Show Summary
Dan Schwartz, Mr. Automation himself, joins us today to talk about how to automate your real estate investing business. We also take a deep dive into how to not over-automate your business, and how to go about building your team, based on your personal strengths and passions. Great show…don’t miss it!
Highlights of this show
- Meet Dan Schwartz, real estate investor and automation expert.
- Join the conversation about the necessary skills you’ll need before you’re able to start outsourcing and automating your business.
- Learn as Dan discusses how to build your team.
- Listen in as we discuss the real threat of over automating your business.
Resources and Links from this show:
Listen to the Audio Version of this Episode
FlipNerd Show Transcript:
Mike: Hey, everyone. It’s Mike Hambright with FlipNerd.com. Thanks for joining us for this episode of the Expert Interview Show. That is episode number 292 with Dan Schwartz. In this show, I interview leaders and entrepreneurs from across the real estate investing industry and if you are a member of FlipNerd.com already, hey, great to see you and if you are not a member, go on over to FlipNerd.com. You can get a free membership in literally about 15 or 20 seconds.
So again, this is episode 292 with Dan Schwartz. Dan is a real estate investor. He’s an automation expert. Dan’s got a lot of stuff going on these days and a lot of people are excited about what he’s working on. And he’s a real life rock star. Dan is also in a rock band.
Dan: [inaudible 00:00:44] Mike: So we’ll let him tell us a little bit more about that. So Dan, how are you doing today, my friend?
Dan: Doing great. Thanks for having me, Mike.
Mike: That’s right. You are in a rock band, right? Or you were?
Dan: I used to be in a rock band. Used to be. I was in a rock band. I realized that I couldn’t have it all and went the real estate path instead.
Mike: That’s funny. I don’t know if I told this story on the show before, but I used to have a Google Alert a long time ago when I started fooling with Google Alerts. I setup Mike Hambright as a Google Alert, thinking, hey, if anybody says my name, I want to know about it. It turns out there is another Mike Hambright that was in a rock band and he was a lot cooler than me. So all these notices are about like rock star-type stuff and I was like, “Okay, I don’t need to see this anymore. Remove that alert.”
Dan: You’re a rock star in your own right, Mike.
Mike: Yeah. My grandma loves me. Hey, man, tell us a little bit about you.
Dan: Yeah. So I guess we can kind of rewind to 2010. I had just graduated from college with a degree in marketing from the University of Maryland, go Terps, and I had gotten into real estate basically because I decided I didn’t want to get a job. I figured the best way to avoid the rat race was just to not get in it at all because I know that you can get trapped. Once you have a job, then it’s hard to get out of the job. So I sort of saw that path in front of me and I just chose to completely avoid that path. I’m so glad I did because this led to where I am today.
I went to a “Rich Dad, Poor Dad,” one of those free seminars they pitch. I went with my dad, actually, and he was also interested in real estate. He’s had his license for a long time, not practicing. But we’ve had real estate in the family for a couple generations. But “Rich Dad, Poor Dad” kind of gave me the idea for assignments. I did some research in my own market, “Is this possible? Is this a real thing? Could I actually make $9,000 just flipping paper?”
That led to me finding my business partner, Mike Casey, who is a great real estate mind. He just needed organizational help. He needed a marketing mind like myself to make it a business. So we created Equity Merchants in Baltimore and since then, we’ve done well over 100 deals. I feel like I’ve been saying 100 deals for a while now, so it’s probably more than that at this point.
Throughout that whole process, I was also touring in this band that we had started in college in 2007. It was a funk band called Pigeons Playing Ping Pong. You won’t forget that name.
Mike: No.
Dan: I played drums for this band. Loved it. I loved performing. I loved playing the drums. I loved the music we were playing, just really dancy, funky music for people. We just consistently kept gigging around the DC/Baltimore area and kind of grew a little flock, as we call them, of fans and it kind of just blossomed out into a national touring act playing over 180 shows a year just through grassroots building fans one at a time and recording albums and writing music.
So I was living that lifestyle while simultaneously flipping houses. I absolutely thought that I could be a real estate rock star. I thought that I could have money and be a musician, which isn’t something that comes together in the land of music these days.
Mike: Right.
Dan: So I was fortunate enough to have the energy somehow to be able to do that. But I realized that I was spreading myself too thin and I was sort of doing both activities half-assed. I needed to figure out a way to systemize my real estate business so that I could keep doing what I love, which is music and performing and all of that stuff, exercising my creative mind while also having a system that manages my team and kind of automates the processes that would usually involve me.
That led to Podio. I discovered Podio through Joe McCall and a couple other people who were just sort of mentioning it in passing a couple years ago. Since then, Podio has kind of blown up as the go-to CRM. Investors love it because you can design the way you execute deals. Rather than just having a repository for information about a lead or a deal, now you can actually design how you’re going to get the deal done from point A to point B and automate a lot of the process along the way and a lot of the communication follow up along the way.
So I sort of took a fascination to that, purely out of circumstance from touring.
Mike: That’s awesome. You were forced into a situation where you had to get automated and streamlined.
Dan: Yeah. I absolutely did. I also started showing other investors that I was doing that. After the 20th person said, “Hey, can you do this for me on my Podio workspace?” I knew that in order to deliver the most possible value, I had to scale this company and create a service around it. This was actually after I decided to leave the band. I decided to leave at the end of 2014, mainly because I wanted to live a healthier lifestyle and be in more control of my time and I knew that if I went all-in mentally on one thing and had the freedom of time, then it would serve the world in a bigger way than if I had split my focus.
Mike: Yeah. Awesome. I’m not sure if I said it up front, those of you listening, we’re obviously going to be talking about automation, how to become a better entrepreneur through automation and systems. Dan’s an expert there.
For those of you that have been listening to our show and how we kind of changed the format in 2016, we break the show apart into two segments. So part one is kind of the skills to focus on in your automation, the skills you need to have and then part two we’re going to talk about how to build out your team and how to get some of the things that you’re not good at it off your plate and install some automation there.
So Dan, let’s kind of jump into the skills section here, part one, talking about skills that people need to have and some of the areas where they may know that they have a weakness that they need to fill.
Dan: Right. Yeah. So you want to design your business so that you’re focusing on your highest and best use, obviously, which is a vague thing to say, but generally speaking, as an entrepreneur, there are a couple of things that you need to focus on and that’s basically improving and building your skills.
Some of the skills that are basically necessary . . . Mike, you can feel free to add to this list, but the first kind of foundational skill you need to have is just your mindset and in general, an abundance mentality.
The one thing, it’s like the biggest thing that’s holding most people back that I’ve talked to is the limiting belief that they’re not deserving of doing a deal making $9,000 or they’re not deserving of bringing a team around them to do things they should be doing or just in general the way that they talk to themselves, “I couldn’t do that. I don’t have enough time to do that. I can’t do that. I shouldn’t do that,” the language patterns people have. It’s a skill to try to shift the way you think about things and focus more on how you can create stuff rather than resist stuff in your brain.
Once you cultivate an abundant mentality, as they call it, you’ll have an easier time executing deals because you know it’s possible. You have the belief in your mind that it’s possible to do this business. So that’s the first thing you should focus on is mindset. That’s the foundation. Everybody talks about that.
But then kind of branching out more specifically for real estate, interpersonal skills. As a business owner, you need to be able to talk to sellers. You need to understand how to build rapport with sellers and buyers and how to come across in an authentic way for people, being open and transparent about the deals and what it is that you have to offer and learning how to negotiate and sales, sales and marketing.
So interpersonal skills as it relates to sales and marketing I think are very key elements to being an entrepreneur. Those are skills that you should absolutely focus on learning, read books on the subject, practice it, practice talking to sellers. That’s another skill.
Mike: That’s a key one, yeah. I think it will be interesting to see where you go with automation. That’s probably in my experience one of the harder things to automate and outsource.
Dan: Absolutely.
Mike: It’s hard as a business owner, like I’m the relationship guy or the sales guy or the person that’s the face of my company where that’s a hard one to outsource. So it will be interesting to see where we go with that one.
Dan: Absolutely. There are simply some things that you can’t automate in the business. Generally speaking, it’s the interpersonal, it’s relationship parts of this business that you can’t outsource. But you can delegate and we’ll talk about that in a little bit.
Mike: Yeah. Awesome.
Dan: And then another skill that I believe is the definition of being an entrepreneur is the ability to create a system that serves other people without your direct involvement. Figuring out how to design a system that doesn’t include you as part of the system is the biggest challenge of being an entrepreneur and is definitely a skill. Every aspect of that process is a skill that needs to be harnessed and practice every day.
You need tools and systems in your business in order to remove yourself from the things that you know you shouldn’t be doing because you’re not the best at them and it’s a skill to see those things in general. So systems implementation is an essential skill. I have a good blog post that kind of dives into all these skills as well that people can check out InvestorFuse.com/Skills. So you could put that in the show notes.
Mike: Yeah.
Dan: Lastly, the ability to analyze properties is by far the thing that you need to be good at no matter what role you have in the company.
Mike: Yeah.
Dan: Getting something under contract for too high is the worst thing you can do. That’s how you’re going to lose money. You need to be able to accurately estimate rehabs. If you can’t accurately estimate rehabs, you need to be working with someone on your team that can. That’s an essential part of the business.
Then once you have that rehab number, you need to be totally sure about the comps in that area. You need to double check to make sure the property has comps and the ARV, the asking price is absolutely justifiable when you send it out. Literally every wholesaler, not every wholesaler, but the majority of wholesalers are going to sense that [inaudible 00:12:03] too much. That’s just a fact.
So you want to stand out from the crowd and be spot on with your numbers and don’t get something under contract unless you’ve crossed your T’s and dotted your I’s and made sure you’re getting it for the right price.
Mike: Yeah. So Dan, maybe you can take a minute to talk about in your own businesses. I know there are some folks that focus on automation and getting themselves out to the point that they don’t talk to buyers, they don’t talk to sellers, they don’t do anything, which for me, I’m kind of classically trained to sit on the couch at the kitchen table and talk to people. So there are kind of those two dichotomies. I know some people who have automated it and they have virtual assistants making offers and negotiating and all this stuff. After I kind of learn a little bit more about them, they typically have a much lower close rate because there’s just some stuff that falls through the cracks. But maybe for them it’s like, “Well, but I didn’t have to do anything, so that’s okay.”
Dan: Right.
Mike: So there are ways to justify some of the drawbacks of automation. Can you talk a little bit about your beliefs about how much you can outsource those things? Let’s say automate. I know we’re going to talk a little bit about . . . automation doesn’t necessarily mean there’s a system that does it and there’s no humans involved. It means you have partners or other people that kind of handle those things. But could you talk a little bit about the big things like buying and selling, how much automation you do and maybe what your thought is on if there is a way to over-automate there?
Dan: Well, I think the biggest thing you need to figure out is what you’re going to outsource and what you’re going to automate and then what are you going to keep for yourself. So obviously every day you want to be doing stuff that you love and you want to be doing stuff that you’re good at.
Generally speaking, when you do stuff that you’re good at, you get in a flow state and you feel good about it and you do an even better job. If you just focus on doing what you’re really good at, then your company is going to thrive. If you focus on trying to do it all, then you’re not really in business and you’re not also going to have as much fun as you could.
So figuring out what to outsource is probably the first step. Generally speaking for me, I’m not I would say passionate about real estate, per se. I’m in the real estate profession, but I think I’m more passionate about the entrepreneurial side of this business and building a business and building a team around the value that I happen to be delivering, which is undervalued real estate.
But I think for most people it’s different. Most people might love talking with people. They might love negotiating and haggling with buyers versus sellers or vice versa or they might like that interplay between trying to get something under contract with the seller or working with wholesalers.
They might like doing the due diligence part and analyzing deals and not talking with anybody. Or they might love just doing the books, balancing the books, making sure that everybody comes to closing on time. You have to know what you enjoy doing the most. Generally speaking, the only way to do that is try everything once and take mental note of what you enjoy doing the most and what had the best results.
There’s also, just operationally speaking, we tend to automate the lower-level tasks and prioritize the higher level tasks. You can kind of equate that to the dollar per hour amount of that task. So I created a chart that kind of breaks down like $5 per hour tasks and then on the right side, $10,000 per hour tasks, which is an exaggeration, but some tasks that actually you focus on and spend time on could actually be generating $10,000 per hour.
Mike: Yeah. Making offers and selling houses. Yeah.
Dan: Exactly. So like $5 per hour tasks would be talking to every single lead, whether they’re unqualified or not, pre-screening the lead is something that is not a $10,000 per hour task. It’s a $5 to $10 per hour task. Cold calling prospects, posting stuff to Craigslist. And then you kind of move up that ladder where $100 per hour tasks are more stuff like managing your PPC campaign or following up with leads or creating reports based on the data from your marketing and marketing reports.
Then $1,000 per hour tasks would be negotiating with qualified leads, talking to motivated sellers, delegating, managing your team or networking with competition, networking with your cash buyers and other wholesalers. So you want to be focusing on that type of stuff.
Then even higher above that, you want to be focusing on higher rock star team members that you wouldn’t be able to do your business without, establishing value and cultures and designing systems that you can plug these people in so literally you can remove yourself from the acquisition side of the business, for instance. It’s totally possible to do that. Negotiating major deals, deals that need your intervention because you’re pretty good at negotiating, you need to step in and do that because that’s high level stuff, or educating yourself. Stuff like that is what you want to focus on.
Then you want to automate the rest. Automation is a combination of using technology, like a CRM system like Podio that actually does some of the stuff for you like managing your database. It used to be something that you had to hire a VA for. Now it’s not something you need a VA for because Podio manages itself if you have it setup properly.
And then I lost my train of thought there, but generally speaking, automation technology-wise is basically following up with leads, communicating with leads, setting tasks to remind yourself to do things for specific processes.
Mike: Or reminding somebody to do things, right?
Dan: Or reminding somebody to do things, exactly. Automation is also outsourcing. If you’re not actually physically doing it, you can consider it automated, but you just depend on some sort of human input to get it done.
Mike: Absolutely. Alright, Dan, let’s dive into the taking action part. Are you ready to tell us how to take some action?
Dan: Let’s do it.
Mike: We talked a lot about automation. It’s interesting for me because I’ve heard a few people talk about this recently. It’s intuitive now, but you can say automation is not necessarily a system doing things, but it’s having people to do some of those things and sometimes you can over-systematize. Tell us your thoughts on . . . we’re going talk about building a team here. What do you think?
Dan: Yeah. We can talk about building a team for the purpose of acquiring real estate, absolutely. We can even use a wholesaling business model to give you a frame of reference of how you can apply this for your own business.
Mike: Yeah. Absolutely. That’s the kind of foundation of real estate investing business is wholesaling anyway. So let’s jump in there.
Dan: Yeah. So I guess we should preface this by saying that you obviously can’t do everything yourself, right?
Mike: As much as people try.
Dan: As much as people try, you have to get creative, even if you don’t have enough money to hire someone, you need to setup the compensation structures in order to bring on a team that believes in your vision and that can execute stuff that you would be not serving your business well doing.
So at this point, you know what you’re good at. For my sake, I’m not the best at negotiating with sellers. I’m not the best at dealing with buyers. I’ve done all of this in my career and I don’t enjoy that part of it. I’d rather focus on bringing other people in that love doing that stuff and then building up, like pumping the business with resources so these people can thrive. So you need to figure out what you’re good at and you need to outsource for your weaknesses.
So for the purpose of this, you should, for the first thing, the first person you want to hire is going to be an office manager. This is going to be somebody that is the bookend for every single deal. They’re talking to all the leads that come through. At this point, you have so many leads coming into your business that you couldn’t possibly handle them all. You need to be focusing on talking to the most motivated people.
So obviously you need an opportunity filter. That isn’t something you can automate. Absolutely you automate the process of getting leads into a database like Podio. At that point, you need to bring in an office manager to kind of filter out and weed through all these leads so that you can focus on the leads that are actually going to make you the most money.
Mike: Sure.
Dan: And you need to have a process in place for all those other leads. Like the dead leads need to be automatically triggered to follow up with in six months, for instance. The cold leads, you need to send an offer for basically every lead that is cold that doesn’t require an appointment, you just want to send them an offer. The more offers you make, the more chances you have of getting something under contract.
Mike: Okay.
Dan: That’s step one. So you need to have a process and a system for your office manager to effectively process all of your incoming leads. So the most essential thing you need to focus on is, one, you need to hire a rock star office manager. So things to look for. You want like a very detail-oriented, very diligent, organized, really good at talking to people in a friendly way, not necessarily the most like real estate savvy or they don’t need to be like sharks on the phone, like negotiating sharks.
They need to be very friendly, secretarial and they need to be good at paperwork. You do need to train them for a base level, how to do quick analysis just for the sake of writing offers for these cold leads because they’re going to be the ones that write offers for all the cold leads as well.
Mike: Okay.
Dan: They’re also once we talk about some other team members, they’re going to be responsible for keeping everybody organized. So they’re going to be in the office answering phones, managing your database and just sort of keeping you on track doing what it is that you’re supposed to be doing in this business, which is doing deals.
Mike: Yeah. A lot of successful real estate investors that I know of are kind of that high energy, can’t slow down, want to always be running around. But you need somebody to rein you in and help things stay organized because they have a tendency to not be the most organized people.
Dan: Right. And you want to give the office manager a nice framework to work inside of and obviously Podio is the best possible framework you can give them to work in because it’s based on lead management. It’s just lead management is what happens in Podio and you need to have a very clear set of tasks that occur for every single lead that comes in and you need to be responsible for setting that up and then finding a good office manager. It could be a VA.
You could use a service like VAEasyButton.com. These are real estate-trained virtual assistants, great, English speaking. They’ve gone through the ringer as far as real estate training. They know how to pull comps, they know how to do all the stuff you’ll need them to do. That’s a good place to start, sending them an email, VAEasyButton.com. And then you want to basically get the leads coming and having them work through the leads.
So at this point, you’ve already taken a lot off your plate. You’ve kind of taken some of those $5 to $10 per hour tasks off your plate, so you can focus more on the right side of that chart I referenced earlier where you can focus on hiring more people, designing marketing plans. Getting the phone ringing, negotiating with qualified leads, not unqualified leads.
Mike: Yeah.
Dan: And this is the process of entrepreneurship, sort of figuring out how you can only be doing the high-level stuff and then still have the stuff that needs to get done to execute what it is your business is trying to do, but not have you be involved. So the next step is to bring out an acquisitions manager. So you have your office manager in place. They’re filtering all the leads. You’re overseeing this process and you’re continually improving the lead process that this person is working in.
So then you have an acquisitions manager. They’re just in charge of getting things signed, getting contracts signed with sellers. They’re the ones that your office manager is going to set an appointment for all hot leads. They’re going to go out and meet the seller or they’re going to build a rapport before meeting the seller, after meeting the seller. They’re going to make the verbal offer. They’re going to get things under contract. That’s their full time focus, just getting stuff under contract.
Mike: Right.
Dan: They should be proactively networking for deals in any way they can. They should be researching on the MLS, networking with realtors trying to get those pocket listings, contacting other wholesalers, any way that they can get a deal under contract and partner with a cold wholesaler, that is the full-time job of the acquisitions manager. That is something that you could spend your full day doing, right?
Mike: Sure, absolutely.
Dan: It’s crazy to think that you can do all of that and talk with every single lead and network with cash buyers and do the taxes.
Mike: Raise money, all of that.
Dan: [inaudible 00:25:55] Mike: Yeah.
Dan: It’s ridiculous.
Mike: Why don’t you talk about what some of these . . . Well, I’ll let you keep going. I have a couple questions for you that I want to ask about, how you, just to get your take on it, how you built out a team. Real estate investing is one of those areas where you have a tendency to have people on your team that overtime start to say, “I’m the one doing all the work. Why am I not getting paid more? I’m just going to go do this on my own or whatever.”
Most of those folks that you talked about so far would potentially struggle to get the systems in place and build out kind of the ship, if you will, and they may struggle. Why don’t you share your thoughts, because you’ve done this successfully, your thoughts on how to build a team that is sustainable and is not always about compensation level?
People that are really good on the acquisition side tend to be entrepreneurial and lone wolfs and want to do their own thing anyway, which is part of what makes them good, but why don’t you share your thoughts on how to maintain that right person?
Dan: If you do see yourself in the role of a business owner and you’re not the one that’s going to be negotiating with the sellers, the you need to focus on building a company culture within your team so that it’s not something that they’re going to want to leave and that there’s no over lapping roles. Everybody is very clear on what it is they should be doing and everybody is totally aware of what everyone else is supposed to be doing.
So that, I think, the first thing is creating, establishing this culture of weekly meetings and motivation and keeping everything afloat. It’s kind of a limiting belief if you hire someone thinking that they’re going to leave you and start their own business or whatever because you’re the person that created this awesome foundation. You put everything together, you built the system, you funded the marketing, you brought these people together. But I think mainly you need to interview a lot of people and you need to use your gut. You can’t just hire the first person you interview.
Mike: No, yeah. Almost never.
Dan: Almost never. But when I was first starting out and we had too many leads to handle to the point where I was like, “I just need somebody to handle these leads.” We interviewed like two people and hired one of them. Obviously it didn’t work out.
You need to interview 10 people and then whoever you feel in your gut is like, “Wow, I would love to work with that person. They are amazingly diligent and talented and I can see them going far with us.” That’s the person you need to hire for. Don’t like skimp on how many interviews you do. That’s like the key. It’s very, very [inaudible 00:28:50] Mike: You can automate that. I will say we have a recruiting app and workspace built out inside of Podio ourselves where we have people take a personality profile. They have to do all these different things to jump through the hoops and then we effectively kind of weed them out that way. You can even have automation inside your processes for hiring people to automate things too.
Dan: Absolutely. When you get to a company like that size, you definitely need a recruiting process, for sure.
Mike: Yeah. Even if you’re small, though, you don’t want to have 100 or 200 administrative folks that have sent you their email via Craigslist. It’s a mess to manage.
Dan: It is. Do you have a book that you can recommend for interviewing and finding talent?
Mike: There is a book. I cannot think of the name. You’re catching me off-guard here. It’s the top-grading process, where it kind of tells you exactly, “These are the questions to ask.” Phase one is the super-fast phone interview. It might just be like 10 minutes. Phase two is interviewing in-person. But you have very specific things that you ask. Personally, my tendency in the past has been to do all the talking. I’m trying to sell them on the job and it’s like you just have to shut up and let people talk and ask open ended questions and see how they respond.
Dan: That’s true. I think top-grading is sort of an intimidating process for most people though because there are like 10 things you need to do. You need to run them through these personality tests and stuff. I’m more of a go with your gut kind of guy. The best way generally is to get them working on some leads for free, just have them as a sample run. Try them out, see how it’s like to actually work with them on a couple deals.
Mike: Yeah. That’s a good idea.
Dan: Instead of just basing it off their personality test results.
Mike: Right.
Dan: You know what I mean? And then just going with your gut like, “Wow. They were really responsive on this lead and they were super-friendly on the phone. I listened to the recordings. I can see this person doing really well in that role.” That’s who you need to hire.
Mike: Yeah. Awesome. So we talked about office manager and acquisitions manager. Are you kind of saying here as you expand these are the typical roles that you would start to fill out?
Dan: Yeah. It’s sort of breaking your business down into different departments. So you have acquisitions, marketing, administrative, like your office manager and then you have sales, which is going to be the next person you hire for, someone to handle the cash buyers and the dispersion of all your contracts.
So the person is responsible for showing the property, marketing the property, taking pictures of it, getting it in a lockbox, sending it out to the buyers, networking with all the realtors that might have comps in that area and their job is to put pen and paper for buyers.
Mike: Yeah.
Dan: And vet any new buyers, do buyer marketing. They need to sort of be the face of the investor scene. They need to go to all the REIA meetings. They need to network with as many people as possible. They need to network with realtors. I found generally that realtors are actually great in this role because they’re used to selling properties. They might even have a lot of cash buyers in their sleeve that they can contribute.
Mike: Sure. That’s the sort of person that posts their wholesale deals on FlipNerd.com, right?
Dan: Yeah. Exactly. That’s the person that’s going to be posting the deals on FlipNerd.
Mike: Yeah.
Dan: So that’s the person you want to hire for. That right there is a full time job as well, networking and constantly talking with cash buyers and doing all of that is a full-time . . . in order to do that effectively, you need to be doing it full time. Again, you can’t do it all. So that’s the next person you have to bring on. And then a bonus person you can hire is a prospecting or research VA.
Mike: Okay.
Dan: This is like a VA just for researching lists. Like in Baltimore, I used to have a VA research the code violation lists on our city website, probate. They would look up to see the recent probate records and then see if they had any real estate in their name and if they died within the last months and they had real estate in their name, then they would go on the list.
So they did a lot of online research to make sure we weren’t marketing to the wrong people. That’s clearly something you don’t want to do. That’s a $5 to $10 an hour online researching task. If you’re doing that all day, you’re not doing deals. But it is something . . . it’s like step one to doing a deal.
Mike: Yeah.
Dan: So basically that person is a prospector. You could also have them researching the MLS every day. I call it just your prospector role, prospecting VA. They’re going to take existing opportunities, tried to dig for existing opportunities and then funnel them into your system for your office manager to process just like a regular inbound lead.
Mike: Right.
Dan: Going on Craigslist, Zillow, calling up landlords on GoSection8.com and seeing if they’re trying to sell, stuff like that, a lot of outbound marketing as something they could do. If you have someone doing that full time, that can absolutely pay for itself. We can actually double back and talk about compensation real quick.
Mike: Sure. That would be great.
Dan: I know a lot of people might not have the funds to put someone on salary, for instance. Well, luckily in real estate, you make enough money per deal that a commission structure is generally a motivation and incentive for people to perform.
Mike: Sure.
Dan: So I would actually for the office manager, I would give them a stipend of like $1,000 to $2,000 per month to start, just for basic living expenses and just to compensate them for their time. Then I would setup a sliding scale based on how many deals you close or how many contracts you get. That could be anything from $300 per deal for the first two deals and then as you do more deals, they get paid more per deal. Something like that.
You can be as creative as you want with that, but a sliding scale commission structure on a per-deal basis, not a percentage basis I think is the best way to do that for the office manager since they’re not really associated with the negotiation part of it.
Mike: Right.
Dan: So your acquisitions person who is in charge of getting it for the lowest price, that person needs to be on a commission structure, so typically 10 to 15% commission for your acquisitions person. For every contract that closes, they get 15%. And then for your property sales person, obviously that’s another commission structure because they’re trying to sell it for the maximum price.
So you need incentive them for seeing it for the most they possibly can and selling as many as they possible can. So just like the acquisitions person, you could spend 10 to 15% commission per deal for them.
And there’s a good quite by John D. Rockefeller that, “I would rather earn 1% off of 100 people’s efforts than 100% of my own effort.” So if you think of it that way, it kind of makes sense. 100% of your own efforts is never going to work. So you need to focus here.
Mike: It’s hard to scale that.
Dan: It’s hard to scale yourself. It’s way easier to scale a group of people and a system.
Mike: Absolutely. Dan, can you talk for a couple minutes about over-automation in this context . . . so to be honest, I run into this problem all the time with myself. We are pretty proficient at building systems, but then if something breaks, a lot of the people that you talked about here for example will have no idea how to fix that or maybe not even know that it’s broken.
So the owner of the company, whoever setup those processes or setup that automation is always the IT person, if you will, that has to fix those things or when things break. That’s a real struggle for, I think, a lot of people.
Dan: Yeah. Well, first of all, you want to have somebody, like a vendor that you work with, that is in charge of your IT stuff. You’re not going to need like a full-time IT person, but also I think a lot of entrepreneurs spend too much time trying to automate everything. But you should really just focus on automating the most essential things.
Just off the top of my head, you should be automating your follow up. That could be as simple as a reminder for someone to call someone back at a certain time or it could be as advanced as setting up an auto responder sequence that keeps in touch with warm leads that previously had rejected your offer, for instance. You need to have a system in place for that.
So follow up because 90% of all leads eventually will want to sell their house if you follow up with them long enough, right?
Mike: Right.
Dan: Marketing is another thing you want to automate. You need to consistently be bringing in leads. Generally, anything you need to do on a repeating process needs to be automated. So follow-up, marketing, and due diligence is another thing that you want to make it as easy as possible for someone to do quickly. Those are all things that I built into my Podio systems to make it easier.
All the other things, like creating offers and generating PDFs and moving one thing from this app to another app in Podio and having Zappier.com sent a handwritten note to the seller after . . . people go overboard on the automation. You have to just focus on what matters the most and try to setup a system where you can create offers, write as many offers as you can and your marketing just has consistent phone calls coming in.
Mike: Yeah. Awesome, Dan. Well, thanks so much for your time today, appreciate it. If folks want to learn more about what you’ve got going on, where should they go?
Dan: You can check out the InvestorFuse system, which is the automated Podio workspace that we are selling on a monthly membership. It basically does everything that I talked about on this interview. Go to InvestorFuse.com.
If you want a more detailed explanation and like a mind map breakdown of all those positions I talked about, you can go to InvestorFuse.com/team. Right now, we currently don’t have any more seats available for the InvestorFuse workspace.
Mike: [inaudible 00:39:37] a big launch. Yeah.
Dan: By the time this is released, we’ll have it available for more people. Check it out.
Mike: Yeah. Awesome. Dan, hey, thanks so much for spending some time with us today. I appreciate you sharing your knowledge.
Dan: Yeah. No problem. Thanks for having me and letting me jabber away.
Mike: Absolutely. Good luck with everything and great to see you, my friend.
Dan: Thanks, Mike. Have a good one.
Mike: All right. Bye, bye.
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So again, this is episode 292 with Dan Schwartz. Dan is a real estate investor. He’s an automation expert. Dan’s got a lot of stuff going on these days and a lot of people are excited about what he’s working on. And he’s a real life rock star. Dan is also in a rock band.
Dan: [inaudible 00:00:44] Mike: So we’ll let him tell us a little bit more about that. So Dan, how are you doing today, my friend?
Dan: Doing great. Thanks for having me, Mike.
Mike: That’s right. You are in a rock band, right? Or you were?
Dan: I used to be in a rock band. Used to be. I was in a rock band. I realized that I couldn’t have it all and went the real estate path instead.
Mike: That’s funny. I don’t know if I told this story on the show before, but I used to have a Google Alert a long time ago when I started fooling with Google Alerts. I setup Mike Hambright as a Google Alert, thinking, hey, if anybody says my name, I want to know about it. It turns out there is another Mike Hambright that was in a rock band and he was a lot cooler than me. So all these notices are about like rock star-type stuff and I was like, “Okay, I don’t need to see this anymore. Remove that alert.”
Dan: You’re a rock star in your own right, Mike.
Mike: Yeah. My grandma loves me. Hey, man, tell us a little bit about you.
Dan: Yeah. So I guess we can kind of rewind to 2010. I had just graduated from college with a degree in marketing from the University of Maryland, go Terps, and I had gotten into real estate basically because I decided I didn’t want to get a job. I figured the best way to avoid the rat race was just to not get in it at all because I know that you can get trapped. Once you have a job, then it’s hard to get out of the job. So I sort of saw that path in front of me and I just chose to completely avoid that path. I’m so glad I did because this led to where I am today.
I went to a “Rich Dad, Poor Dad,” one of those free seminars they pitch. I went with my dad, actually, and he was also interested in real estate. He’s had his license for a long time, not practicing. But we’ve had real estate in the family for a couple generations. But “Rich Dad, Poor Dad” kind of gave me the idea for assignments. I did some research in my own market, “Is this possible? Is this a real thing? Could I actually make $9,000 just flipping paper?”
That led to me finding my business partner, Mike Casey, who is a great real estate mind. He just needed organizational help. He needed a marketing mind like myself to make it a business. So we created Equity Merchants in Baltimore and since then, we’ve done well over 100 deals. I feel like I’ve been saying 100 deals for a while now, so it’s probably more than that at this point.
Throughout that whole process, I was also touring in this band that we had started in college in 2007. It was a funk band called Pigeons Playing Ping Pong. You won’t forget that name.
Mike: No.
Dan: I played drums for this band. Loved it. I loved performing. I loved playing the drums. I loved the music we were playing, just really dancy, funky music for people. We just consistently kept gigging around the DC/Baltimore area and kind of grew a little flock, as we call them, of fans and it kind of just blossomed out into a national touring act playing over 180 shows a year just through grassroots building fans one at a time and recording albums and writing music.
So I was living that lifestyle while simultaneously flipping houses. I absolutely thought that I could be a real estate rock star. I thought that I could have money and be a musician, which isn’t something that comes together in the land of music these days.
Mike: Right.
Dan: So I was fortunate enough to have the energy somehow to be able to do that. But I realized that I was spreading myself too thin and I was sort of doing both activities half-assed. I needed to figure out a way to systemize my real estate business so that I could keep doing what I love, which is music and performing and all of that stuff, exercising my creative mind while also having a system that manages my team and kind of automates the processes that would usually involve me.
That led to Podio. I discovered Podio through Joe McCall and a couple other people who were just sort of mentioning it in passing a couple years ago. Since then, Podio has kind of blown up as the go-to CRM. Investors love it because you can design the way you execute deals. Rather than just having a repository for information about a lead or a deal, now you can actually design how you’re going to get the deal done from point A to point B and automate a lot of the process along the way and a lot of the communication follow up along the way.
So I sort of took a fascination to that, purely out of circumstance from touring.
Mike: That’s awesome. You were forced into a situation where you had to get automated and streamlined.
Dan: Yeah. I absolutely did. I also started showing other investors that I was doing that. After the 20th person said, “Hey, can you do this for me on my Podio workspace?” I knew that in order to deliver the most possible value, I had to scale this company and create a service around it. This was actually after I decided to leave the band. I decided to leave at the end of 2014, mainly because I wanted to live a healthier lifestyle and be in more control of my time and I knew that if I went all-in mentally on one thing and had the freedom of time, then it would serve the world in a bigger way than if I had split my focus.
Mike: Yeah. Awesome. I’m not sure if I said it up front, those of you listening, we’re obviously going to be talking about automation, how to become a better entrepreneur through automation and systems. Dan’s an expert there.
For those of you that have been listening to our show and how we kind of changed the format in 2016, we break the show apart into two segments. So part one is kind of the skills to focus on in your automation, the skills you need to have and then part two we’re going to talk about how to build out your team and how to get some of the things that you’re not good at it off your plate and install some automation there.
So Dan, let’s kind of jump into the skills section here, part one, talking about skills that people need to have and some of the areas where they may know that they have a weakness that they need to fill.
Dan: Right. Yeah. So you want to design your business so that you’re focusing on your highest and best use, obviously, which is a vague thing to say, but generally speaking, as an entrepreneur, there are a couple of things that you need to focus on and that’s basically improving and building your skills.
Some of the skills that are basically necessary . . . Mike, you can feel free to add to this list, but the first kind of foundational skill you need to have is just your mindset and in general, an abundance mentality.
The one thing, it’s like the biggest thing that’s holding most people back that I’ve talked to is the limiting belief that they’re not deserving of doing a deal making $9,000 or they’re not deserving of bringing a team around them to do things they should be doing or just in general the way that they talk to themselves, “I couldn’t do that. I don’t have enough time to do that. I can’t do that. I shouldn’t do that,” the language patterns people have. It’s a skill to try to shift the way you think about things and focus more on how you can create stuff rather than resist stuff in your brain.
Once you cultivate an abundant mentality, as they call it, you’ll have an easier time executing deals because you know it’s possible. You have the belief in your mind that it’s possible to do this business. So that’s the first thing you should focus on is mindset. That’s the foundation. Everybody talks about that.
But then kind of branching out more specifically for real estate, interpersonal skills. As a business owner, you need to be able to talk to sellers. You need to understand how to build rapport with sellers and buyers and how to come across in an authentic way for people, being open and transparent about the deals and what it is that you have to offer and learning how to negotiate and sales, sales and marketing.
So interpersonal skills as it relates to sales and marketing I think are very key elements to being an entrepreneur. Those are skills that you should absolutely focus on learning, read books on the subject, practice it, practice talking to sellers. That’s another skill.
Mike: That’s a key one, yeah. I think it will be interesting to see where you go with automation. That’s probably in my experience one of the harder things to automate and outsource.
Dan: Absolutely.
Mike: It’s hard as a business owner, like I’m the relationship guy or the sales guy or the person that’s the face of my company where that’s a hard one to outsource. So it will be interesting to see where we go with that one.
Dan: Absolutely. There are simply some things that you can’t automate in the business. Generally speaking, it’s the interpersonal, it’s relationship parts of this business that you can’t outsource. But you can delegate and we’ll talk about that in a little bit.
Mike: Yeah. Awesome.
Dan: And then another skill that I believe is the definition of being an entrepreneur is the ability to create a system that serves other people without your direct involvement. Figuring out how to design a system that doesn’t include you as part of the system is the biggest challenge of being an entrepreneur and is definitely a skill. Every aspect of that process is a skill that needs to be harnessed and practice every day.
You need tools and systems in your business in order to remove yourself from the things that you know you shouldn’t be doing because you’re not the best at them and it’s a skill to see those things in general. So systems implementation is an essential skill. I have a good blog post that kind of dives into all these skills as well that people can check out InvestorFuse.com/Skills. So you could put that in the show notes.
Mike: Yeah.
Dan: Lastly, the ability to analyze properties is by far the thing that you need to be good at no matter what role you have in the company.
Mike: Yeah.
Dan: Getting something under contract for too high is the worst thing you can do. That’s how you’re going to lose money. You need to be able to accurately estimate rehabs. If you can’t accurately estimate rehabs, you need to be working with someone on your team that can. That’s an essential part of the business.
Then once you have that rehab number, you need to be totally sure about the comps in that area. You need to double check to make sure the property has comps and the ARV, the asking price is absolutely justifiable when you send it out. Literally every wholesaler, not every wholesaler, but the majority of wholesalers are going to sense that [inaudible 00:12:03] too much. That’s just a fact.
So you want to stand out from the crowd and be spot on with your numbers and don’t get something under contract unless you’ve crossed your T’s and dotted your I’s and made sure you’re getting it for the right price.
Mike: Yeah. So Dan, maybe you can take a minute to talk about in your own businesses. I know there are some folks that focus on automation and getting themselves out to the point that they don’t talk to buyers, they don’t talk to sellers, they don’t do anything, which for me, I’m kind of classically trained to sit on the couch at the kitchen table and talk to people. So there are kind of those two dichotomies. I know some people who have automated it and they have virtual assistants making offers and negotiating and all this stuff. After I kind of learn a little bit more about them, they typically have a much lower close rate because there’s just some stuff that falls through the cracks. But maybe for them it’s like, “Well, but I didn’t have to do anything, so that’s okay.”
Dan: Right.
Mike: So there are ways to justify some of the drawbacks of automation. Can you talk a little bit about your beliefs about how much you can outsource those things? Let’s say automate. I know we’re going to talk a little bit about . . . automation doesn’t necessarily mean there’s a system that does it and there’s no humans involved. It means you have partners or other people that kind of handle those things. But could you talk a little bit about the big things like buying and selling, how much automation you do and maybe what your thought is on if there is a way to over-automate there?
Dan: Well, I think the biggest thing you need to figure out is what you’re going to outsource and what you’re going to automate and then what are you going to keep for yourself. So obviously every day you want to be doing stuff that you love and you want to be doing stuff that you’re good at.
Generally speaking, when you do stuff that you’re good at, you get in a flow state and you feel good about it and you do an even better job. If you just focus on doing what you’re really good at, then your company is going to thrive. If you focus on trying to do it all, then you’re not really in business and you’re not also going to have as much fun as you could.
So figuring out what to outsource is probably the first step. Generally speaking for me, I’m not I would say passionate about real estate, per se. I’m in the real estate profession, but I think I’m more passionate about the entrepreneurial side of this business and building a business and building a team around the value that I happen to be delivering, which is undervalued real estate.
But I think for most people it’s different. Most people might love talking with people. They might love negotiating and haggling with buyers versus sellers or vice versa or they might like that interplay between trying to get something under contract with the seller or working with wholesalers.
They might like doing the due diligence part and analyzing deals and not talking with anybody. Or they might love just doing the books, balancing the books, making sure that everybody comes to closing on time. You have to know what you enjoy doing the most. Generally speaking, the only way to do that is try everything once and take mental note of what you enjoy doing the most and what had the best results.
There’s also, just operationally speaking, we tend to automate the lower-level tasks and prioritize the higher level tasks. You can kind of equate that to the dollar per hour amount of that task. So I created a chart that kind of breaks down like $5 per hour tasks and then on the right side, $10,000 per hour tasks, which is an exaggeration, but some tasks that actually you focus on and spend time on could actually be generating $10,000 per hour.
Mike: Yeah. Making offers and selling houses. Yeah.
Dan: Exactly. So like $5 per hour tasks would be talking to every single lead, whether they’re unqualified or not, pre-screening the lead is something that is not a $10,000 per hour task. It’s a $5 to $10 per hour task. Cold calling prospects, posting stuff to Craigslist. And then you kind of move up that ladder where $100 per hour tasks are more stuff like managing your PPC campaign or following up with leads or creating reports based on the data from your marketing and marketing reports.
Then $1,000 per hour tasks would be negotiating with qualified leads, talking to motivated sellers, delegating, managing your team or networking with competition, networking with your cash buyers and other wholesalers. So you want to be focusing on that type of stuff.
Then even higher above that, you want to be focusing on higher rock star team members that you wouldn’t be able to do your business without, establishing value and cultures and designing systems that you can plug these people in so literally you can remove yourself from the acquisition side of the business, for instance. It’s totally possible to do that. Negotiating major deals, deals that need your intervention because you’re pretty good at negotiating, you need to step in and do that because that’s high level stuff, or educating yourself. Stuff like that is what you want to focus on.
Then you want to automate the rest. Automation is a combination of using technology, like a CRM system like Podio that actually does some of the stuff for you like managing your database. It used to be something that you had to hire a VA for. Now it’s not something you need a VA for because Podio manages itself if you have it setup properly.
And then I lost my train of thought there, but generally speaking, automation technology-wise is basically following up with leads, communicating with leads, setting tasks to remind yourself to do things for specific processes.
Mike: Or reminding somebody to do things, right?
Dan: Or reminding somebody to do things, exactly. Automation is also outsourcing. If you’re not actually physically doing it, you can consider it automated, but you just depend on some sort of human input to get it done.
Mike: Absolutely. Alright, Dan, let’s dive into the taking action part. Are you ready to tell us how to take some action?
Dan: Let’s do it.
Mike: We talked a lot about automation. It’s interesting for me because I’ve heard a few people talk about this recently. It’s intuitive now, but you can say automation is not necessarily a system doing things, but it’s having people to do some of those things and sometimes you can over-systematize. Tell us your thoughts on . . . we’re going talk about building a team here. What do you think?
Dan: Yeah. We can talk about building a team for the purpose of acquiring real estate, absolutely. We can even use a wholesaling business model to give you a frame of reference of how you can apply this for your own business.
Mike: Yeah. Absolutely. That’s the kind of foundation of real estate investing business is wholesaling anyway. So let’s jump in there.
Dan: Yeah. So I guess we should preface this by saying that you obviously can’t do everything yourself, right?
Mike: As much as people try.
Dan: As much as people try, you have to get creative, even if you don’t have enough money to hire someone, you need to setup the compensation structures in order to bring on a team that believes in your vision and that can execute stuff that you would be not serving your business well doing.
So at this point, you know what you’re good at. For my sake, I’m not the best at negotiating with sellers. I’m not the best at dealing with buyers. I’ve done all of this in my career and I don’t enjoy that part of it. I’d rather focus on bringing other people in that love doing that stuff and then building up, like pumping the business with resources so these people can thrive. So you need to figure out what you’re good at and you need to outsource for your weaknesses.
So for the purpose of this, you should, for the first thing, the first person you want to hire is going to be an office manager. This is going to be somebody that is the bookend for every single deal. They’re talking to all the leads that come through. At this point, you have so many leads coming into your business that you couldn’t possibly handle them all. You need to be focusing on talking to the most motivated people.
So obviously you need an opportunity filter. That isn’t something you can automate. Absolutely you automate the process of getting leads into a database like Podio. At that point, you need to bring in an office manager to kind of filter out and weed through all these leads so that you can focus on the leads that are actually going to make you the most money.
Mike: Sure.
Dan: And you need to have a process in place for all those other leads. Like the dead leads need to be automatically triggered to follow up with in six months, for instance. The cold leads, you need to send an offer for basically every lead that is cold that doesn’t require an appointment, you just want to send them an offer. The more offers you make, the more chances you have of getting something under contract.
Mike: Okay.
Dan: That’s step one. So you need to have a process and a system for your office manager to effectively process all of your incoming leads. So the most essential thing you need to focus on is, one, you need to hire a rock star office manager. So things to look for. You want like a very detail-oriented, very diligent, organized, really good at talking to people in a friendly way, not necessarily the most like real estate savvy or they don’t need to be like sharks on the phone, like negotiating sharks.
They need to be very friendly, secretarial and they need to be good at paperwork. You do need to train them for a base level, how to do quick analysis just for the sake of writing offers for these cold leads because they’re going to be the ones that write offers for all the cold leads as well.
Mike: Okay.
Dan: They’re also once we talk about some other team members, they’re going to be responsible for keeping everybody organized. So they’re going to be in the office answering phones, managing your database and just sort of keeping you on track doing what it is that you’re supposed to be doing in this business, which is doing deals.
Mike: Yeah. A lot of successful real estate investors that I know of are kind of that high energy, can’t slow down, want to always be running around. But you need somebody to rein you in and help things stay organized because they have a tendency to not be the most organized people.
Dan: Right. And you want to give the office manager a nice framework to work inside of and obviously Podio is the best possible framework you can give them to work in because it’s based on lead management. It’s just lead management is what happens in Podio and you need to have a very clear set of tasks that occur for every single lead that comes in and you need to be responsible for setting that up and then finding a good office manager. It could be a VA.
You could use a service like VAEasyButton.com. These are real estate-trained virtual assistants, great, English speaking. They’ve gone through the ringer as far as real estate training. They know how to pull comps, they know how to do all the stuff you’ll need them to do. That’s a good place to start, sending them an email, VAEasyButton.com. And then you want to basically get the leads coming and having them work through the leads.
So at this point, you’ve already taken a lot off your plate. You’ve kind of taken some of those $5 to $10 per hour tasks off your plate, so you can focus more on the right side of that chart I referenced earlier where you can focus on hiring more people, designing marketing plans. Getting the phone ringing, negotiating with qualified leads, not unqualified leads.
Mike: Yeah.
Dan: And this is the process of entrepreneurship, sort of figuring out how you can only be doing the high-level stuff and then still have the stuff that needs to get done to execute what it is your business is trying to do, but not have you be involved. So the next step is to bring out an acquisitions manager. So you have your office manager in place. They’re filtering all the leads. You’re overseeing this process and you’re continually improving the lead process that this person is working in.
So then you have an acquisitions manager. They’re just in charge of getting things signed, getting contracts signed with sellers. They’re the ones that your office manager is going to set an appointment for all hot leads. They’re going to go out and meet the seller or they’re going to build a rapport before meeting the seller, after meeting the seller. They’re going to make the verbal offer. They’re going to get things under contract. That’s their full time focus, just getting stuff under contract.
Mike: Right.
Dan: They should be proactively networking for deals in any way they can. They should be researching on the MLS, networking with realtors trying to get those pocket listings, contacting other wholesalers, any way that they can get a deal under contract and partner with a cold wholesaler, that is the full-time job of the acquisitions manager. That is something that you could spend your full day doing, right?
Mike: Sure, absolutely.
Dan: It’s crazy to think that you can do all of that and talk with every single lead and network with cash buyers and do the taxes.
Mike: Raise money, all of that.
Dan: [inaudible 00:25:55] Mike: Yeah.
Dan: It’s ridiculous.
Mike: Why don’t you talk about what some of these . . . Well, I’ll let you keep going. I have a couple questions for you that I want to ask about, how you, just to get your take on it, how you built out a team. Real estate investing is one of those areas where you have a tendency to have people on your team that overtime start to say, “I’m the one doing all the work. Why am I not getting paid more? I’m just going to go do this on my own or whatever.”
Most of those folks that you talked about so far would potentially struggle to get the systems in place and build out kind of the ship, if you will, and they may struggle. Why don’t you share your thoughts, because you’ve done this successfully, your thoughts on how to build a team that is sustainable and is not always about compensation level?
People that are really good on the acquisition side tend to be entrepreneurial and lone wolfs and want to do their own thing anyway, which is part of what makes them good, but why don’t you share your thoughts on how to maintain that right person?
Dan: If you do see yourself in the role of a business owner and you’re not the one that’s going to be negotiating with the sellers, the you need to focus on building a company culture within your team so that it’s not something that they’re going to want to leave and that there’s no over lapping roles. Everybody is very clear on what it is they should be doing and everybody is totally aware of what everyone else is supposed to be doing.
So that, I think, the first thing is creating, establishing this culture of weekly meetings and motivation and keeping everything afloat. It’s kind of a limiting belief if you hire someone thinking that they’re going to leave you and start their own business or whatever because you’re the person that created this awesome foundation. You put everything together, you built the system, you funded the marketing, you brought these people together. But I think mainly you need to interview a lot of people and you need to use your gut. You can’t just hire the first person you interview.
Mike: No, yeah. Almost never.
Dan: Almost never. But when I was first starting out and we had too many leads to handle to the point where I was like, “I just need somebody to handle these leads.” We interviewed like two people and hired one of them. Obviously it didn’t work out.
You need to interview 10 people and then whoever you feel in your gut is like, “Wow, I would love to work with that person. They are amazingly diligent and talented and I can see them going far with us.” That’s the person you need to hire for. Don’t like skimp on how many interviews you do. That’s like the key. It’s very, very [inaudible 00:28:50] Mike: You can automate that. I will say we have a recruiting app and workspace built out inside of Podio ourselves where we have people take a personality profile. They have to do all these different things to jump through the hoops and then we effectively kind of weed them out that way. You can even have automation inside your processes for hiring people to automate things too.
Dan: Absolutely. When you get to a company like that size, you definitely need a recruiting process, for sure.
Mike: Yeah. Even if you’re small, though, you don’t want to have 100 or 200 administrative folks that have sent you their email via Craigslist. It’s a mess to manage.
Dan: It is. Do you have a book that you can recommend for interviewing and finding talent?
Mike: There is a book. I cannot think of the name. You’re catching me off-guard here. It’s the top-grading process, where it kind of tells you exactly, “These are the questions to ask.” Phase one is the super-fast phone interview. It might just be like 10 minutes. Phase two is interviewing in-person. But you have very specific things that you ask. Personally, my tendency in the past has been to do all the talking. I’m trying to sell them on the job and it’s like you just have to shut up and let people talk and ask open ended questions and see how they respond.
Dan: That’s true. I think top-grading is sort of an intimidating process for most people though because there are like 10 things you need to do. You need to run them through these personality tests and stuff. I’m more of a go with your gut kind of guy. The best way generally is to get them working on some leads for free, just have them as a sample run. Try them out, see how it’s like to actually work with them on a couple deals.
Mike: Yeah. That’s a good idea.
Dan: Instead of just basing it off their personality test results.
Mike: Right.
Dan: You know what I mean? And then just going with your gut like, “Wow. They were really responsive on this lead and they were super-friendly on the phone. I listened to the recordings. I can see this person doing really well in that role.” That’s who you need to hire.
Mike: Yeah. Awesome. So we talked about office manager and acquisitions manager. Are you kind of saying here as you expand these are the typical roles that you would start to fill out?
Dan: Yeah. It’s sort of breaking your business down into different departments. So you have acquisitions, marketing, administrative, like your office manager and then you have sales, which is going to be the next person you hire for, someone to handle the cash buyers and the dispersion of all your contracts.
So the person is responsible for showing the property, marketing the property, taking pictures of it, getting it in a lockbox, sending it out to the buyers, networking with all the realtors that might have comps in that area and their job is to put pen and paper for buyers.
Mike: Yeah.
Dan: And vet any new buyers, do buyer marketing. They need to sort of be the face of the investor scene. They need to go to all the REIA meetings. They need to network with as many people as possible. They need to network with realtors. I found generally that realtors are actually great in this role because they’re used to selling properties. They might even have a lot of cash buyers in their sleeve that they can contribute.
Mike: Sure. That’s the sort of person that posts their wholesale deals on FlipNerd.com, right?
Dan: Yeah. Exactly. That’s the person that’s going to be posting the deals on FlipNerd.
Mike: Yeah.
Dan: So that’s the person you want to hire for. That right there is a full time job as well, networking and constantly talking with cash buyers and doing all of that is a full-time . . . in order to do that effectively, you need to be doing it full time. Again, you can’t do it all. So that’s the next person you have to bring on. And then a bonus person you can hire is a prospecting or research VA.
Mike: Okay.
Dan: This is like a VA just for researching lists. Like in Baltimore, I used to have a VA research the code violation lists on our city website, probate. They would look up to see the recent probate records and then see if they had any real estate in their name and if they died within the last months and they had real estate in their name, then they would go on the list.
So they did a lot of online research to make sure we weren’t marketing to the wrong people. That’s clearly something you don’t want to do. That’s a $5 to $10 an hour online researching task. If you’re doing that all day, you’re not doing deals. But it is something . . . it’s like step one to doing a deal.
Mike: Yeah.
Dan: So basically that person is a prospector. You could also have them researching the MLS every day. I call it just your prospector role, prospecting VA. They’re going to take existing opportunities, tried to dig for existing opportunities and then funnel them into your system for your office manager to process just like a regular inbound lead.
Mike: Right.
Dan: Going on Craigslist, Zillow, calling up landlords on GoSection8.com and seeing if they’re trying to sell, stuff like that, a lot of outbound marketing as something they could do. If you have someone doing that full time, that can absolutely pay for itself. We can actually double back and talk about compensation real quick.
Mike: Sure. That would be great.
Dan: I know a lot of people might not have the funds to put someone on salary, for instance. Well, luckily in real estate, you make enough money per deal that a commission structure is generally a motivation and incentive for people to perform.
Mike: Sure.
Dan: So I would actually for the office manager, I would give them a stipend of like $1,000 to $2,000 per month to start, just for basic living expenses and just to compensate them for their time. Then I would setup a sliding scale based on how many deals you close or how many contracts you get. That could be anything from $300 per deal for the first two deals and then as you do more deals, they get paid more per deal. Something like that.
You can be as creative as you want with that, but a sliding scale commission structure on a per-deal basis, not a percentage basis I think is the best way to do that for the office manager since they’re not really associated with the negotiation part of it.
Mike: Right.
Dan: So your acquisitions person who is in charge of getting it for the lowest price, that person needs to be on a commission structure, so typically 10 to 15% commission for your acquisitions person. For every contract that closes, they get 15%. And then for your property sales person, obviously that’s another commission structure because they’re trying to sell it for the maximum price.
So you need incentive them for seeing it for the most they possibly can and selling as many as they possible can. So just like the acquisitions person, you could spend 10 to 15% commission per deal for them.
And there’s a good quite by John D. Rockefeller that, “I would rather earn 1% off of 100 people’s efforts than 100% of my own effort.” So if you think of it that way, it kind of makes sense. 100% of your own efforts is never going to work. So you need to focus here.
Mike: It’s hard to scale that.
Dan: It’s hard to scale yourself. It’s way easier to scale a group of people and a system.
Mike: Absolutely. Dan, can you talk for a couple minutes about over-automation in this context . . . so to be honest, I run into this problem all the time with myself. We are pretty proficient at building systems, but then if something breaks, a lot of the people that you talked about here for example will have no idea how to fix that or maybe not even know that it’s broken.
So the owner of the company, whoever setup those processes or setup that automation is always the IT person, if you will, that has to fix those things or when things break. That’s a real struggle for, I think, a lot of people.
Dan: Yeah. Well, first of all, you want to have somebody, like a vendor that you work with, that is in charge of your IT stuff. You’re not going to need like a full-time IT person, but also I think a lot of entrepreneurs spend too much time trying to automate everything. But you should really just focus on automating the most essential things.
Just off the top of my head, you should be automating your follow up. That could be as simple as a reminder for someone to call someone back at a certain time or it could be as advanced as setting up an auto responder sequence that keeps in touch with warm leads that previously had rejected your offer, for instance. You need to have a system in place for that.
So follow up because 90% of all leads eventually will want to sell their house if you follow up with them long enough, right?
Mike: Right.
Dan: Marketing is another thing you want to automate. You need to consistently be bringing in leads. Generally, anything you need to do on a repeating process needs to be automated. So follow-up, marketing, and due diligence is another thing that you want to make it as easy as possible for someone to do quickly. Those are all things that I built into my Podio systems to make it easier.
All the other things, like creating offers and generating PDFs and moving one thing from this app to another app in Podio and having Zappier.com sent a handwritten note to the seller after . . . people go overboard on the automation. You have to just focus on what matters the most and try to setup a system where you can create offers, write as many offers as you can and your marketing just has consistent phone calls coming in.
Mike: Yeah. Awesome, Dan. Well, thanks so much for your time today, appreciate it. If folks want to learn more about what you’ve got going on, where should they go?
Dan: You can check out the InvestorFuse system, which is the automated Podio workspace that we are selling on a monthly membership. It basically does everything that I talked about on this interview. Go to InvestorFuse.com.
If you want a more detailed explanation and like a mind map breakdown of all those positions I talked about, you can go to InvestorFuse.com/team. Right now, we currently don’t have any more seats available for the InvestorFuse workspace.
Mike: [inaudible 00:39:37] a big launch. Yeah.
Dan: By the time this is released, we’ll have it available for more people. Check it out.
Mike: Yeah. Awesome. Dan, hey, thanks so much for spending some time with us today. I appreciate you sharing your knowledge.
Dan: Yeah. No problem. Thanks for having me and letting me jabber away.
Mike: Absolutely. Good luck with everything and great to see you, my friend.
Dan: Thanks, Mike. Have a good one.
Mike: All right. Bye, bye.
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