Too many real estate investors are chained to their business of flipping houses and never experience true freedom. If you look at my life, I not only have a vast mentoring and coaching operation, but I also flip my own houses, own a large portfolio of real estate and own several other businesses. On top of that I am married and have four kids. How do I get it all done and still have a life?
That’s what I’m going to share with you. The secrets of how the most successful real estate investors automate their house flipping business so they can produce more results with less effort. House flipping doesn’t need to be something that consumes your entire life.
Change Your Mindset from DIY to Delegation
The basis for automating your house flipping business is your perspective. Your do-it-yourself mentality needs to move to delegation. How do you do this? You need to remove the idea that, “If you want it done right, you have to do it yourself”, and replace it with something that Paul Orfalea used to say, “Someone else can always do it better”.
1. Learn to Hire Well
Instead if thinking of yourself as the one doing everything, think of yourself as a CEO. It may be necessary to do the work yourself as you are getting started. However, as the business begins to grow, you need to work yourself into a position of delegating and hiring people to do the work. Some of you think that if you delegate, the job won’t get done as well because as a business owner you care more. This is why you need to learn how to hire well.
There are capable, skilled people out there that have unique talents and gifts, and you as a business owner need to lead them to utilize those gifts. Remember, it begins by changing your mindset. When you change your mentality from DIY to delegation, you see yourself as a CEO and start putting people in place to do certain things for you. This is the fundamental key in automation; it’s going to take other people’s efforts.
What’s unusual about real estate is that each individual deal has several different outside parties. You have buyer’s agents, an inspector, an appraiser and a seller. The seller could have an agent in the middle, and you have a title company or closing attorney. All these different parties are involved and usually get paid when the deal closes. They all have their individual jobs that they do.
Often I see beginners in real estate investing reluctant to hold the people involved accountable, to timid to instruct them on what they’re supposed to be doing. Instead, what they do is have this DIY mindset and pick up the slack for the incompetence or the laziness of the other parties in a deal. Drive them to fulfill their responsibilities, because that’s what they’re getting paid to do.
2. Creating Jobs is Good
You are creating opportunity and jobs, and that’s a positive thing. Don’t be scared of being a leader or feel bad for telling people what they need to be doing. You need to see this as a noble pursuit. Somebody needs to be the driver in the deal and be giving these people opportunities and tasks to accomplish.
Unique to house flipping is often it’s not an employee or assistant that you have doing the work. There are other people in the deal and you’re just holding them accountable. Remember, the key is this mentality that you are now the CEO and you need to delegate.
For me, the idea of automating happened after my business was up and running and I was doing very well. My mentor had opened an office in Las Vegas, and he flew me out there from Nashville to train some people and get that office going.
I ended up staying out there longer than I had anticipated, and I had to start learning how to to run my house flipping business in Nashville when I wasn’t there. Who’s going to go look at the property or going to go meet this person? I was so used to doing everything myself and this forced me to delegate tasks. It was revolutionary for me, changing the way I looked at the business.
Systems in Automating House Flipping
How do you begin automating your house flipping business? Now that you have hired good people, you need to have written, video, or audio instructions showing the people you delegate, exactly what to do and how to do it.
1. Buy It or Make It
You will either have to buy that system from someone like me or make it yourself. I’ve been building my system for Freedom Mentor for over fifteen years. It is what I would consider the most sophisticated system ever invented in the history of this industry. It’s so thick and detailed that some of my apprentices that have been with me a year still haven’t gone through everything.
You must have a documented system that you can plug people into. If you are going to make it, you must document in detail everything you do and how you do it. Then you need to make it dummy proof. This is because the people you work with aren’t always going to understand how you communicate what you communicate.
2. Use Tools to Simplify
Software can play a role in automating house flipping by simplifying certain tasks within the system you have. A software that I absolutely love is called PropStream. This software is a data aggregator that simplifies and speeds up the process of getting information about a property. It has other tools in it as well, but that’s the one that I use the most.
These are great tools, but it’s not only software that are tools. There are other things that can be tools as well. For example, contractors that you never have to babysit. It’s great when you have worked with them for so long that they already know what you want and how you want it. I have this kind of working relationship with my contractors. It’s amazing how much they accomplished without ever talking to me because we’ve worked together for so many years.
3. Hire Slowly, Fire Quickly
Within your system, you will need a system for hiring and firing. Most likely you will have an assistant or two, and possibly more employees in your organization at a later point. This requires you to have an employment policy. I’m going to give you an important tip; hire slowly. You can do this by having them start with just a couple of hours a week, testing them out on one thing at a time. Tread lightly in the beginning and don’t give them too much responsibility yet.
If they impress you, give them more responsibility. If they continue to impress you, give even more. If there’s a problem, fire as quickly as you can. You might be pushing back and think this attitude is unchristian of me and that you don’t want to fire anybody. However, the truth is you will need to. If you are going to be a CEO, then you will need to fire some people occasionally. There are bad seeds out there and you need to get them out of your organization as quickly as possible because a good seed is just around the corner.
4. Focus Your Energy
This is the next key point as we talk about systems, because you can build a great system but then fail in this area. In the movie The Founder, the McDonald’s brothers (founders of the McDonald’s fast food empire) invent the fast food model. One of the most amazing parts of the story is how it all happened. They had a long list of items on their menu, and when studying the results they discovered that over 80% of their sales came from just a few menu items. Burgers, french fries, and milkshakes.
With these results in mind, they simplified their menu. The idea was to only serve a few things, be better at those few things and serve them faster. They got to the point where they were serving a burger and french fries in thirty seconds, which was monumental for the time.
The same thing holds true with you and house flipping. Real estate is a vast expanse of deals you could be doing. What do you do when someone calls you looking for buyers for 80 acres of raw commercial land at a busy intersection across from a retail development? Do you start making phone calls for weeks to try to make something happen because it’s a big deal? I know lots of investors do that, however that’s not focusing your efforts.
Focus on Deals that Make the Most Money
Single family homes are the most liquid because they have the most investor and retail buyers. There’s also so much you can do with a single family home versus a high rise condo or vacant land. You need to focus your energies because when you do that, you apply so much more power to that which makes the most money.
Focus on the hot knife through butter kind of deals, and avoid the ones that are going to be a complete train wreck. You will still be able to make money on the deals you don’t do by referring them to someone else and making a referral fee. The key is to get the right system in place and the tools to simplify things as much as possible, then focus your efforts and don’t be chasing rainbows.
Aspects of Automating House Flipping
Now that we have the right mindset and a working system in place, I’m going to break down particular aspects of house flipping. I will also give you tips on how to automate every one of those aspects and make these more efficient.
1. Lead Generation
When you first start off in real estate investing you are on a tight budget, so you’re doing lead generation the most manual way possible. You’re knocking on doors and outbound calling. At some point you will need to get to where you can pay for advertising platforms to do the lead generation work for you.
I pay for lead generation in all the different businesses I own. The mentality that building a business is about organic rankings and referrals isn’t accurate. You need to pay for marketing if you are going to be in business, and that’s a good thing because it’s an automation piece. I’m not hiring people to lick stamps or put out signs. It’s all very automated; except I do monitor it, making sure everything is in line and make any needed adjustments.
2. Qualifying Leads
You should have an assistant do all the qualifying and talking to the sellers for you. These responsibilities are perfectly suited for the role of an assistant, and it’s what my assistant does.
3. Due Diligence
This is another area where an assistant can play a role. This includes doing a title search to get your title company or verifying the inspector you’re hiring. I have my assistant performing various tasks for me like pulling public records for code violations and such. I’ve taught her exactly how to pull comps and my assistant is as good as anyone at determining what a house is going to sell for.
4. Deal Creation
This is where I step in, look at the property, meet with the sellers, and get it under contract. Granted, this might be the last time I meet with them. I learned this tip from an agent when I was first getting started in real estate investing.
I had a house I was trying to flip listed it on MLS and it didn’t sell. I wanted to hire an agent and I reached out to the top agent in the area. She had a lot of employees and I kept talking to assistants and was never able to speak to her. Eventually, I spoke to her and met with her at the property to do the listing agreement. I showed her what was going on, we signed a listing agreement and I never heard from her again.
I strategize based on the research gathered by my assistant. I put together the deal, speak with the seller, meet them at the house and get it under contract. That’s really the most important role I play in the entire transaction.
Through the years I have personally worked with several title companies, and literally hundreds with my apprentices. I have learned that it is critical you find a great title company or closing attorney. Lots of title companies are good with retail agents but don’t work well with investors. You need to find the right closing team because that will make this job insanely easy.
My closing people are fantastic. I don’t even go into their office to sign. Instead my assistant comes to my office. She acts as the notary, then I sign, and it’s brought to the closing office. It’s automated and efficient.
6. Exit Strategy
We automate flipping our properties by only listing them on the MLS. It’s true that when you list a property on the MLS, you must pay a buyer’s agent upwards of two to three percent. However, that’s part of my automating house flipping strategy. I need it to be more like a machine, so just like I pay for leads, I’m paying to find the buyer.
By not doing the lead work, leg work, and selling work yourself, you will make less money on a per deal basis. However, the advantage is you have more time, and that extra time gives you the ability to do more deals and make more money. By giving up a little bit of money in each of these steps, you’re creating automation and valuable time.
Some of you are renovating houses and not just selling them as is and that is part of your exit strategy. I have a video on how to find great contractors, which helps you solve all your rehab problems. You need a great contracting team. Great electrician, plumber, HVAC, and great overall kind of general handyman. I have a fantastic team that I’ve worked with for many years.
They say I’m their best client because I pay them the same day they send the invoice. They’ve never worked with anybody who does that. I could probably be more cutthroat and find some other contractors. However, I want automation, so I pay a little more for better contractors I don’t have to babysit and I keep my people happy.
One aspect I don’t automate is bill paying. It does take time each week for me to pay people, but I like to be the only one in the operation who can send thousands of dollars to other people. There are certain things I like to hold on to. I go through all my QuickBooks with my bookkeepers every month for all my different businesses. I like to stay close to the money, because if you watch the pennies, the dollars will take care of themselves. That said, you can automate that as well and have bookkeepers use software like QuickBooks and do all the finances for you.
Make More Money with Less Time and Energy
Just to clarify, I’m not suggesting that you can completely automate house flipping. However, I do thing that you can automate house flipping so that it is about the same amount of work as a rental. In fact, I have a great video that I recommend you watch called Flipping vs Renting Houses. In it I talk about the pros and cons of both. There’s a little work to be done here, but when you get every aspect of this operation set up, as I’ve described here, you free up your time to do more deals and you’re making more money.