The Science of Flipping - Episode 20: How to Mind-Map Your Business | Real Estate Investing Podcast

Episode Date: January 17, 2014

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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 20. I can't believe we made it to episode 20. This is absolutely amazing. Thank you guys for all staying tuned. Again, this is the Science of Flipping podcast episode 20. I'm your host, Justin Colby. I am excited, guys. This is going to be a great year. Obviously, by the time you are hearing this, we are well into 2014. This is going to be the year for everybody. It seems as though the real estate market has evened out slightly. We're not going way up. We're not going way down. We're staying steady. So guys, this is when you really got to start listening to this podcast. If you've never heard our podcast, if you are new, I highly recommend you get over to our website, thescienceofflipping.com.

Get our ebook, The 15 Most Costly Mistakes You Can Make As A Real Estate Invest investor. Guys, this e-book is paramount for your business. These are the mistakes that myself, my business partner, and our colleagues, some of the biggest real estate names that you have ever heard of, have all made. The reason why I put this e-book together is to help you guys not make the mistakes we've made. Even if you're an experienced investor,

get this ebook. It is free. This ebook is free. There is no reason for you not to go to thescienceofflipping.com and download this ebook. Guys, today what we are going to be talking about is simply mind mapping your business, getting all aspects of your business mind mapped out. I will tell you the software we use and I will be very descriptive in talking about how in this new year you need to get all of your business, all the departments, all the activities mind mapped out. That is what you are going to have to do absolutely. So that is what we're going to be going over, over episode 20. I'm excited as you can probably tell in my voice. If you never tuned in, if this is your first time tuning in,

again, I'm your host, Justin Colby. My business partner, Eddie Rosefield, and I have been flipping homes here in Phoenix, Arizona since 2007. It's 2014 now, guys, and we've had a terrific last couple of years. In 2012 and 2013, we flipped over 300, well, in our company's existence, we flipped over 300 deals. Just in the last two years alone, we flipped over 150 deals in the last two years alone. In 2014, we have a development currently going, which we are developing 79 townhomes out in Mesa, Arizona, which is a segment of Phoenix, Arizona. Very exciting stuff going on. And so if this is your first time hearing, you would hear about this and you would say, wow, you are very, very successful.

You're an overnight success. But that has not always been the case. When we started in 2007, it was the years of the short sales, right? The banks didn't know what they were doing. 2008 came along. We were bumping along the bottom, barely surviving, barely paying our bills, barely affording to be able to go out to dinner once a month. We've had the struggles. We have been there.

I want all you guys out there knowing, whether you're a brand new investor just trying to stand up on your own two feet, or even if you're an experienced investor kind of going through the struggles of the real estate economy, we've been there. We've done that. We're here in Phoenix. Talk about a bump in the road. We had the hedge funds come in town, 2010, 2011, basically kick us out of the auctions. We were buying 90% of our inventory at the courthouse steps at the auctions. And in 2010, 2011, they kicked us out. They were overpaying by 110%. We couldn't even compete.

So talk about already being established and already having your feet under you. And then all of a sudden, you get blindsided by these hedge funds that come in. So again, if this is your first time listening to me, we've been there. We've gone through it. We started back in 2007. We've had to overcome those hurdles and we've done it successfully. And again, now that you look at us here at Phoenix Wealth Builders and you say, wow, you're where we want to be, we've done very well for ourselves, but we've also overcome those hurdles. And that's what this podcast is about. This is about taking you, whether you're experienced or a rookie, and developing the lifestyle that you want,

in systemizing your business so that you can be on vacation during the holidays. The holidays just passed. So that you could be in a different country, that you can be in a different state, that you can be flipping homes from the comfort of your own couch. That's what we're about. That's what I'm trying to teach you guys all here is to create the systems so that you can do better in the years to come so that you guys aren't just swinging the hammer and doing every part of your business, right? That's not what it's about. So again, let's get going on today's episode, guys. This is a great episode. We are talking about mind mapping your business.

Mind mapping. The product that we use is called X-Mind. X-Mind. It is a free product. You can go on there and start mind mapping yourself. But the reason why I'm having this podcast today, the reason why we're talking about mind mapping your business is because I just got off the phone with one of my students.

Great student, just getting into real estate, already making moves and taking action already. Been in real estate for about 30 days. I'm very proud of this student. And I asked this student, you know, if they've been able to really envision what their company looks like and what direction they're going to go in and who's handling all the different positions within their company. And he said, no. And I said, okay, well, it's time to start. Now, this is going to be effective whether you are a rookie investor or whether you're an experienced investor. Because no matter who you are or what business that you're in, whether you're in real estate or if you're in another type of industry, it doesn't matter. You need to be mind mapping your business so that you're in another type of industry, it doesn't matter. You need to be

mind mapping your business so that you know the vision of your business, you know exactly who's playing what role, who's doing what position, and how effective you can be with those people in those positions. It's important, no matter whether you're in real estate or otherwise, for you to mind map your business. So what we want to do here on the science of flipping is help you mind map your real estate business. So some of you are wholesalers, some of you are fixing flippers, some of you even buy and hold and you just listen to the podcast because there's little tidbits and golden nuggets within each podcast that you can create and utilize in your business and systematize in your business and add these systems. Well, this is one of those systems. So if you take your company as a whole, let's use Phoenix Wealth Builders. That's my company. And we try to re-mind map our company every year.

In fact, while I was on vacation for the week or so for the holidays, I was creating another mind map on what our company looks like and who is fulfilling what role, who is marketing, who is sales, who is taking in the lead, all of those positions. So we take Phoenix Wealth Builders and there's several components of Phoenix Wealth Builders, right? So right now, we are primarily a fix and flip company. In 2013, we bought an eight-acre piece of land and started developing. So we became developers. And we also from time to time would wholesale properties that we were not gonna fix and flip

or that we knew we could just make a quick nickel over a slow dime so we would wholesale from time to time. So I started mind mapping our company for the year 2014 and I broke our company up into three different divisions. Now again, I want you to go use Xmind. Xmind is a free software. It's not the only software. So if you're already using a software, feel free to keep using that software. It's just the software we use. So I took Phoenix Wealth Builders and I broke it up into three subgroups, wholesaling, fix and flipping, and development. And the reality

is I also added a fourth subgroup because I do a lot of consultative work. Consultative work, yeah, I think that's called consultative work, but private mentorship programs, very high level for those students who are high level, already doing deals and want to get their business to the next level. Well, this is part of it. So I broke it up into four because I included the consulting slash mentoring aspect of our company. However, for sake of this example, let's just include the three. So I have Phoenix Wealth Builders at the top. And if you can envision almost like a tier, so to speak, or I forget the word for it, but like an organizational chart, right?

So I have three bubbles under Phoenix Wealth Builders. One would be wholesaling. So what goes into wholesaling, right? So I got to work my way backwards on what parts and what departments would be in our wholesaling. Well, one of them obviously is we need to find deals. Well, how are we going to find deals? Well, marketing. So then I put marketing as a subgroup of the wholesaling. Now in wholesaling, we have marketing. And in marketing, we have subgroups on the style

of marketing. So, we have direct mail, we have bandit sign, we have radio, we have networking, and we can have subgroups of all the styles of marketing. Okay, so we have wholesaling, subgroup marketing. In marketing, we have all the different subgroups of styles of marketing. Well, also in wholesaling, we do another subgroup, right? So right now, wholesaling has one subgroup. It is marketing.

The next subgroup would be acquisitions manager. Well, once we get marketing and people start calling us, who's taking that lead in? We need an acquisition manager. So we need to either find an acquisition manager or become the acquisition manager. So the acquisition manager has several roles. They need to take in the lead. Then they need to go in and meet the seller. Then they need to get it locked up and in contract and in the title.

So the acquisition manager is a subgroup of wholesaling. And then the acquisition manager has subgroups of what their role looks like. Then another subgroup of wholesaling would simply be sales. Well, who is selling these properties once we tie them up? Who is creating the email blast? Who is networking with buyers? Who is doing the sales once we tie up these properties? We need to know who is in each role.

So that way we can figure out how our wholesaling business looks. Now we can get much more specific in all of these subgroups. So don't limit yourself to what I'm verbally saying here, what you're listening to here. You can be as specific and granular as you possibly want, or you can be as broad as you want. Okay. So what I'm doing is I'm trying to do my best to give you a verbal example of how I broke down our mind map. All right. So that was wholesaling. That was one bubble of the three that I'm going to be talking about. Now we have fix and flipping. So fix and flipping, we have multiple subgroups in that. First of all would be acquisitions. Where are we acquiring these deals? Well,

the natural answer would be some of the deals come from the deals that we've been marketing for on our wholesale business so we'll cherry-pick from those deals now that's easy so the other would be so acquisitions right so we have the marketing we have the MLS we have the courthouse steps we have wholesers. These are all subgroups under acquisitions, under our fix and flip bubble, let's call it. Now, each one of those roles and each one of those acquisition strategies need to have someone implementing them. So who's going to auction? Who is cherry picking the deals that we have under contract? Who is dealing with the wholesalers? Who and what

agent is writing offers on the MLS for us? So you need to mind map all that out. Now, once we acquire it, we have raising private money. Whose money are we going to be using? Why? How? What's the interest rate, right? So we want to make a subgroup under fix and flipping for private lenders. Whose money are we using? What is the interest rate? How often do we use it? How much money do we have with that private lender? The next subgroup would be project management, rehab management. Who's managing our rehabs? Who is getting the three bids on each fix and flip property by three different contractors to get the number? Right? So you break down the rehab management of it. Who is getting all these bids? Who is watching over the contractors?

Well, that's our project manager. And then we have sales. Sales is our in-house brokerage. We don't own the brokerage. We are very close with the brokerage. We have a good business relationship with the brokerage. They actually work out of our office. We sublease a part of our office to them. And so then we go through sales and we say, what are they marketing? How are they doing that? What numbers are we looking at? Those are all subgroups of the fix and flip business. And what's our last business? The developing side, acquiring land. So what's part of the development side? We have multiple subgroups, acquisition. Now this would be different than wholesaling because we're going after raw land

or land with improvement. Either way, there's no structure on it. This is not going to be a rehab and very rarely would it be a wholesale. Though we are actually in contract wholesaling a piece of land. So I guess I'm speaking too soon, I guess, because we are actually wholesaling a piece of land to D.R. Horton. But that being said, the land development side is, or the development side would be acquisition, finding the property, little bit different. You can't find land the same way you necessarily can just find homes to fix and flip, right? So acquisitions.

Who's our head of acquisitions? How are they finding that lead? What are we doing? Do we need to be marketing for that lead? Do we need to be looking at the MLS? How is that structured? Subgroup one, acquisitions. Funding would be subgroup two.

Again, very similar to the private lenders. A lot of times these are private lenders when we're acquiring land. Sometimes they're not. similar to the private lenders. A lot of times these are private lenders when we're acquiring land, sometimes they're not. They're more institutional lenders. Who are we using and why are we using them? Now we have to deal with the contractors, right? The building. So very similar to the fix and flip, but we're starting from new, right? So we want a builder to be doing that. Who's managing them? Who's looking at their budget? Who's doing the pro forma to make sure that the numbers work? All of that goes under the construction and then sales. Who's selling the property? What are the commissions? How are they marketing it? So on and so on.

Now, again, guys, I'm verbally trying to explain what a mind map is, but this is an incredibly important part of your business. Again, the software that we use is Xmind. You can download it for free on the internet, but you need to be mind mapping all divisions of your business and get as granular as you possibly can. That is the key to this whole thing. Get very, very granular. And that way you have the people and you can edit it constantly. You can constantly edit your mind map. So don't feel limited to what you've put on there.

You can constantly edit it. Guys, for you to be successful in any business, specifically real estate, you need to be mind mapping your business. What does it look like? Who's filling those roles? Get into XMind today. Download it. It's free.

And start mind mapping your business. I have a handful of students who have never, they've heard of it, but have never used it and they love it. I do very high end consulting. These are already investors who are doing deals, but they've never mind mapped their business. And I'm telling you and I'm telling them, once you do this, your business takes leaps and bounds. It's exciting stuff. You start to really be able to take a different view of what your business looks like.

You start thinking like an entrepreneur. You start focusing on the one thing that really matters, which is a great book, by the way. If you've never read The One Thing by Gary Keller, you need to pick that book up and read it. If you've never read The One Thing by Gary Keller, you need to pick that book up and read it. That is a great read. So anyways, guys, that's what I got today. You need to get on XMind. Download the free version. It's all you need and start mind mapping your business, guys. This is going to be a great year. Go make it a great year. No excuses.

Work hard. Work effortlessly. We will talk soon. I've been your host for the Science of Flipping. I'm Justin Colby, and I am out of here. Peace.