades mastering this trifecta. This seasoned investor shares how he navigated through the tech world, applied lessons learned to real estate investing, and developed unconventional strategies for identifying under-the-radar and mispriced assets.
Hecker's insights are invaluable for anyone interested in expanding their knowledge of real estate investing. Richie's transition from tech to real estate is nothing short of inspiring. He candidly shares his experiences, including the purchase of mispriced hotels in New York and New Jersey and a failed deal due to a power plant issue. He also discusses the importance of maintaining a 'broke' mindset to making sound decisions.
Richie doesn't just stop there. He also shares his expertise on property management systems, best practices and common pitfalls in outsourcing.Not one to shy away from learning, Richie emphasizes the importance of learning from mistakes -- his own and others. He provides invaluable advice on how to avoid repeating them. His approach offers a valuable perspective on how to handle challenges and make the most of your knowledge. This episode is a treasure trove of insights, whether you're a novice or seasoned investor. Don't miss out as Richie Hecker takes us on an enlightening journey through his world of tech, finance and real estate.
0:00:00 - Vikas Gupta
This is the Hacking Real Estate podcast, and we are back with another season. Last season, we were accompanied by many experienced, hands-on, influential guests and we are excited to introduce many more this season. Thank you for joining us again and, without further ado, this is season two, episode one.
0:00:06 - Richie Hecker
That's the first lesson. Always assume and take the perspective that you're broke. Now I came from venture capital, which is the opposite perspective. Like venture capitals, like always spend money you don't have and always spend money to chase growth, to hope someone else takes you out of, gives you more money, chasing more growth I was always the guy with the opposite perspective. I'm like but why do things that make sense and they work? Maybe I'm too rational on things, so that's a small, very small business mentality. You can have 1500 people working in your company, but what's your sell of five people?
0:00:34 - Brandon Hall
Welcome to the hacking real estate podcast, where we dive into the stories of seasoned, hands-on and tech-savvy real estate investors. We'll learn the strategies and tools they use to maximize returns and minimize hassle, all while navigating the rapidly changing real estate market. I'm your co-host, brandon Hall, and managing partner of Hall CPA, and I'm sitting alongside my co-host, vikas Gupta, ceo of a Zibo. With our combined 15 years of experience in real estate investing and entrepreneurship, we're here to help you up your real estate game. Let's get hacking.
0:01:07 - Vikas Gupta
Hi everyone, welcome to the hacking real estate podcast. Today's guest is Richie Hecker. Richie is a real estate investor and 20 year veteran of technology and finance. He manages a portfolio of multi-family buildings in New York and has built and sold several startups. Richie, welcome to the show.
0:01:27 - Richie Hecker
Nice to see you guys. Thanks for having me in your own words.
0:01:30 - Vikas Gupta
Can you tell us your real estate story?
0:01:32 - Richie Hecker
Sure, I'm 38, from New York. My background is technology and finance. So since I was 15, I've been entrepreneurial. I started an early online advertising business and, along the way, I used to run a mortgage company and did a lot of work with bank on the banking and finance side. So, and just commercial banking and mortgages, mortgage marketing. So over the course of 20 or so years I've done a lot of things in that area and then about I don't know something about 20 or so years ago I actually worked for my cousin who manages a A large portfolio in New York and some other areas. I got some initial exposure to real estate then working on that portfolio. Through the years like I've just been part of a lot of different investments, whether it was technology and help take a technology company public I looked at, almost acquired a bank and worked in different bank acquisitions, and so I got a lot of exposure to different investors, different investment groups, different asset classes and, along the way, I ended up getting involved in some real estate and some real estate transactions.
0:02:35 - Vikas Gupta
That's a pretty diverse set of firms, you know, banking, real estate, tech, startups. I mean, how do you, how do you think about the differences between those three categories? Let's say, in which one do you like the most?
0:02:48 - Richie Hecker
Oh, it's all the same. At the end of the day, it's finding an opportunity, identifying a trend and then recruiting and managing people, and then that's the floor of execution. So I've never looked at the difference between a technology startup, real estate, a nursing home, a hospital, a finance company. It's the way I look at things is it's all the same. You have the same things. What's the trend line You're on, what's the asset you're in? What are the resources and tools you need to execute against it? I just don't happens in technology. I was really early in technology, so I had a competitive advantage by being physically or virtually I should say virtually there, but a lot of the tools that have been helpful and in In technology is Translates over to real estate. In other areas, real estate is, just like I don't 20 years behind the times in terms of technology to other areas.
Is what I found going back to 2000 2002, when I was working on Mortgages and banking technologies and real estate technology at the time also.
0:03:45 - Brandon Hall
Actually so what? What made you, like, jump into the current role You're in now? Because I guess what I'm like, what you just said is great I look at. I look at it kind of the same way with my own business and various things that we are getting into, but, like, how are you identifying? You mentioned the trend. How are you identifying this is a good opportunity, this vertical, if you will, is Trending in the right direction, where I know I can go and build a team to execute on some solution. What are you looking for there?
0:04:13 - Richie Hecker
It depends on the market. So in New York, for example, we were looking at things that were Underneath where institutional capital would typically enter into the market, so smaller size, smaller scale, things that fall underneath the realm of heavy regulation, which in New York it's under six unit buildings, because that's when you can get into the lens of the world of rent stabilization. So you're looking at being under the radar because of the both the mixture of competition in New York with huge capital and also Regulatory environments which simpler to do and simpler to execute. I fell I fell into by, by accident, which just happened to be in the right place at the right time identified some market trends in 2020-2021 that we we thought were mis-proof, things that are mispriced.
I was doing a lot of work at the time and import, export and first got all got a lot to deep understanding of light industrial real estate so warehousing, other light industrial assets because I was dealing with a lot of warehouse all over the country with its moving goods, moving trucks, and Got a deep expertise around how warehousing works in light industrial assets work, which is a super nice part of the market. And then from there we started looking at all right other interesting opportunities around warehousing, because I was a client of working with and had worked with a lot of different Warehouses and a lot of partners and managed our own warehouses. So that was the first thing. Then that led into Looking at things with some, some investors and whatnot, on multi-family, simply like where the opportunities in the market, and we just noticed some trend lines in New York that was underserved completely over the last couple years, and we've looked at a lot of other markets also, each one at different things that we saw were mispriced. What I've learned is there's two ways for things to work. As a successful entrepreneur, the first thing to look at is Is there an information Symmetry in the market? Do you have better information in someone else? Have you identified a trend in your marketing cost lowered in someone else, and why is that? What is the competitive advantage that can be built around that over time? I don't believe there's any such thing as a competitive advantage in anything, but how long is the window that you have? And so I realized initially in light industrial we were moving a lot of goods during COVID whether it was masks and gloves and other products where the medical supplies were hard to get, so developed an expertise around global import, export warehousing logistics, and that was when most of the world's logistics just shut down in 2020. So that was a legitimate competitive advantage that I saw on the market because I knew how things were actually moving.
And Then we started looking at multi-family. It was really a Derivative of that is just finding another segment that we thought was undervalued at the time. What would the trend line was?
There's a lot of people moving in and out of New York and other cities because of COVID the very large scale there's always a liquid market in real estate, but at the small scale there really isn't a liquid market in real estate. There's liquid markets for short periods of time when people are throwing cash around. If you look at past day a six month trend Trend line there is not a liquid market, no matter what people say, for small multi-family. In single-family, residences are liquid.
Typically very large properties are liquid, but light industrial is just typically not liquid. Neither is Small multi-family, neither is retail. So just looking at where the where there's an opportunity in the market because there's a timing issue, we can get in and create a little bit of an advantage in an area. I have other cases over the years and I have some interesting, interesting stories about things that I didn't do, where I found really good market Trends and timing and some real estate opportunities Over time when we had perfect timing, just for one reason or another we didn't get done. Those are a much larger scale. We had a lot of capital behind, working with some very large capital sources.
0:07:55 - Vikas Gupta
I mean, I'd love to hear one of those stories it's always interesting to hear about, like what is the path not taken and why?
0:08:01 - Richie Hecker
about 14 years ago I bought a site called Bebo. Bebo was at one point the largest site in the UK, I think also Australia and New Zealand, wales, and I think the third largest social network behind myspace. Bebo was basically the myspace of the UK. So I bought that company out of, or those assets out of, aol when aol was still like a large company and existed. So at the time a I was in the flow of capital markets. That was pretty high profile, had a lot, of a lot of press behind it.
I moved to San Francisco on Literally zero notice. I I didn't even have a bag, I just flew there and I stopped them my friends couch for 10 days Because we had no idea we're going to get the deal done. This, by the way, bebo was valued at 850 million dollars before. This was a large deal. I had like 100 million user accounts. But then I got the San Francisco. I got the no aol.
So I tried to buy AOL's data centers off of them in a sale these specs transaction Because, like you guys are shrinking and you have all these data center assets. So we partnered up with a large family office investment group and we started negotiating and came very close to buying their data centers. We had a deal in print, I think we had a deal in principle with them and somehow it ended up falling through. This is before the run on data centers, which happened in like 2012, 13, 14. So it would have been an incredible deal to get done.
It was probably $150 million of transaction or so, if I remember correctly. And then through that I got to know some of the investors that I've worked with and got exposure to other asset classes of real estate, which is data centers are super fascinating. That was one of the deals that got away at the larger size. I have a couple over the last 15 years or so. Also when I was in San Francisco. Now San Francisco is a mess. Everything's falling apart. The real estate market's gone, falling through the floor but for a minute.
San Francisco was doing extremely well and in 2010, there's a market in San Francisco called SOMA, which is south of market and it was just in the process of gentrifying, in that you walk into a building and there may be someone that's on bath salts blocking entry to the building, and inside is this gorgeous loft. I remember one time I saw someone chasing someone else down the street with a machete. We had identified a bunch of real estate opportunities in the SOMA area because parts of it was totally undeveloped and dirt cheap and parts of it had really fancy lofts, and the only difference was someone put money into turning a formerly decrepit building into a fancy loft, and to me, that's sort of a trend that you have about a year or two before people realize if you're paying a million dollars for a loft but the building is negligible. This doesn't make any sense, so I ended up deciding to move back to New York. At the time, I was either going to start buying every piece of real estate I could find in San Francisco or move back to New York, and I ended up breaking up with moving back to New York. My partner ended up investing in a lot of San Francisco real estate and we put together a pretty large deal in Oakland. He ended up involved in a bunch of San Francisco real estate. It was just a market thing. I had great timing, look up 2010, san Francisco real estate and where things were from 2010 to 2020, and it would have been a home run.
What I learned from that is real estate is very local right.
So if I wasn't in San Francisco, I didn't want to start buying a ton of stuff in San Francisco, because if you're not there, you can't really see where things are going.
Well, you can visit, you can fly places, but it's really hard without having a local presence to actually be able to understand what a trend is in the city, because it changes based on the local coffee shop. And, yes, sure, you can have a team in different places. In retrospect, I probably would have just hired some people and built out a team, but I was thinking, even though some of the things I was working on were pretty large in scale and high profile, I still always had a small business mentality, which is, no matter how much resources you have always assume and approach things like you're completely broke, like what's the least staffing you need, what's the simplest path of execution and when I'm lucky and on a good day, that's what I actually follow. And then I left San Francisco and my partner ended up investing in doing a bunch of stuff in SF's real estate. I came back to New York, did a bunch of other things in tech and also worked on a couple of other interesting transactions over the years here.
0:12:14 - Speaker 4
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0:12:52 - Vikas Gupta
When you move back to New York. You said you started doing some tech and then you started getting involved in some interesting real estate transactions in New York. I guess over the past 10 years or so have you seen sort of like the relative amount of time you're spending on real estate shift up or down, or really is it like I'm seeing an opportunity today in a specific asset class so I'm going to go after that opportunity.
0:13:14 - Richie Hecker
It was more about what I did than I didn't get done over the years until the last couple of years. So I looked at a number of times buying hotels in different parts of New York and New Jersey because they were just always mispriced. So I used to live in the Lower East Side of Manhattan on top of a Whole Foods which is at the time like this shiny tower building in the Lower East Side of Manhattan. Right across the street for me was an old hotel that happened to be owned by an investment firm that friends of mine worked at. We had looked at acquiring this hotel on a really iconic corner of the Lower East Side, did a lot of the work on it and that property it's kind of funny in things, right Something I hadn't managed a hotel and it was too small to buy and hold and wait. Ultimately that piece of real estate is worth a fortune now because that was maybe eight or nine years ago in the Lower East Side. It's I don't know how much exponentially it's gone up in value, but the location was incredible. Love the location. I knew it would eventually be something that could be turned into residential or as a hotel. It could go up market. But hotels were down at the time and it was in a weird sizing to buy and we looked at a portfolio of a couple of hotels like that. Then I had another crazy deal, which also I didn't do. I had the opportunity to buy the Revel Hotel in Atlantic City.
The Revel Hotel Morgan Stanley, I think, put in like two billion dollars to build it like in 2007-2008. We went out there, we sent the team there, we came this close to buying it. It was an issue with the and I was working in the private equity firm at the time. We had access to the capital to do the deal. It was like a pretty large transaction. Way less than two billion dollars we spent to build it. The physical steel and glass was basically worth the purchase price, just the raw materials. We took apart the building but we ended up not coming to terms because it had its own power plant and this is something I never had it ran into in other things I had done in real estate in other areas. But the building had a power plant that was financed and owned by a separate entity, so the building did not own its own power source and thinking about that for a second, that is terrible. It was a structured finance transaction where they put the PowerPoint in a special purpose vehicle off to the side and with, things are perfect. That works. But your power cost is preset in a power purchase agreement through the roof and the power purchase agreement you can't buy out of, just owned by some random bond investors. You had to take on a terrible, terrible annual commitment of really expensive power to take on buying the hotel. The real estate was valuable and the raw materials were valuable, but we ended up not being able to figure out a way to take on the power plant there, so that one was going big where we could have hired a team. There was no issues at the hotel. We knew what they were because I had stayed there as a guest a bunch of times.
And it's super interesting when you get to work on those very large kind of shiny properties. It's the opposite of like gritty industrial or multi-family or what I worked with my cousin, which is mostly small, mid-sized and have a lot of rent stabilized type of properties. It's just a really gritty thing and warehousing is really gritty. Shiny towers is a completely different. I mean, it's a different asset class, completely literally and metaphorically.
So I started working on other transactions and I started helping out and advising different things. I looked at a bunch of different real estate technologies over the years for investors and for my own investments and my own portfolio of stuff. And then over the course of COVID last little bit I got into it as a focus and trying to make a go of it because of these trends and long term I like it. It's a different kind of risk and a different type of work than what I had done before. I have a bunch of licenses for all sorts of different stuff. I got my sales person's license. I started working with different people and different things. We put a couple of deals together and started applying what I had learned from running at sometimes large scale technology assets to real estate.
0:16:56 - Vikas Gupta
What are some of those lessons that you learned from technology that you've been able to successfully apply in real estate?
0:17:02 - Richie Hecker
First lesson always act broke. That's the first lesson. Always assume and take the perspective that you're broke. Now I came from venture capital, which is the opposite perspective. Venture capital is like always spend money you don't have and always spend money to chase growth, to hope someone else takes you out and gives you more money chasing more growth. I was always the guy with the opposite perspective. I'm like but why do things that make sense and they work? Maybe I'm too rational on things, so that's a small, very small business mentality. You can have 1500 people working in your company. What's your sell of five people? Like?
0:17:32 - Brandon Hall
How has that mentality helped you over the years? It?
0:17:35 - Richie Hecker
helps, because then you're making decisions as if this is the only dollar you have. Do you need to spend money on this repair? Do you need to hire people to do this or can I outsource it? So in the import export work I was doing and frankly I've run multiple outsourcing businesses over the years so I did. We helped Sundance launch their first virtual film festival during COVID, for example, by staffing a on zero notice, 70 people for a tech support operation.
I got really good at virtual staff. So how can you staff up reaching out to different service providers? Can you staff? How do I outsource reaching out to different building owners so to see if properties are for sale, picking up the phone and calling people? So I have we have people in the Philippines that will pick up the phone, do a lot of research projects, make a lot of phone calls, do a lot of marketing support. So all of that stuff that is expensive to do in the States, which is staff driven, primarily outsourced to the Philippines and other areas where we can do it faster, more, more cost efficient and in a really organized way. Also, I do a lot of email marketing really good at B2B email marketing.
So we figured out a way to develop. We built a system over COVID to reach out to tons and tons of companies for medical supplies and PP, which is our, which is that business, and I applied that to helping and working on creating a process for sourcing real estate opportunities and trying to figure out and make a run of it and figure out what the is it something that I'm going to buy or just learning how that works? We can call an entire every building owner in a neighbor and I can call in a couple of days, really cost effective, really see if there's an opportunity here. So those tools, I would say both learning how to outsource on a very bespoke way I don't have many full time people doing it.
We're very good at putting together bespoke teams to do X in Y time and then looking at all of your decisions as if do I, do you need to spend this dollar? Not, do you need to spend this dollar? What are you spending it on? Are you saving your time? Are you hiring the right people for this based on that budget? Those things are really valuable. But the cool thing about real estate versus tech is it's hard assets right. The building is generally staying put, tech if you go away for like three days or you fire half your team, like we learned with some, say, twitter, like things just break really fast. Real estate things break. You send people, you fix it, but it's more. The physical buildings are generally there and that's a really big advantage. Things are over. It's a 30 year time horizon, not a three month time horizon in tech.
0:20:04 - Brandon Hall
Can we talk a little bit about the outsourcing, Talk about one or two best practices, Also talk about where people make mistakes. We outsource at my CPA firm we have 10 people in India and 10 people in the Philippines and I don't think that we've got it necessarily figured out, but we're leaning more and more into that model. But I also know that there's a lot of service professionals not just accountants but just any sort of service business that really struggle to outsource, and I know that we're talking about real estate here. So that'll be even more interesting to kind of see how do you use an outsource team with real estate. But before we talk about specifically with real estate, I'd love to just kind of know what are a couple of best practices in your experience and where do people make mistakes when building outsource teams.
0:20:51 - Richie Hecker
Biggest mistake in outsourcing is outsourcing.
0:20:55 - Brandon Hall
Okay, you have to explain that one.
0:20:58 - Richie Hecker
Well, there's no such thing. You can have a virtual team in other places. But when people try to outsource, they try to dump. Typically, using the word outsource typically means the word dump and it's hard to dump on your if you have an assistant or a partner sitting next to you. It's really hard to dump. Here's 30 tasks, just do them. It's 10 times harder to do that when you're outsourcing to another country. Language barriers, cultural barriers, time difference all fail.
So the key to outsourcing successfully is discrete tasks and outsourcing in such a way or virtual staffing or remote staffing in such a way where if you get 80% of what you're asking for, you're having a great day. You're not going to get 100% of what you're trying to do done correctly. It's impossible with outsourcing Never seen it happen. I've managed outsourcing companies with many, many tons of people in many countries all over the world. I think at one point in our end import and export business, we have people in like 11 or 12 countries and I had like hundreds of people in call centers at the time in India at different times. So in all those scenarios, unless all you need is someone to read a script, you need to be very discreet and careful how to outsource. Break every task up into very discreet parts. Only give people discrete tasks to do at a time. At max you're going to give people two different projects, max and types of tasks. So let's say you need to do something that has seven different steps. I would actually bring that up into three or four different people. Give each of them, using a platform like Upwork, two of the steps. That's it and have one handed off to the other. You'll think you're spending more money or not, because by trying to have it's just, I've never I haven't found successful multi-step outsourcing in a very long time. It's hard to make sure people do what you want, but you're usually can manage one or two steps pretty effectively because you know if they did it right. You know how long it took. They spent three hours, they did this task. They did that 17 times. You can really quickly figure out if people are doing their job or not. General purpose a ton of real estate brokers have have general purpose assistance in the Philippines and other places. I guarantee most of those are not cost effective because most of them are like do like 15 different tasks.
I I've done outsourcing for 20 years or, like I said, remote staffing for 20 years on some capacity or another. I have managed full on outsourcing teams. I've done it for very large organizations and I've done it for myself in a small business mentality. I have never seen a hundred percent perfection. I've never even seen 80%.
Honestly, all you do is you start off at X and you need to be able to fire people very quickly and, or I should say, optimize that position very quickly so you can test an outsourcing. You can kind of like hire people. If it doesn't work, you say I'm not working with this person anymore, go to the next person. You need to be able to turn through potential staff very fast because you might get lucky and have one out of every three people be so in this longterm on your team, and I'm saying one out of three. So you got to be willing to try three different times for any one task to find the right person for that task, pick it up into very small, discrete tasks and then if you get, like I said, 80% of what you want, that needs to be your barometer of success.
Most people go for 95% and then people quit on them, or they just don't do it or they screw up horribly. If your goal is 90%. With someone sitting next to you, it's going to be 80% out overseas, or even if it's like I'm in New York, someone's in South Dakota. It's the same issue. It's harder when you have different languages, different cultures, different schedules, different time zones. Is that helpful?
0:24:07 - Vikas Gupta
No, I think it's super helpful. What are the types of tasks that you're sending to the Philippines for your real estate business?
0:24:13 - Richie Hecker
Oh sure. So first it's database development. We'll get our raw database on some site. We'll have someone then clean it up. They then scrub and clean up email addresses, make sure they're valid, run a bunch of checks and verification. So that's the first step. Then we can run a bunch of checks and verification and phone numbers are valid. Then I might give it to a second person whose job it is to send out emails compliant email. That second person's job is only to send out emails using a very specific process that gets it into the main inboxes. That might be a seven step process, but it's one single process. Then the third person is doing calling. All they're doing is taking that list of, say, 400 people in the neighborhood and calling everybody, say three or four times, until they get a yes, no, voicemail answer or whatever. They're calling everybody a few times. So that might be three different people, three different outsourcing tasks, the sub tasks. One person is database development and cleanup. The other person is actually cleaning up a second time, plus sending out emails. Then the third person is only making phone calls and maybe sending text messages. If we're doing text messaging with it, and that's a very discreet thing, then if we're doing direct mail or something, it'll be a fourth person that's queuing up and doing that.
So a lot of people in the house are just might try to get one person as a marketing assistant. That almost never works Because first of all you want expertise to that task to either you train someone or already has specific expertise. It's really hard to train someone. Cross functional takes one or two years to do that. I'll go take a step back. If you want to outsource cross functional like a general purpose assistant, assume it's one to two years of training. If you have the right person then to actually do what you want successfully, it's the same thing. It takes a year to master any new skill or new industry, generally sometimes two.
0:25:55 - Vikas Gupta
It's going to be the same, if not longer, and if you're remote staffing or outsource, and then from a systems perspective, like taking this you know lead gen example, for lack of a better word, or do you have a CRM that you're working in with them, or how are you managing this? The systems end of this.
0:26:09 - Richie Hecker
We use so many different systems or different things. I have yet to find a single CRM that I like. It doesn't exist at very large scale. Salesforce is very good if you have the money and it's worth it if you do invest a ton of money in it. Outside of that, every single CRM has significant flaws. I use Google. We use Google Sheets as a CRM most of the time and then we use it one system for phone numbers, calls and text messages called JustCall, with virtual phone number and some automation tools. I've used other tools for auto dialers. If we're using dialing tools or technology, email we use. If you're doing cold email, you're going to be using an SMTP server plus one of several email tools on top of that, a Gmas or a Woodpecker. So you have a series of different tools that are used. I tried, I've spent in every business I've been in. I've tried to build or optimize my CRM process. I've yet to find one that is actually good at saving data, sending marketing communications, can be used for email and calling correctly and doesn't cost fortune.
0:27:08 - Vikas Gupta
Yeah, I don't, I don't think it exists.
0:27:12 - Richie Hecker
No, you use Salesforce. Salesforce can do everything, but it's going to cost you three times what any other system will cost you.
0:27:19 - Vikas Gupta
We use HubSpot and then open phone for phone calls and other stuff, for different types of emails and other things, for texting and bound texting versus outbound texting in one way versus two way.
0:27:32 - Brandon Hall
We use HubSpot. I don't like it. I mean, I like, I like a lot of HubSpot, but it really stinks. From a sales manager perspective, it's great from like an actual rep perspective, but like the data is just incredibly cumbersome to view on a live basis. And so I actually we switched. I just rebuilt our entire sales process over the past three months and we pulled everything out of HubSpot and put it into ClickUp in two days and we rebuilt our CRM in ClickUp in two days. Now our reps use ClickUp primarily and then they hit HubSpot for, like, website interactions and stuff. It's like it's annoying. But from a manager perspective at least I can kind of see the entire playing field. I can see all the data, I can see all the dashboards and it's beautiful, but yeah, it's like, I agree, there's not a. I'd love to try Salesforce, but it's cost prohibitive, it doesn't make sense for me, but there's no real CRM that I've fallen in love with and said this is the one.
0:28:41 - Richie Hecker
Yeah, we've literally demoed 15 or 20 CRMs in a three month period at one point. There is some ways if you want to build your own. There's some good engines you can build off of that I found. But none off, none out of the box that does all the seven or eight things you need in the modern CRM. But JustCall is good. If you need very basic outbound dialing, virtual phone numbers and text messages, justcall is a pretty good. Openphone is very good for phone numbers and kind of slower texting and international numbers it's good.
0:29:12 - Vikas Gupta
Yeah, we use OpenPhone for calling and for one-to-one texting. It took us a while to find the right system, but since we adopted OpenPhone we've really liked it and it's also pretty cheap.
0:29:21 - Richie Hecker
It's like 10 bucks or something. A base plan, yeah, yeah.
0:29:24 - Vikas Gupta
Lots of different systems. It sounds like you've gotten the outsourcing down to a T. I mean, what other lessons have you learned that you've been able to apply to your real estate business?
0:29:35 - Richie Hecker
This is a non-paid advertisement when I'm about to say and for the record, vikas did not ask me to do this, so I'll tell you a story from a long time ago. My cousin's real estate portfolio used Yardee, which back 15, 20 years ago was the best technology and most popular property management system used, probably the only technology most people even heard of. We were using an older version of Yardee that did not include annual subscription fees. It was an on-premise version and it's an older version and we didn't want to spend the money to upgrade to the next version because I came with extra fees and stuff. So, like, how can we make this version of Yardee more valuable? So I found the only developer I think it existed that knew how to code on top of and build a module on top of that version of Yardee, designed a customized process to upgrade that version to the modern version of it so you can track and, for anyone who doesn't know, yardee does property management. It helps you manage your rent roll and pretty much everything around your rent roll. It was like the first major system in the market. It was expensive too. So we were using the system and we figured out a way to hack it to basically make the old version the equivalent of the new version of it, which was the challenge that was set up to me. Can you figure out a way to make this version of Yardee as good as the new version? Figured it out, and then I got turned down for the budget to do the project, even though it was pretty inexpensive, and I'll go back to a lesson I learned from that experience later. But that was the first thing Fast forward to modern.
It's really important to have a good property management system, specifically around rent collection and rent accounting, because if you're in a regulated state like New York, for example, you need to make. It's really tricky if you ever have to evict people. It's really tricky to get payments via ACH from people, and so what's really important is having a system that is designed to get the tenant to opt in. So it's good for the tenant to automate their rent collection and therefore automate your accounting, because small mistakes in highly regulated states mainly blue states like New York are very hard to correct, because it's really difficult to evict people. It's really difficult to charge late fees. It's really difficult to charge anything but other very basic late fees on things you can't legally mandate people to use automated rent collection. You have to simply request they use an automated rent collection.
Very nuanced, subtle things of how to present things. So what I found and we tested every system we can find. We tested Azibo, baselain, stessa. We looked at, I think, apartmentscom and, like every other one we could find that did automatic rent collection and then that backed into allowing us to do accounting correctly, and we found that Azibo actually was the best from the tenant perspective. The language and copy that was used to encourage a tenant to sign up for automated rent collection is doing the tenant a favor. The copy was written as if they're doing a tenant a favor, like whoever wrote Azibo's copy I assume was not a landlord but a tenant. It actually is doing the tenant a favor to simplify their process. Send them reminders, offer them the ability to have their rental insurance and their rent collection on time so they avoid $50 late fee that you're allowed to charge in New York. So we found, by testing all the systems, azibo had the one that was the best from the tenant's perspective, which is really important because you need to make sure people pay their rent and then you have the data in an organized way and then have the accounting package on the back of that.
Now I'll go back a second. That sounded too much like a commercial and I know that you guys are working on it. Azibo still needed to actually finish the accounting module because it's incomplete when it comes to actually being able to properly manage all of it. But it's in that direction and getting there and it was. But it was really good from the perspective of getting people to actually pay their rent through the system and that was the most important feature that ultimately we made the decision on. And that's what I tried to do hacking already like 15, 20 years ago and it still wasn't perfect. And now the systems today actually are the ones that focus around that as the primary feature. I think will be the most successful in the next five years worth of these systems. Is that helpful?
0:33:38 - Vikas Gupta
No, that's super helpful. You did say, though, that there was a lesson learned that you were gonna come back to, so I'm gonna remind you to come back to that. As much as I enjoy basking in the Azibo praise.
0:33:49 - Richie Hecker
This is a lesson learned. I was sitting in my cousin's office and there was an insurance broker there An old, an older gentleman at the time and he was pitching him on letting him do some of his insurance and some of the properties. And I'm sitting there on my desk, you know, a few feet away listening it, and my cousin said a very important lesson there, which is don't just listen to what people say, listen to what you think they mean. Which that means is everybody says one thing and they most of the time some of the time, hopefully mean what they say. Most of the time people say something and they mean that, but also keep this in mind, the unspoken part of a conversation, and so it's really important to keep it, the unspoken part in mind.
What I learned there by trying, I listened to what the project given to me was, which was can we make Yardee better without spending money on the new version? And I figured out how to do that, but I missed the point, which is don't spend any money doing this Right, because it still would have cost me. I would have had an engineer do it, I would have had that engineer support it. At that point I'm actually building my own software package and I'm sure it would have worked great for like two years and then died completely. So I listened to the project at the time, which was how do I hack Yard again, make it more modern, but without raising the cost of doing it, because we were trying to avoid from upgrading the software package. I did the project but I missed the point of the project. So I realized that in a few different projects that I had worked on back in that time, I had lessons to learn individually.
I was always, when I was younger, I was always rushing I want to do this today, be done today, never think about it again. But life is a series of incremental improvements, not a series of one-off cliffs. Otherwise you just accidentally jump off them once in a while, which I've done it before. I've had spectacular failures. But if you look at life as a series of incremental improvements, you're much less likely to actually fall off a cliff, so you're much more likely to actually execute successfully.
When you think about what are you really trying to accomplish, not just what the task is, and then, like when I came back to you earlier, which was always act like you're broke, do you need to spend the money. Because why that matters is that maybe today it's fine, but if you built a really expensive mouse trap, a really expensive system, but then your circumstance changes three years from now, you may not have the budget or want to spend the money to support that really expensive system when you really just need, like I don't know, duct tape and a paper clip and like two hours in the Philippines. But because you have this fancy system, you need like seven people and a huge tech budget to support it. I learned that in tech also Like build as if you're broke, always Spend as if you're broke. And a lesson I learned from my dad was always always blame it on the accountant, which is like if you're always worried about your budget, always I got to check with the accountant before I, before I spend money on this.
In modern times, it's like no matter what the size, if you're yourself or you have an investment group, or you have a partner or whatever, or an investment committee or a board, it doesn't matter Always act as if you need your accountant's approval. And then, whoever it is that advisor which in 30 years ago, and or if you work with Brandon and it's today who your accountant is, actually do it. Actually, make sure you have a process to double check your expenses. It doesn't matter if you're the decision maker. You always need someone whose job it is to try to convince you not to do something in a productive way, though. Have you thought about it like this Do you need to spend on this, or can you do this instead? Now, someone who's just saying no to everything and being a curmudgeon is going to backfire, and then you'll end up doing the opposite of what they say is. Everyone who's always been, ever been a two year old has learned when their parents say no, no, no, no, no, no, no, no, no, no.
You just do the opposite, but having someone whose job it is to be your devil's advocate test back things, suggest alternatives, look at other ways to do things. It's so valuable Any size organization Be a CEO of a hundred thousand person company If you don't have anybody that's actually watching your back, you're probably going to run off a cliff, and you can just see that in some of the big tech companies that have huge venture capital that just ran off a cliff. One day I bought some of those assets in companies. I bought several large assets that were previously worth hundreds of millions of dollars or more that had ran off of cliffs, and then I buy them for pennies on the dollar.
So you take the risk of being a wily coyote and just running off the cliff and not being fast enough like the road runner to pull yourself back and go and make a left turn. Some people are really fast like a roadrunner. They can always make a left turn. Most people will be the coyote and run off a cliff, though Even some of the most successful, richest people and best CEOs in the world. They get the megalomaniac complex and then you run off a cliff at some point. Too many yes, men equal cliff.
0:38:22 - Vikas Gupta
Yeah, that's great advice. Or, VP of finances, every vendor's worst nightmare. Even if sometimes he was a phantom before we hired him, it was still. I need to check with my VP of finance. Let me get back to you. Well, this has been fantastic, richie. We have three closing questions. If you don't mind that, we like to wrap up every podcast with, without further ado. Question number one is what is your favorite book, and it doesn't have to be real estate related.
0:38:48 - Richie Hecker
Catch 22 by Joseph Heller, because the book is nonsense. It is complete and total circular nonsense. It is basically if your cynical uncle or the cynical guy at the bar was telling you making up a story in real time and kept drinking as the story went on. But there's a lot of lessons built into it that are really smart and clever around how ridiculous bureaucracy gets and how ridiculous situations get by having unchecked power Through the guise of a drunken fool. Spinning nonsense at a bar is the way that I've always taken that book to be, so it's super entertaining and really fast to read and in my mind it's always the guys like walking backwards as he's reading it, as he's done, as a story is going through, and so it's just sort of fantastically entertaining book on the surface of just being funny, but then your lessons are like this is ridiculous. What is going on here? I don't understand this is how can this happen? Because it's just like if nonsense runs amok.
0:39:43 - Vikas Gupta
That is a great recommendation. I have not read that book in at least 20 years. I think I'm going to have to revisit it this summer, though. Well, thank you for that. Question two is when you're investing in real estate, from your perspective, what's more important cash flow or appreciation?
0:39:58 - Richie Hecker
The only thing that exists in real estate is cash flow, unless you're a speculator. So if you don't have cash flow, you go bankrupt before you get any appreciation. That's my general viewpoint.
0:40:08 - Vikas Gupta
Got it Great, I like it. A lot of people say both, but I like the definitive answer.
0:40:16 - Richie Hecker
It depends what cash flow means. Right Rewards are a funny thing. Is cash flow break even? Is cash flow profit? Is the cash flow? A 1% a month rule, Is the 10% cap rate? That's completely up to you, but it ain't no cash flow. You're broke Love it.
0:40:34 - Vikas Gupta
Question number three. Final question for you Is there any last piece of advice that you would like to leave our audience with?
0:40:40 - Richie Hecker
Whatever lessons you get, write down. If you got a lesson from this podcast, if anything that I've said has been either helpful or entertaining over the last X minutes, write it down. Only way you're going to actually incorporate a lesson is to write it down and, when it's relevant to you, remember it and decide do you want to make the same mistake and learn it for yourself, or can you learn by reading it? That's why most business books it's too many pages. You have 250 pages. I can't remember 250 pages. Take that one lesson, write it down, stick a little note card on it or put it in a file. Whenever you have a challenge, Look up if it's in your list and make a decision. Do you want to make the same mistake or can you learn from the lesson from someone else? Most of the time, you'll probably choose to make the mistake yourself, but that's fine. At least you were warned. If not, you'll just learn someone else vicariously and you win.
0:41:27 - Vikas Gupta
Thank you so much, Richie. I think this was both informative and entertaining, which is the duo that we're looking for. It was a pleasure to have you. Thanks again. With that, we'll close this episode.
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