The Science of Flipping - Episode 10: Outsourcing | Real Estate Investing Podcast

Episode Date: October 25, 2013

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Welcome to the Science of Flipping Podcast. I'm your host, Justin Colby. Welcome, welcome, welcome everybody to the Science of Flipping Podcast, Episode 10. Guys, I'm excited today. Today you are going to be hearing about some issues that a lot of fix and flip investors have with delegating responsibility. That's really what it's about, guys. You're going to hear about how you can get out of the day-to-day business of fix and flipping homes. So you're not swinging the hammer. You're not the project manager. You're not your bookkeeper.

You're not your accountant. How to delegate and outsource all of these things that we do in our business, guys. If you're new to this call, if you're new to this podcast, I really suggest and encourage you to go over to thescienceofflipping.com. Get your free e-book. This e-book is the number one e-book on the market today. It is called The 15 Most Costly Mistakes a Real Estate Investor Can Make. I say this time and time again, if I had this ebook, if I had access to this ebook, we would have made more money sooner. We would have made less mistakes. We

would have bloodied our nose less. It would have been so much easier to know these mistakes up front and not have had to live through them. Get over to thescienceofflipping.com. Download your free e-book. It is a must. Guys, if you don't know, I'm your host, Justin Colby. Me and my business partner, Eddie Rosefield, we started fixing flipping homes here in Phoenix, Arizona in 2007. And let me tell you, it was not pretty. It took us nine months to get our first deal done. It took us another couple months to get our second deal done. In two years,

we got eight deals done. Eight in two years. We sacrificed it all. We've gone through it all. We've lost houses. We've lost cars. We've lost our health. It was difficult, but you know what? We stuck with it. We made sure that we promised each other we were going to make it no matter what. And now you take a capture, a picture in time right now, and you would consider Eddie and I and Phoenix Wealth Builders incredibly successful. And it's true. But don't get it wrong. We took our lumps. We took our punches to the gut. But we stuck with it. We had the fortitude to keep pushing forward. And now, guys, you know, last year we flipped 96 deals. This year we're going to get

over 50 deals. And this year we've become developer builders. We took down a piece of land, about eight acres. We're building 79 townhomes in Mesa, Arizona, and it is going on right now. Today, I was just reading reports of the soil testing. We're laying down our foundation for our third building. We've already framed one building completely. We're framing the second building. We're putting down the foundation for our third building guys. This is exciting stuff for us. This is our first time becoming developer builders. Exciting news. So we're going to have about 79 townhomes out in Mesa, Arizona, and it hasn't slowed down our flipping

business at all. We'll still do over 50 flips this year alone. Again, today you would consider us very successful. But we've been there. If you're out there, if you're saying it's hard to find deals, if you're just trying to get in the game and you can't find a deal or you're just trying to build your buyers list we've been there you know so today's call guys you could probably hear it in my voice I have an energy about me because yesterday I put on my mastermind the science of flipping mastermind I go around the nation and I speak with groups of like-minded investors who are flipping homes.

They're actively flipping homes. And these are intimate events. And you know what? I'm recording this podcast specifically from what came out of that mastermind. Was everyone was working too much in their business to grow their business. They were all at a standstill. They were all frustrated. They all were dealing with the minutia of their business.

And that is what today is going to be about, guys. That is what today is going to be about. It's going to be about how to hire the right people, how to build the right team, and what systems in our business have we outsourced? What do we do or what did we do that we no longer need to do, guys? And listen, I got up in front of the room and I talked about our business and I told them, you know, out of the 50 plus deals that we're going to do this year, I've probably walked inside of two of them. Their minds were blown. They couldn't understand how we were able to acquire properties, rehab properties, sell properties, and I didn't even go into the properties.

They didn't understand how we outsourced our business and how we have people in place in our business. So guys, this is going to maybe be a little bit shorter of a podcast than what we're used to doing because I'm going to just get straight to the point about things you need in your business and how to structure it. First of all, we hire virtual assistants to do a lot of the internet work that we do. Whether it be post Craigslist ads, whether it be list building, whatever we need to do with on the internet,

we hire virtual assistants. If you're doing something on the internet for your business, whether it's marketing or otherwise, most likely you can get a virtual assistant to do it you need to have a virtual assistant to call on you have to do it secondly and i'm in this is a larger picture but if you do not have a bookkeeper and an accountant doing your work for you, you are doing it wrong. I can't tell you. I had 18 people in that room yesterday.

And each one of the 18 people said they hate paying checks, they hate doing the accounting, and they hate having to figure out all the tax information. It's tax season, guys. It just passed. October 15 just ended. My accountant's been all over us for the materials, but you need people in your business and there is a cost to that. I understand that and I can appreciate that. If you're a beginner out there and you're not making any money yet and you maybe have done a deal or two and you can't afford that, I get that too. Make sure you're a beginner out there and you're not making any money yet and you maybe have done a deal or two and you can't afford that, I get that too. Make sure you're keeping on your books.

But if you are cutting your own checks, if you're paying the bills, if you're doing your own bookkeeping, doing your own accounting, you are doing it wrong. And the reason is this. I'm not saying you're doing the accounting part wrong, but you're spending time in your business when you should be working on your business.

You're cutting checks, paying contractors, reviewing their work, looking at the invoices, you know, doing the bookkeeping, handing that over to your accountant, or maybe you're trying to do the online tax return form, and you're doing it. But you know what you're not doing is you're not working on your business, finding more deals, putting deals in contracts, building a buyer's list. That's the stuff that creates income for you. That's the stuff that cuts your paychecks. That's the stuff you need to be focusing on. Focus your time and effort on the stuff that creates money for your business. Everything else outsource. All of it. Gone. You need to have a bookkeeper cutting your checks for you every single week. Creating documents so that you can hand it to your accountant so your taxes

are in line you need a bookkeeper get it done some call it a controller other call is a bookkeeper make sure you implement that in your business and you don't need to pay them a lot maybe two hundred dollars a month i think we pay our bookkeeper maybe four hundred dollars a month total but we do a lot of business. And it's gone up during taxing, obviously. I think we just paid her $1,000 to get some things done during tax time. But at the end of the day, every month, a month, $200, $100. Have a controller or someone to come in to pay your bills for two hours a day, five days a week, once a week, whatever that looks like. A hundred bucks a month you pay them. It doesn't have to be expensive. You need these people in

your business. That's a very, very important part of your business. It's top of mind because tax season just ended, but you need it. You have to have these people in your business. Now, the next subject I'm going to go to is the rehab side of your business. Well, think about something. How many days do you go to a rehab project that's in the middle of working? If you do not have a project manager on your payroll, you are doing it wrong. I just mentioned to you guys at the very start of this podcast that out of the 50 plus deals that we're going to do this year, so far to date, and it's October 17th I think today,

I've walked into two of the homes so far to date. Why? I've systemized my business so that I have a project manager that views the home before I buy it, views the home once we buy it and changes the locks, shoots a video of the home before we buy it and the day we buy it, shoots a video of the home once a week for us and keeps us posted on progress. I pay that project manager $1,000 per deal that we do. Now, as a company doing 50 plus flips a year, he makes a good income. Last year we did 96, good income. I understand that you may be doing bigger, better deals. Maybe you're an expert real estate investor,

but you do five deals a year and you make 500 grand off those five deals. Well, maybe you need to adjust how much you pay your project manager. But if you are walking each and every one of your projects every day, every week, every month, you are doing it wrong. You need to implement a project manager into your business so that you do not need to visit that home every single day. Period. As a fix and flipper, you do not need to do that. You need to focus your times on finding deals and selling deals and raising more money so you can buy more deals. That is what creates money and paychecks into your pocket. You know what doesn't put paychecks in your pocket?

Following a contractor around all day telling him what he's done wrong. That doesn't put money into your pocket. You're missing out on the point of creating a business and managing a business rather than just managing employees or managing people. As a president of a company, you need to drive the company in the right direction. And then you need to hire individuals to manage the other individuals with the same vision of driving the company in the right direction. And if you're too far in the minutia of paying bills, following contractors, you're doing it all wrong. You need to have those people in your business to handle the minutia of your business.

This is why we hire real estate agents, is it not? Because they handle the contracts and the negotiations and the selling of the home. If you're doing that, you're doing it wrong. Hire a real estate agent. They handle the contracts and the negotiations and the selling of the home. If you're doing that, you're doing it wrong. Hire a real estate agent. I don't care if you're licensed. Hire someone else to do that. We also have a transactional coordinator that we pay $200 per file to handle all of the paperwork when we're buying the home and to handle all of the paperwork when we're selling the home. So a wholesaler sends me a deal. We like it. We green light it as a purchase for us. We put

in earnest money. The second we do that, the email back to the wholesaler saying, we want this deal. I CC my transactional coordinator and now they're involved on the deal from that point forward. They handle all the paperwork, all the signatures. They make sure the earnest money gets handed over to title. They handle it all. In fact, in certain cases, I give my transactional coordinator authorization to sign for me. If I'm out of town, if I'm somewhere, I will write them a letter saying they have authorization to sign paperwork. That's how systemized our business is, guys. Guys, I'm traveling in San Francisco right now. I'm doing this podcast from San Francisco, California.

Because I've systemized our business to a point where I am still doing deals, I'm still doing my development, I'm still flipping deals, we're closing on a home today that we bought last week, we put it on the market, found a buyer, we're closing on a home today, and I'm not even there. That's how you systemize a business. Make sure the three things, guys, and I told you this podcast was going to be short, but man, is this a crucial podcast.

This is a super crucial podcast. Make sure you have a controller, someone who pays your invoices, pays your bills. Make sure you have a project manager. Make sure someone is turning on the water, turning off the water, following the contractors around. They do all of that. The project manager does it all. Make sure you have a transactional coordinator, someone to handle all the paperwork between title, loans, hard money loans, whatever paperwork that has to happen to buy the deal and sell the deal. The transactional

coordinator handles it. These are things you need in your business so that you can live the lifestyle you want to live. I talk about it all the time. My podcast is simply about being a fix and flipper and continuing to live the lifestyle you want to live. Travel, spend times with friends and family, but still make the same amount of income, if not more, by creating the systems, implementing the people in your business, so that you can live that same lifestyle with the same income, if not even more. And I'm telling you now, since we've put people into our business, and we are paying them, we make more money.

I know people are thinking, oh, I don't have money to pay for that. I can't pay $1,000 per deal. I can't pay $200 a deal. I can't pay someone to pay for my bills. But since we have implemented those people into our business, we are making more money now than ever. Because we focus on the stuff that makes us money, like acquiring more deals, selling more deals, building a buyer list to wholesale a couple deals, raising more private money. That's what makes us money. Super important podcast.

I'm happy that you guys are here. Implement these people in your business. You need to implement these people in your business. Know if, ands, or buts about it and build them into the deal. They are all costs I build in to my rehab budget. So I budget them in to what I'm going to have to spend as a part of the deal. So if my rehab's 50 grand, I budget 53 grand so I can pay my project manager, so I can pay the transactional coordinator, so I can pay my controller.

Budget into the deal, guys. That's how you pay them. Guys, you can tell I'm excited about it. I just gave a kick-ass mastermind. It was absolutely awesome. Everyone's saying how important those masterminds are. If you're interested in masterminds, give me an email, info at thescienceofflipping.com. If you have any questions any questions period come email me at info at the science of flipping.com i'll make sure to respond to you um i give masterminds all over this country um they're exciting they're fun and they're incredibly helpful for the people that attend if you've never been in a mastermind you need to check out masterminds. Again, email me at info at thescienceofflipping.com.

Get over to the website. Get your free e-book at thescienceofflipping.com. I'm excited. You can tell it in my voice. But that's all I got for you today, guys. This is an important podcast. I'll talk to you next week. Peace.