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Property Management Mastermind Show

#171: Next in Line: Legacy Planning with Deb Newell

Jun 07, 2023 by Brad Larsen

Have you been wondering how to preserve your legacy for generations to come? Do you want to ensure that the values, life lessons, and experiences you've been working hard for are passed down and used as a guiding light in the future? In this episode, Brad is joined by Deb Newell, and they'll discuss various tips on how to protect and manage your wealth along with strategies that will help ensure that your values are kept alive long after you're gone. 

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Connect with Brad's team at www.rentwerx.com!

Brad Larsen: Hey everybody. On today's episode, I've got Deb Newell and we're going to be talking about next in line legacy planning. It's a must listen.

Announcer: Welcome to the Property Management Mastermind show with your host, Brad Larsen. Brad owns one of the fastest growing property management companies in San Antonio, Texas. This podcast is for property Managers. Buy property managers. You'll hear from industry leading professionals on best practices, new ideas, success stories and lessons learned. This is your opportunity to learn about the latest industry buzz surrounding property management, as well as tips and strategies to improve your business.

Brad Larsen: Hey, everyone. We wanted to introduce the RentWerx Summit going on December 7th and eighth, 2023, in San Antonio, Texas. We're only allowing six attendees to this event, two full days of all the inside outside training that RentWerx puts on with BizDev Mastermind, our CPA, our maintenance team, our operations, our leasing, all of that two full days in San Antonio. Visit our rwmastermind.com.

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Brad Larsen: Welcome, everybody, to another edition of the Property Management Mastermind podcast. I'm your host, Brad Larsen. Now today's guest, I have a repeat customer, a repeat offender. We have Miss Deb Newell coming on and she's going to be talking to us about a subject that is very near and dear to my heart. And it is the next in line, the legacy planning. And she's going to be putting on some information. And she has a thing going on right now. I want her to describe it. Really. We're going to make this part of the PMMCON 2024 for next year is one of the themes we want to talk about is making sure that you have a plan for somebody to step in. If you were to go away, retire, decide to sell, whatever that's going to be. And we're going to talk a lot through a lot of the points through this and give some good examples. So, Deb, give us a little bit about yourself and so we can kind of get this conversation rolling. 

Deb Newell: Sure.Thanks, Brad. Deb Newell, Consultant in the property management industry. I've been doing this since the consulting full time, since about 2013. I've been in the industry since just before 2000. Started off doing fix and flips and then got into property management kind of by the back door through maintenance. And that's kind of my background. I ended up selling my company in 2021, so in 2021, I went back to school, got my MBA, and I'm actually currently in school for my PhD.

Brad Larsen: Yeah, use your example as kind of like a success story because a lot of people, unless they really have a scratch that they want to itch as far as selling, you made a perfect example on that because you sold your management company. It was set up for success and then you were able to free up your time to do something you love, which is consulting. And you've been a facilitator at the PMMCON and a speaker at PMMCON several times over. So there's really nobody in my mind that can handle what you're going to be talking about better because you know the industry so well. And so this leads right into this conversation. So I want you to describe kind of what you've put together and and and this will lead quite easily into some questions I have and some comments. And then we can just have a really good chat on it. Go ahead.

Deb Newell: Yeah, well, it kind of started because of you. I mean, at PMMCON this last year, in 2023, you gave this really good presentation on why some may not want to sell. And it's not for everybody. And everybody's story is different. My story is different than somebody else's who has sold in the past. And it's not just because I had kind of this part two of my life, too. I wanted to explore, but I didn't have children who wanted to take over the business, and I didn't have family in the location that I was that the business was in. We you know, we were in Minnesota. We weren't from Minnesota. And so after being there 21 years, it was just it was one of those things that it was time to move into the next chapter of our lives. And some people find themselves in that same position. Oh, yes. Are you raising your hand?

Brad Larsen: Yes. So, yeah, I'm raising so I can interject here because I want to give the background of that. The presentation I gave was basically build it to sell but never sell. So it was a 5050. Like here's the reasons to build up the company to sell. And then here's the other 50 side of that. The other side of the coin here are the reasons to if you do decide to sell, this is why. And so, it's it's kind of like both heads of that that dichotomy there because and when I got through with that presentation, everyone was just like, oh my God, legacy planning. If we can just build it up to sell and make it run itself, it'd be a great, great business to hand off to your children, hand off to your next in line. And it seemed to be that just that just hit a hot button with a bunch of people and they brought it up during the mastermind sessions and then you guys were talking about it. And so you've really kind of taken the ball and run with this. And Scott Brady had a big part of this as well, is let's talk through this whole next in line concept and what we want to potentially advise people on in getting their businesses ready to hand off to somebody. And that could be next of kin. It could be your broker of record. It could be your next door neighbor. I mean, whoever you decide to be next in line. And I want you to talk more about what you've got to working to this point.

Deb Newell: Yeah. So, there was a group of us actually, it was, you know, Melissa Prandi was part of their that initial discussion I think was Scott. And it was kind of just an idea to say, hey, what would this look like? Again, kind of this was really right after your presentation. So, it was a quick pivot to say, what would this look like? And, you know, they brought me in, and I've done other mastermind groups, as you as you know, and have kind of led some of those, both through property management and outside of property management. I have one right now that I'm doing that's just for business owners throughout the country and maintenance. And so I think what I'm seeing is that not everybody again, you hit a point that there's been a lot of sales, you know, a lot of acquisitions in the last couple of years. It's been a lot of buzz around that and there's nothing wrong with it. And I'm not even saying that that's not a good solution for some people, but others may have opportunity to pass on this legacy of their business to either a son, a daughter, an in-law, you know, a son in law, a daughter in law, sons, or even in your case, it might be not your children. It might be somebody that you've groomed who's been in the business so long that they might be in this director of operations seat, this president seat, this interim CEO seat, whatever it is that they may be ready to take over. And then that next in line is is there to kind of continue through that, that what we've already built.

Brad Larsen: So let's think of this and let's think of this in a tomorrow scenario. So I all of a sudden get diagnosed with brain cancer tomorrow and this could happen to anybody. You could you could come down with something. You could get hit by a bus, you know, the whole emergency situation. And if the business is not set up correctly to just kind of keep running, it can have detrimental effects in your legacy planning, in your estate planning, because if the business falls apart or it used to be worth X and now it's worth half of that because it just went into disarray, then you're really kind of screwing over your heirs. And that's a big concern because I think everybody needs to have you got concerns in two different areas. You got to take care of your owners. You got to take care of your tenants. And of course, you got to take care ahead of all those. You got to take care of your family and or whoever may be inheriting that business because also you have employees to worry about. You don't want the business to collapse because that's their livelihood. So think of everything that's on the line of something that could go wrong. You don't want to be caught into a situation where you are incapacitated and the business just comes to a screeching halt. And, you know, if you can keep it running, it makes it very, very easy. Handoff into your estate planning, as mentioned. So the group that you are kind of working with, I'm assuming you're going to go at least to to that faction of like, okay, let's let's talk about tomorrow's planning. What if happened tomorrow?

Deb Newell: Yeah. So there's kind of a multi purpose through this group. So it will consist of I'm going to do a year, it's going to be a case study. Essentially. This is the first one I've done. I've worked with just consulting. I've actually worked with family offices many times. And the dynamics can always be interesting because you're dealing with parents and children and sometimes relatives in a family situation and that can always that has its own problems or, you know, circumstances as well. But what we're going to do for this next year is meet through Zoom four times and then we're going to our final meeting will be at Con next year. And the idea is that I will work with them. Yes. To kind of say what would tomorrow look like, but also to help them recognize the the things that are going on in the business that as entrepreneurs and business owners that we've done and built up, that we can get them to see. So oftentimes we see things employees don't see. It's like we're always looking ahead at the consequences of, well, if you do that, this is going to happen. If you don't call the owner, this is what they're going to ask. So that's kind of just what we've done and we've figured that out.

Brad Larsen: We've seen some we've seen some we've seen some case studies around this. And I'm sorry to cut you off there. Apologies. That's okay. This is also I got to assume it's going to be multifaceted because you're not just talking about a simple will. Okay. Or a simple trust or an estate, because way before that, you have to tighten up your procedures, your policies, your procedures, your backup broker, your who's handling the money, who has access to banks.

Deb Newell: Exactly where I was going with that. They have to know all of that piece. Like that's that's a lot to digest. And there's there's another part of this as well. So keep in mind, you've got a child that might have, you know, so-and-so has been in the front office for 17 years and she saw little Johnny when he was five years old. And now Johnny's taking over, you know, now he's 25 and he might be ready to be really in the business and taking more control. That also is a part that you have to, you know, get over. Is employees also being okay with somebody that is not necessarily worked as long in the business as they have, but is next in line to take over the business. So there's many different facets, like you said to it. And we're going to cover all of that and how they can address that. And I'm going to assign them homework. I'm going to make sure that they because we're going to collaboratively, like work together through pain points. So aside from just the Zoom calls, I'm going to I have a Slack channel that I've created for them as well so that they can communicate with each other because I want them to mastermind with each other. What are some of the issues you're going through? This is what I had. You know, my dad told me this the other day. What does that mean? So there's a little bit of those dynamics that I want them to work together on and then have me help them, you know, guide them through these high level things that we need to think about. Just like you said, the bank accounts and signatures, you know, signatures and things like that, and who's going to take over and and not even just making sure they understand regulatory things that are going on in their state or market. It goes way beyond that. It's digging deeper into the business and making sure they understand the fallout should these certain things not happen.

Brad Larsen: I think this is a fantastic drill and I, of course, want to be a part of it. What I'm thinking is you have so many factors to consider. And one, for example, is let's take my case. I've got two kids, 15 and 13. They're both going to be freshmen in high school. They're not anywhere near taking over the business in the next ten years. Right. So let's say they're both fast forward ten years from now and they're 25, 23 and they're in the business. And I were to suddenly go away or whatever, I would design some sort of vesting process where for every year they serve in the business, they get a little bit more of it. And, you know, maybe this I mean, this is a whole estate planning conversation. It's going to be deeper than just our group because it's going to be you got to take this to a lawyer at some point, you know, digest your chicken scratching on a notepad, and the lawyer is going to draw up a whole estate plan for you along with your your key leaders in the business if you have them. And I think that's going to be covered. So I'm very excited to see some of that. So in my case as well, you have to consider insurance, right? So you have a little bit of estate planning. With insurance, you're going to have some sort of life insurance or if you don't, you should. And this might wake up some people to, okay, do you have the insurance? Is it correctly named? Is it enough amount? Is it going to, you know, set people up? And it's not just all about the hand off that you think will never happen for the next 20 or 30 years? It's the what if scenarios that are going to be covered. So I think people are going to walk away with this with a to do list of ten, 20, 30 items if. More.

Deb Newell: And it's not even just about if something happened to you tomorrow, it's also you could live until you are 90 years old. Brad But you're not going to run the business until you're 90. You may say I want to bug out at 60 or 65 and then and then that that changes the dynamics of how you you'll still have the estate planning in place, but the handover of the business might look a little bit differently as well.

Brad Larsen: Yeah, that's a great point too. I mean, going on the far side of that, let's fast forward 40 years and I finally golfed my age, right? I'm 82 years old and I can shoot an 82 on the course. Right? That's everyone's life goal. It should be. So if I can get to that point, you've got to figure there's a divesting, not just vesting for the kids, but you got to figure there's some sort of legacy where, okay, for for life I get X percent of the business, X percent of the profits for life, even though I don't ever touch the business and it's been handed off to somebody else. And I think that's that's almost like your insurance. Let me say that again. It's almost like your retirement plan. And that could be a real good way to set it up. So it's very clear because you could be in a nursing home for ten years. You don't know. And if you don't have a drawn out, you know, people can take advantage of that and kind of leave you to the wayside.

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Deb Newell: And that's a really good point. And the other thing to consider is, do you have just one child? Do you have two children? Do you have three children? I mean, you know, do they each one a part of the business? What is that going to look like? I've dealt with one where there's just one child and I've dealt with families where there's multiple. And so, you know, each has a specific role and making sure that that's in place as well. But to your point, it's and I've also had families who or I should say business owners who are like, I'm just going to give the business to my child. And I have had others say, I'm going to sell the business to my child. So what does that look like? Right? So you have to have something in play. And and I get it. You know, you don't want to we're not going to give our children just because we built something. They just they get it because they're a kid. You you may you want them to work for it as well. Some may just say, well, your length in, you know, the time that you've spent into the business is enough for me. I'm just going to give it to you when I die or, or when I retire. However that whatever that looks like or they're going to, you know, they're going to charge them. You know, a percentage, an equity stake of some sort.

Brad Larsen: I like it. And all this is going to come out of that. And this is going to be turning into a very good estate planning type of a concept. You know, I've heard things from other managers too, where they tell their kids, you're not getting anything in the business until you get a four year degree or you serve four years in the military. I stole that from Brian Birdie, so I'll give him full credit. And he told his kids that and he's a great example. He has three kids in the business and then they're all married and they have kids and now he has grandkids and I hope and he's got a brother in the business. And so I hope he's got and.

Deb Newell: That's a good leg. And that's a really yeah, that's a great example because that is a legacy. I mean, his father was in it. So it's, you know, so it's it's something. Now to your point, now Brian's in it and his brother David's in it and so then he's got his children. So yeah, there's a, there's a lot there to probably unpack, but I'm, you know, they obviously have different roles in the company and to expand that company and to even be bigger than Brian, it will probably take more than just Brian and David and that's good. You want the company to get bigger and expand and grow. I would say if it were if my children were to take over the business, I my hopes would be that you make it something even better than I did so that it's worth not just more, but it is something that can continue growing throughout years and even beyond them.

Brad Larsen: As we do this, are we going to be able to come up with like an outline? Because if you've ever done trust planning or estate planning, it's it's pretty detailed. It's like, what if this happens? This will happen, and then what if that happens and somebody else goes like, what do you do with your kids? And it really woke me up a few years ago and I've done some comments about this on a podcast where you got, let's say, two, three, $4 million in life insurance on the line and a business on top of that, and all of a sudden you pass away. Everyone's going to be fighting for your kids because with those kids comes millions of dollars. And it's sad. It's a sad way to look at that as far as people. But it's got to be very careful on who you organize to take over the business and the kids. And of course, that's when that's before they're adults. And so I'm hoping what we can do during this this whole drill is come up with an outline. And that outline answers all of those questions to where we could potentially take that entire outline. And it could be a five page document, ten page document. We could take that to a local attorney, because I think you've got to do this on a state specific level. You don't want to necessarily try to use some one attorney. So I think we'd have to take it to a state specific attorney that's local that you can trust and say, all right, this is what I want you to draw up. And they draw it up and it's going to cost you an extra little bit. But you did 90% of the work for them. They're just putting it in legalese and making it, you know, notarized and legal. And so this is a really good drill. I'm actually the more I talk about it, the more excited I get about it because it's going to make you sleep better at night.

Deb Newell: Well, I also think it's going to have allow those who are next in line to have these hard discussions. We have to actually have these discussions with those who own the company. So if it were me taking over your business, Brad, to your point, I'm going to want to know certain things and you're going to have to be okay disclosing them. Because if my role is to eventually take over running the company, I need to know, you know, where the bodies are buried, so to speak, so I can understand. Should you become incapacitated or away and I can't reach you or anything, I have the full autonomy to make some decisions and power of attorney and things like that. So slowly those things have to be kind of passed on. But whoever is next, children or other needs to know where those things are at and how to actually execute on that stuff.

Brad Larsen: You know, one thing to consider, too, is just like a backup broker. And that's something that we kind of had required in Texas for a while. So, you know, let's say if one of the local brokers that you know, you mentioned Brian Birdie earlier, let's say if he decided to go on a vacation and he's gone for three, four weeks, they can assign duties to a temporary backup broker. Or you could come in on a on an ad hoc basis and act as the broker, not a broker, act as the broker of record to do whatever you got to do to make that business run. And it's almost a requirement by the Texas Real Estate Commission. Not every state has that, and it's kind of loosey goosey on what they actually require, but it's a darn good idea. And I think that should be drawn up in every one of these things.

Deb Newell: A lot of states have that. I'm working with a client right now in California. Her husband unexpectedly passed away last year in November, and she's not even in the business. She is a therapist by trade, actually, and she's got two small children. And she now has a thriving property management company that she is taking her license for. So she's so she went she had to petition to the state of California. So to get obviously, in this circumstance, she's she had taken her classes years ago to be a real estate agent, but never actually finished them, only because she went on to a different career. Her husband did the real estate. So now, because she had already taken some classes, they have grandfathered her in on certain classes. But she still has to pass others to be able to be the broker. So they've given her a deadline and gave her a full year to do that so she could still operate the business and be compliant with the DRC. So but it's also looking at her business and saying, do I have. She's looking at it going, okay, I'm doing this. Do I have a viable business? And what, you know, what do I do? And so her and I are actually kind of going through the steps of building, you know, building the foundation up because she actually really has something good and getting the right people in place to help her run that, because that's just not her full time gig.

Brad Larsen: I think this is a great idea. And I'm I fully endorse it and I want to be a part of it with you. So let's talk through some of the dirty details just to get this in front of the folks. You know, there are some costs to this, so please talk through some of that.

Deb Newell: So the costs right now. So because this is kind of the the the first time we've ever done this, this is the beta test, you'll call it. You know, that's why I'm experimenting with just the four Zoom calls. We may change it in the future to be more frequent, but it's $2,000 a participant. And then at the end, we love to come have them come to PMMCON and we're going to do a panel there. It's basically kind of kind of a little bit more expanding what you talked about. But having these people on the panel on stage to answer questions, to kind of say this is what I learned in the last year, this is what I didn't know before. This is what my eyes were open to, this. This is what I've learned and this is what I know. I still I mean, a year is not going to solve and they're not going to be able to take over the business in a year. But what I'm hoping is that they have the tools and understand this is what I need to work on the next couple of years to be able to get to that point, to either take over or or be on that right path. That's where the focus is.

Brad Larsen: Good stuff. So how do we. All right, so let's go through this a couple grand. Well worth it. I mean, you ever done legacy planning with an estate attorney for building a trust? They charge 6500 bucks. If not, you know, 10,000 bucks. So I know you got to take it to an attorney afterwards. But again, it could be reduced from ten to like 1000 bucks just to draw it up. So you're actually saving money versus taking this concept to an attorney and watch them run that clock up to where all of a sudden it's a 5 or 10 grand bill just to shake their hands. No offense to any attorneys listening, but you know, that's how they roll. This is a very affordable way to do it, to where you have a cookie cutter type of a long form list to take to these attorneys and say, do this and they'll walk you through it to make it legal.

Deb Newell: And and I think the advantage I have is I've worked with hundreds of property management companies, so I've seen the guts of many and I've seen what's worked, what's not worked. I'm not just helping them kind of do this. I'm supporting them throughout this whole year. This is like, you get me when you need me and I'm there to kind of help you guys succeed and get to this next level. So it's not just I'm going to talk to you on Zoom every quarter or, you know, that's it. I want to be able to help them kind of manage through the struggles of the dynamics of what I know that they're going to encounter or have already encountered and how to get to that next step.

Brad Larsen: Have you decided to cap it at a certain number just in case we get overloaded?

Deb Newell: Yeah, I think I'm going to cap it at around 12. So and so as of right now, I have it. So the first session is on June 15th, so I'm hoping to get it started that soon so we can have it. And it may be that just might be the launch call. And then we actually have our our real, you know, the first of four. Soon thereafter.

Brad Larsen: Yeah, that sounds like a plan. And of course, tied into that is they can attend PMMCON, which is going to be March 6th, 7th, 8th, 2024, in Nashville. This will be the second iteration there in Nashville, Same hotel, same location. We had a fantastic conference this last year in 23, and we're doing kind of a different theme. We're going to be also doing the legacy planning as we talked about, and we're also going to be doing different verticals. We're going to be talking about all these different verticals that are out there that are going to be put in front of the property managers that attend the conference between mortgage title insurance, even investing in real estate sales. And so we'll be talking quite a bit more about that in the future. And that's going to be a fantastic conference just because you're going to get so much value to learn about other industries other than property management. In addition to making sure your business runs runs correctly. And it could be something you almost it's like another vertical of businesses that you can build. And if you know it's built correctly and you know it's ready for a handoff if you needed it, it allows you the peace of mind to look at something else. All right. Let me go create more opportunities and start a title company. Let's go start a mortgage company. Let's go start an insurance company. And that's that's going to help the entire business umbrella that you have built.

Deb Newell: I think it's going to open a lot of people's eyes to say that we're not just pigeonholed into just property management. There's so much more opportunity out there in our industry and these are all like add on features that actually benefit the core of our business.

Brad Larsen: So how do we reach you to get signed up while they can?

Deb Newell: So, yes, good question. So we'll include my information in this podcast as well, like at the end of it. But you can reach me through my website at propertymanagementconsulting.com. That's one way. And if you want to message me through Facebook, I'm on there and email. It's dnewell@realtimeconsultingservices.com It's kind of long but um reach out to me I have a team that will, you know, send out the information and there's a link which I can also give you and they can sign up just directly from that link so they can go there. They'll be in our system. We'll send them out the next steps, email, everything that kind of comes along with it. They're going to be. But you know, this isn't just my my focus and goal with this is not just to help them get prepared, but I want to you know, this is kind of talent development, so to speak, right? So, I'm hoping to develop them as individuals, too. And oftentimes, as we all know who our parents, somehow our kids and others listen to other people more than they will listen to their own parents. Like I can give advice to my kids and somebody else will give them the same advice and they'll come to me and say, Did you know so-and-so said this? And I'm like, That's exactly what I said to you.

Deb Newell: So, it's just it's they hear it better from somebody else and that's okay. And I understand that. And I think we get to that point where we've kind of talked enough and now it's somebody else, you know, just an outside point of view to help them get over that next step. And it's not mom or dad trying to push them to do this, read this book. It'll really get you there. But, you know, we're going to I'm going to push them. I'm going to challenge them and tell them that there are certain things that they should incorporate into the business. And it's going to actually, I hope, show the maturity that they will bring into the company. So it's not just the parents or the business owner that's seeing this change in this individual. It's also the employees who have to you know, you have to have their respect as well. If you're going to end up taking over the business, you need the respect of those you work with, including or I mean, your your property owners, right? So, they know your mom or dad because they you sign them up. But how you pass that baton, that's going to be really important as well.

Brad Larsen: Agreed. Fantastic discussion. Point on what you've offered. Sign me up. Consider me part of it. If anybody couldn't catch your email, they can email me. Brad@pmmcon.com. I can forward it over to you real quick. But yeah, look forward to starting at June 15th and thanks for coming on with this episode. It's been fantastic. Thank you.

Deb Newell: Thank you. I appreciate it. Thanks, Brad.

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About The Host

The Host of this Podcast is Brad Larsen from San Antonio, Texas. Brad is the founder and owner of RentWerx, one of the fastest growing residential Property Management companies in Texas that currently manages over 700 single family homes.