This is episode #411, and my guest today is Ryan Scialabba.

Many real estate investors that find success end up getting trapped in what I call “Self Employed”. They’re not ‘business owners’ or entrepreneurs, they own a job. Fact is, almost everyone that starts in real estate investing does it with the hope for not only financial freedom, but time freedom as well.

If you do everything in your business, you can’t ever leave your business. If you go on vacation, your business suffers. If you spend more time with family, your business suffers. If something happens to you, your business stops.

Today we talk about building your business from a one man (or woman) shop to a team structure, as well as how to get started. You deserve more freedom…let’s talk about how to get it.

Please help me welcome Ryan to the show.

Highlights of this show

  • Meet Ryan Scialabba, Pittsburgh based real estate investor.
  • Join our conversation on how when growing your business, you need to consider the lifestyle you want to live first.
  • Learn about the importance of managing cash flow.
  • Listen as Ryan shares advice on how to reinvest in your business for growth.

Resources and Links from this show:

Listen to the Audio Version of this Episode

FlipNerd Show Transcript:

Mike:This is the FlipNerd.com Expert Real Estate Investing Show, the show for real estate investors, whether you’re a veteran or brand new. I’m your host, Mike Hambright and each week I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility and taking control of your life and financial destiny, you’re in the right place.
This is episode number 411 and my guest today is Ryan Scialabba. Many real estate investors that find success end up getting trapped in what I call self-employed. They’re not business owners or entrepreneurs, they simply own a job. The fact is, most everyone that starts in real estate investing does it with the hope for not only financial freedom, but time freedom as well.
If you do everything in your business, you can’t ever leave your business. If you’re on vacation, your business suffers. If you spend more time with family, your business suffers. If something happens to you, your business stops.
Today, we talk about building your business from a one-man or one-woman band to a team structure, as well as how to get started with that process. You deserve more freedom. Let’s talk about how to get it. Please help me welcome Ryan to the show. Hey, Ryan. Welcome to the show.
Ryan:Hey, man. How are we doing?
Mike:Good. Excited to have you on today.
Ryan:Yeah. I’m really excited to be here.
Mike:We were talking beforehand and came up with a topic of building your team. I know this is something you’re passionate about because you’ve built a team, I’ve built a team. I coach and mentor a lot of people and we talk often about this, about how you don’t want to become self-employed. A lot of real estate investors, even if they do “make it,” they’re doing deals, making some money, a lot of times they get pigeonholed to doing everything themselves and they don’t get the lifestyle component they wanted when they got into this business from the get-go. You’ve seen that too, right?
Ryan:Yeah, exactly. So many people either want to get started in entrepreneurship young, early or they’re working a corporate job for so long and then they just quit and they buy themselves a job but they never figure out how to get themselves through each level to where they’re not working for themselves ten years later going, “I probably should have just hung out in the office and had a little bit easier life.”
Mike:It’s going to be a great topic. So, before we dive in, for those that don’t know you, why don’t you tell us about your background? Tell us more about who you are.
Ryan:Yeah. I’m Ryan Scialabba. I’m from Pittsburgh, Pennsylvania. I’m 25 years old. I’m a young guy. I’m the young guy on the block. I got started back in real estate when I was 19 years old through my dad, so six years ago now. What happened was, and I have to go back to really . . . but I’ll try to keep this tight here. Growing up, my dad worked for the airlines, for US Airways. A lot of people out there remember US Airways as an airline that no longer exists. Back in ’04-’06, they basically went through two bankruptcies in 18 months.
I basically watched my dad go from super comfortable, very happy, loved his job—he was that guy that didn’t care about money as long as he could pay the bills and we could have fun. That bankruptcy, the first one, they lost their pay, everything. He was getting paid now less than what he was getting paid in 1987 when he started. The second bankruptcy, they lost their pensions and then the stock crashed, so they lost their 401(k)s.
So, now, I’m a part of this turmoil here and stress where he basically felt like he had to restart. He didn’t know what to do. During that process, he spent a lot of time really drilling into my head, “You’ve got to learn how to become resourceful and self-sufficient. You’ve got to learn how to put food on the table on the side,” things like that. Throughout high school, we flipped a lot of cars and dirt bikes and speakers and all kinds of stuff. I went off to college to play football, get an education. I went to a fantastic school. It just was not for me. I was being pulled such a different way.
So, for my birthday there, sophomore year in college, he got me tickets to a flipping seminar, which was Fortune Builders. We ended up maxing out credit cards, home equity line. My parents were terrified. It was the last bit of money that we really had at the time to get into that education. He said it was for him, but I knew it was really for me. It was for us. So, we set off to go build this business together.
Six months in, I still hadn’t . . . five months in, I still hadn’t had a deal yet but finally got a house under contract, ended up doing my first wholesale deal for $6,000 right before I would have had to have reported back to college. We had made a bet that if I got a deal done before I reported back, I could take a year off and pursue real estate. So, I got my real estate license, just started crushing out deals. I had done like six or seven deals in the next 45 days, paid back the investment and we were on cloud nine.
But October, 2013, I actually ended up losing my dad in a motorcycle accident just out of the blue on the way home from work. Your life just turns upside down. It’s a little bit easier to talk about now because I’ve probably told the story about a thousand times and it’s really my driving fuel today. But from there, I had a lot of really hard decisions. I was lost for quite some time. So, I got in some bad stuff to cover up pain and going through a lot of personal things, broke as hell. I was living on friends’ couches and trying to make the real estate work, doing everything I could to not go get a job. I did that.
Mike:Yeah.
Ryan:But it was a lot of struggle. Lead up into 2014, I started rehabbing, having lots and lots of trouble. My lender made more money than me on my first deal. Then I ended up making really good money on my next two deals. So, I was like, “Okay, cool, put that money aside and start marketing, things like that.”
So, I ended up getting this deal under contract, 2015, where I meet my now partner as he was building a house across the street. We were going after the same deal. I messaged him on Facebook.
We didn’t really know each other. I messaged him on Facebook. I was like, “How about we not cut each other at the knees and we negotiate and figure out a way to make this deal work?” So, we ended up meeting down at the house, going out, drinking beers. 30 days later, we had become friends. We bought two houses together and Urban Capital was born in May of 2015.
So, now, fast forward and I’m sure this is where the team building will come into play in a minute here. Fast forward 2017, we had our first million-dollar net profit year, which was just the goal I’ve had since I was 16 to do $1 million in business. This year, we’re already going to do that by June.
Mike:That’s awesome, man.
Ryan:With a full team in place, so it’s been quite a journey.
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Ryan:. . . born in May of 2015. So, now, fast forward and I’m sure this is where the team building will come into play in a minute here. Fast forward 2017, we had our first million-dollar net profit year, which was just the goal I’ve had since I was 16 to do $1 million in business. This year, we’re already going to do that by June.
Mike:That’s awesome, man.
Ryan:With a full team in place. It’s been quite a journey.
Mike:Yeah, that’s awesome. Thanks for sharing your story. You guys are primarily rehabbers, right?
Ryan:Yeah. My partner always jokes and says we’re a construction company that also buys houses.
Mike:That’s awesome. Let’s talk about when you build a team, maybe we can share a little bit about your team. It started with you, you and your dad, obviously, then it was you and then you found a partner. Where did you guys go from there? Talk about your growth. It’s really been about two years, right?
Ryan:Yeah. Coming up on three years, which is pretty crazy to really think about it. While it was just myself from 2013 to ’15, I was mostly wholesaling. I had a good reliable GC that I could trust when I was rehabbing, but I was only doing one at a time. That was sustainable while I was marketing and trying to find other deals. We ended up having a falling out. I thought it was him back in the day and now I know it was my arrogance and my naiveté taking a lot of things for granted like we do when we’re starting out.
Once Arch and I partnered up in 2015, he had a lot of the construction knowledge he had built. That’s what he grew up around. He was having a lot of hard time finding houses. I was having a hard time obviously getting rehabs going to where I could keep two or three going at a time. I couldn’t even do that. so, I was still wholesaling stuff off.
Basically, what we do, we started like everyone else does. We bought two houses at once. I don’t know if everyone starts like that, but we bought two houses at one time and we patched them together. We had a high-end house and a low end house. We were using low end guys on the high end house and anything we could to get that rehab done. We did them. We did well. We made money on them.
Then the big hit for us was we actually wholesaled some land. So, we had ended up wholesaling some lots and we made a really, really nice chunk of change. We ended up making $60,000 on a wholesale deal and that was like okay, now it’s time to invest in our business. Let’s decide what do we want to do. There wasn’t really lifestyle involved in that. At the time, we just knew we wanted to build the biggest baddest business that we could and be number one in Pittsburgh on the rehab front.
We took that money and then we just invested it into marketing. Next thing you know, we started buying houses real heavy. The MLS was really hot back then and since I’m a licensed agent, we didn’t have a lot of marketing costs and we just rock and rolled.
We knew that rehabbing was going to be our biggest problem. We started building out our construction systems and processes and team first. We knew down the line that was something that would separate us from everybody else. How we were going to rehab these houses, what we were going to put in them, the whole nine yards, really the foundations I had learned from Fortune Builders, we just turned those things up a notch and started building that out.
Mike:That’s great, especially where you’re at in Pittsburgh, a lot of old houses there. In Dallas where I’m at, there’s old houses, but not that old. They’re 30, 40, there’s some 50-year old—there’s some old houses here, but we’re not rehabbing stuff that was built in the ’20s. Talk about some of the houses, maybe how old some of the houses that you rehab.
Ryan:We’ve done houses all the way back to 1890. So, a lot of stuff we’re dealing with is . . . the biggest problem is our price point and then the construction that has to match it. So, let’s say we’re buying a house for $60,000. It’s only worth $160,000, but you need an $80,000 budget there, but you’re trying to do it on $40,000 or $50,000. You get lucky every once in a while, but it just doesn’t work. So, we niched out to where we only do houses built after 1950 and those are our $25/square foot rehabs. Then we do gut jobs, full gut jobs. We don’t do anything in between anymore because that’s where we lose money every single time.
Mike:Right. Okay.
Ryan:So, we figured out that niche and then our first hire was actually a project manager because we were really—I was doing well filling the funnel for what we could. We hired a project manager and we hired an animal, someone that we were not prepared for whatsoever. We thought we were, but we weren’t. We were paying this guy $100,000 a year. We hadn’t even paid ourselves a single penny yet.
So, we started paying this guy $100,000 a year, worth every single penny. We still have a great relationship with him today. He project manages on our larger developments for builders for another building company now. Basically, he only lasted with us for three months and it wasn’t that he couldn’t cut it, it was that we couldn’t cut it.
Mike:Couldn’t keep him busy enough?
Ryan:As much of a system as we thought we had, we had nothing and we thought we were doing really well. I’ll never forget the day. He’s an older guy. He’d say, “Get yourself an old grey with a lot of experience that will whip you into shape.” He was sitting back at the desk and he just goes, “I don’t know how the heck you guys do this?” I was like, “What, Gar?” He’s like, “You guys are either dumb, blind or you just have no idea what’s going on in your business.” I was like, “Maybe all three.”
He was like, “Gents, I’m leaving, but I’ve got three or four weeks left here with you, I’m going to give you enough time. If you’re willing, I’m going to put some things in place and we’re going to change this ship around.” So, we did. That changed our whole entire mindset on what actual systems and processes were. So, then we went to project manager lists for almost a year. This was about a year ago now. Everything happened so fast, but this is last summer—spring/summer. We hired everybody. We hired an office manager/bookkeeper role.
What ended up happening was our best GC in Pittsburgh that we had ever had was actually going out of business. So, we ended up acquiring them and it the best move we ever made. This came with four guys that we called “the A-team.” We got them all at cost and we got a project manager.
This was the scariest thing that we had done, basically acquiring a construction company. But to this day, it was the greatest move. So, now it’s office manager, project manager. We have 12 guys on the construction team now. We build out teams of threes and fours and then I have an acquisition manager as well. So, we’re lean and mean, as we like to say.
Mike:That’s awesome. People that are listening right now, if they’re going to build their team out, let’s talk about the importance of your vision. So, a lot of people that might be listening right now, we have lot of veteran folks that listen to the show too, but let’s say we’re talking to the person that’s new or newer and they like the idea of getting into real estate investing or maybe they’re doing some deals right now, but everybody wants to eventually be sitting on a beach collecting paychecks.
It’s not ever like that for most people, right? The lifestyle part is real. We get into this because we want more out of our life. We want financial freedom, freedom of time, but a lot of people seem to forget that vision when they start their business. They’re just trying to do whatever they can to make it work. They don’t really focus on their business so much as they just get in the weeds and, “I’ve got to make this work.” Vision is kind of secondary.
Ryan:Yeah. I think if you’re first starting out, the biggest thing I want every new investor to disregard is deal volume. When you’re first starting out, if you can go and do two wholesales a year and they’re $50,000 apiece, $100,000 apiece, stockpile that money. If you want to build a business, the old volume does not matter.
If you’re looking at profit per deal and things like that, obviously that makes more sense, but I think that throws people off a lot to start with. “I’ve got to go to 100 deals a year because that’s the sexy thing.” For most people, that’s not very attainable. For most people, me being one of them, I don’t want to do 100 deals a year. I would pull my hair out.
Mike:It’s not sexy for anybody. Even the people doing it, it’s not sexy.
Ryan:I think it’s admirable. I’m like, that’s a lot of moving parts. My biggest thing is you’ve got to look at the overall lifestyle that you want. I love to travel. That was my biggest thing. If I could run a business and travel as much as I possibly can, that’s what I want to do because I know that’s not realistic once I get married and have kids and things like that. I know that’s going to slow down.
So, I just want to be able to afford a very comfortable life, go to dinner when I want, things like that. I’m pretty modest and humble. I’m not flashy. But travel is a very, very big thing for me and never having to look at my bank account, that is my goal. I don’t want to have to look at my bank account before I go do something.
So, my lifestyle is obviously simple. Yours, whatever you want it to be, I think you should write it out, frame it, put it in front of you and then put it away. When you’re first starting out—I know this is unconventional, but when you’re first starting out, you’re going to have all these big aspirations. You write all those things down and don’t look at it for three or four years because what will happen in three or four years is you’ll go back and pull them out of that bin and it will cause you to realize all the work and things you do have that you forgot you wanted.
Then what that does is that allows you to calibrate and set new goals. I don’t believe in looking at that every single day. But if you do take your lifestyle and you begin to put more and more pieces of that into your life every day, I think that’s more realistic than saying, “I want to spend six months a year on the beach,” meanwhile you’re not even making $100,000 a year in your business. I think you need to chunk it down, “I want to get to the beach this year because the business paid for it,” and the next year, recalibrate, set new goals towards your ultimate lifestyle down the road.
Mike:Yeah. That’s awesome. So, talk about the importance of . . . maybe talk in your experience what happens to some people that aren’t thinking about their lifestyle but they just get overwhelmed with just trying to make the business work and therefore, they never get any of the lifestyle piece.
Ryan:Specifically, real estate, like investing, rehabbing, you go, you buy a deal, now you’ve got to renovate that deal, then you’ve got to sell it. If you’re a one-man show . . . and you have to manage all the back office of that and then do the books for it too. There’s 1,000 to 1,200 pieces to that thing at the end of the day. But while you’re doing that, you have to go and find another deal. So, what you do is you put yourself on that loop forever. I guess if you invest enough or you get the fortitude to go ahead and buy two deals or three deals at once, it feels like it multiplies.
So, now you feel deeper in the weeds. The biggest thing is to get on top of that if you can and decide if you’re going to invest in a business or invest in a payday. We talked about this a little bit before. If you’re investing a payday, there are many times I wish I could go back and do one deal at a time or two deals at a time, three or four a year, $80k apiece, sweet. But we wouldn’t hit those $80k deals unless we did 10 other $20k and $30k deals. It’s a multiplication of efforts.
Mike:Right.
Ryan:I think you’ve got to get on top of it and invest in that hire. So, basically, my metric is if we can put six months in the bank for that hire, really all you’re risking is 60 to 90 days. Whatever your probation period is is your risk when you’re hiring. If you’re able to risk that and pretend that that money isn’t there, it’s already away, then why not hire that A-player and see where their business takes you in that 90 days or six months? Then you just keep doing that forever.
Mike:Right. It sounds like you had the kind of foresight to say when you get some money to say, “I’m going to invest this back in the business.” A lot of real estate investors don’t necessarily do that. A lot of people are taught you’ve got to plow back into advertising, which you do, you’ve got to continue to find new leads. But you knew that you needed to invest in your team, like, “Now we’ve got to bring somebody on,” or obviously you acquired a construction company, things like that. Talk about the importance of kind of having a deal pipeline. You can’t just go out and blow all your money without having some cash in the pipeline because you’re going to run out of money.
Ryan:There’s like a pyramiding to inventory. For some reason, I don’t hear about this very often, but if you’re buying three or four deals at a time, you’d better be working on six to eight and selling three to four if you want a consistent six-figure revenue or profit at the end of the year. If you want $1 million, you better be buying 5 to 6, working on 12 to 15, selling 5 to 6 at a time. So, you’re constantly thinking in terms of that pyramid and we learned this the hard way. I still can’t find a lot of information about this today and maybe it’s because I didn’t make it through college. Maybe they teach you this in college, like the real financials behind a business.
Mike:They don’t teach you that in college. They teach you how to go work from somebody else, ultimately.
Ryan:We learned it the hard way. We learned about inventory and cash projections after we were broke, broke in the business, broke millionaires. You’re paying for this marketing. You’re paying for these deals and you’re not seeing a return for six to nine months. So, you better be rolling things in on top. Since this is on video, I can actually do this, but it’s ebbs and flows and it always is.
As you have more inventory, that ebb and flow becomes higher and higher. So, you have more and more in your bank account, but if you’re hiring, what you’re doing now is you’re creating a monthly nut, that overhead that that ebb and flow cannot drop below. If you can figure out how to project for that early on, it allows you to make better hiring decisions timing wise. That’s what we’ve learned really over the last two years is having that money in the bank, understanding how your cash flow cycle is and then making hires based on that. It tells you when you need it, you know.
Mike:Right. Let’s talk about who to hire first. Where do people go? There’s a lot of different ways you could do it. Some people hire for their weaknesses, some people hire for their strengths. What are your thoughts?
Ryan:So, the typical way to go about this is the E-myth pyramid—technician, manager, entrepreneur. So, say you take an organizational chart and you look at five roles in a rehabbing business and you look at all the low-level $10, $12 an hour tasks. You say, “How do I get these things off my plate so I can get up to a managerial level, then to an entrepreneurial level?”
If you’re a singular person in a business and you don’t want a partner, don’t have a partner, weren’t lucky like me to basically find your work wife, then that’s the route you’re probably going to go, but either way, if you’re rehabbing, if you’re going to be a rehabbing business, I don’t speak outside my lane, there’s two sides of the business—marketing, financing, operations, and construction. It is that black and white. It’s two businesses within the business.
So, I’m a firm believer that you should know every role and you should know it well before you hire it. I don’t think you should stay in that role because you’re probably not the best person for it, but you definitely should know it because we went through that. We still go through that today.
If you’re going to be one person, I think that you have to figure out or know what you’re good at first and then hire out those lower-level tasks, decide which side of the business you want to be on ultimately, but realize that if you’re an acquisition person and you’re really good at that, you should put an A-player in place that fills your pipeline while you go to learn and get really dang good at construction and project management and then you hire an . . . now you can afford it because your pipeline is full.
Now you understand the needs and the qualities of a really high-end project manager. You hire that out and then ultimately, you get to be on your side of the business if you want or you’re managing the oversight of your small little three-mean team. That’s very attainable. That’s the way our business looks like except I have a partner on the other side as well. So, we both sit on top of that organizational chart, if you will.
Mike:How does it help to have a partner? We’ve talked about this on the show many times before. There’s a lot of value having a partner. There’s lots of responsibilities in this business that you can clearly split up, whether it’s, like you said, construction or the day to day business operations, sales side of the business, acquisition side of the business. There’s some really clear divisions to be able to split this business up. What are your thoughts on that? Obviously, you have a partner, so I know you believe in partnership.
Ryan:I do and I don’t. I’ve heard and I’ve seen the bad sides of it, where just from a mental capacity or a mindset standpoint, two people are not destined to work together right from there. That’s really where I think it all has to start. You have to have the same vision, the same overall mindset. I think really, tenacity, work ethic and—Arch will get a kick out of this when he listens to it—same amount of baggage.
That was one of his first questions, “What kind of baggage have you got? Do you have a wife? Do you have kids? Do you have dogs? What have you got?” He wanted to know, “Are you committed to 100-hour workweeks until we hit $1 million a year or are you only going to be able to work 9:00 to 3:00 because I’m crazy. I’m going to work 100-hour weeks, so I want to be matched.” I was like, “Well, I work 110, so let’s go for it.” But we clicked on that level.
That really has been the driving factor to where we can get through anything. It’s like he’s the yin to my yang. What I don’t want to do, he’ll do and what he doesn’t want to do, I take care of. When it comes to management decisions, we now . . . it’s like weird, man. We have that inherent trust in each other to make those decisions from the beginning.
Mike:That’s rare, but that’s awesome.
Ryan:I think I hit a million to one and I know he thinks the same. But my biggest thing is that mental tenacity, that mindset and that long-term vision. You’ve got to lay everything out upfront. When it comes down to it, if you’re not happy, you’ve got to cut bait and maybe you’re better off getting a new partner or going off on your own, but if you don’t love what you’re doing or you don’t love who you’re doing it with, why are you doing it?
Mike:Yeah. Absolutely. So, as you build this team out, one thing you always have to be careful of is you can continue to pay for them, continue to pay for that growth. I know we talked about this a little bit before. You guys have had some challenges before, all of us have with cashflow. Let’s talk a little bit about the importance of managing cashflow as you build your business so you can continue to pay people on time, reinvest in advertising and you don’t have to make decisions to start cutting it up. Once you start making those decisions, it’s a little bit of a downward spiral, like things start to spiral out of control. So, talk about the importance of managing cash flow.
Ryan:Yeah. At this point in time, the hardest decisions to make are the ones that are based on not having money in the bank. When you know you need to make a business decision that’s going to solve a problem or push forward but you don’t have the money in the bank to do it, that causes a stress. How do you put your head down on the pillow at night when you’ve got $76 in your bank account and you’ve got to pay $10,000 worth of construction work tomorrow? That’s the bottom of the downward spiral that we’ve been in multiple times up to this point.
As far as cashflow, when you get into a rehab deal, I think what people don’t realize until they’re already into it is they start out, let’s say they borrow hard money, they’ve got to put money into the deal up front, then they’ve got to put money in to get construction started and then let’s say they go over budget. So, now, you put $4,000 to $5,000 down to get construction started and then you go to $4,000 to $5,000 over budget, what happens is a lot of times in that very first deal, those people don’t have $15,000 in the bank to push that deal through, so it just stalls.
If they borrowed properly let’s say private money or something like that, they don’t realize that pain on the first deal. They had private money. So, then what happens is they are cushioned now until they have two or three deals going and they have to go borrow hard money on two and private money on one and now that cash flow is triple or I should say triple negative. Now they’re $45,000 out and they’re thinking, “Oh my god, we’re going to lose everything.”
So, the stress heightens. Then if you’re 10 deals in, this happened to us in 2016, we had 10 rehabs going. All of them went . . . we thought we were staggering them nice and tight to where the money would flow through but one fell behind, one pushed forward. Basically, at the end of the day, it was the scariest thing ever. We didn’t even realize we had $150,000 to our names in our business, but you better believe it was out, it was already spent and we didn’t know it was there. So, now your business stops until you sell houses or at least in your head it does or it absolutely has to.
Mike:Well, as long as you can make decisions like, “Well, we can’t advertise this month,” or, “We’re going to have to let somebody go because we can’t afford them.”
Ryan:Right.
Mike:Those have long-term implications, right?
Ryan:Yeah. That’s really, really stressful when you can’t make good business decisions. So, if you understand that there’s money in running a business, that there’s money in doing these deals, even if you’re borrowing 100% private money, which we do, and we still have $10,000 or $15,000 at the apex of a deal, we still have money out with interest payments, insurance, utilities and construction overages. You still have money in.
Now you spread that across 15, 20 rehabs going at a time. You’re a half a million bucks out, you know it’s going to come back now because you went through that cycle before. So, long story short, telling you that story, you can plan for this beforehand. So, if you’re going the business route, the rehabbing, construction, hiring, building a long-term business route, you have to keep a healthy operating account in order to get through these ebbs and flows as you’re changing out inventory.
Mike:Yeah, for sure. Do you guys use something different now to manage projected cashflows? I know early on, it’s hard, especially if you’re rehabbing and especially if you’re in . . . sometimes when you’re in the Northeast or older parts where your rehab takes longer, you celebrate today because you got a house, but that cash isn’t coming back in for four, five, six-plus months sometimes, so I found it helpful to start to project, “I think I’m going to make $20,000 on this. I think I’m going to make $30,000,” whatever the number is, my projected cash flow, and just kind of project, “I think I’m going to get it back in four months.” So, I could have this tracked in Excel of from the time I bought it, how much I think I’m going to make from it, when I think it’s going to come back around so I can project out when cash flows are coming in so we know if we’re going to get in a pickle or not.
Ryan:Yeah. So, we do two things. I have an overall income projection sheet for the year. As we buy deals, I put it on the other end of the sheet, 6 months out, 9 months out, 12 months out. I don’t do anything less than six months. If it’s less than six months, it’s a bonus. But so many things happen. We’re averaging 100, 110 days on our deals, but still, I don’t want to think that money is coming back so I make business decisions that are long-term, not short.
Mike:Worst case scenario.
Ryan:Then the second thing we do is we have this huge 8-foot by 8-foot board in our office and it is awesome and we track everything on it. Our purchases, the dates, how much money we’re borrowing, once it’s in rehabbing, we have a five-phase construction process, so across from that is how much money did we get back at closing, how much is held back, what draws did we get in correspondence with our phases.
So, basically my construction part of this board is like a large Gantt chart. Where are we at on progress and where are we at on cash flow in the deal? Then we have our selling side. So, down on the bottom, say what’s it listed at? What’s it in our contract at? Gross profit or CB, cash back in the bank, net profit and that thing just runs and flows and runs and flows.
Mike:Yeah. That’s awesome.
Ryan:Then everyone has their own board. So, acquisitions has his board for everything, then we have a metrics tracking sheet on Excel because that’s more granular, versus just seeing appointments, contracts, closings, and then project managers, he has his own board as well with basically it’s just a fireboard is all it is, what fires do we have to put out. As visual as everything is, it’s also backed up by Excel and Dropbox and things like that and Trello, we love Trello.
Mike:Yeah. Awesome. I used to use Trello. We use Asana now, but used to use Trello. Awesome, man. What advice would you give people real fast here for people that are just getting started? We just threw out a lot of information, you gave a lot of good advice. If somebody is not necessarily just getting started, they’re doing a couple deals here and there but they want to ramp up, how can you summarize what we talked about today so they can go apply it?
Ryan:If you are a singular person right now and you want to get to the point where you’re running three or four deals at a time, I would go ahead and market like crazy, invest that money, buy three or four cherries, not three or four slim deals, three or four cherries and so your marketing costs will be a little bit higher on the front, but buy three or four cherries where you’re going to make $35,000, $40,000, $50,000 on those deals.
So now, you have some inventory, so you can go ahead and hire some help on the construction side, whether that is a GC that project manages a job for an extra 10% of his budget or you go and get some outside help, subcontracted project management work that allows you to get some of that off your plate and now you’re starting that cycle, the recycle, I should say, while you’re in your rehabbing process of being able to market again and get some deals pushed out.
So, you want to start that cycle as quickly and as often as you can on the front end and then obviously get them on the market as quickly as you can so you can reinvest that cash and then make a long-term hire at that point, have at least six months in the bank to make a hire and realize that your risk tolerances, however long your probation period is for hiring somebody, if it’s a 90-day probation period, that’s all your risk tolerance is for making a hire.
So, for most people, that’s only $10,000 to $15,000 maximum as far as the risk tolerance goes. For sales guys, there’s no risk. If you’re paying them on draw or on commission, there’s minimal risk, so get over the fear, jump off the ledge if that’s what you want and go have fun with it.
Mike:Awesome, man. If folks want to learn more about you or look you up, where do they go?
Ryan:Find me on facebook.com/urbaninvestor. If you type in “Ryan Scialabba”, which is S-C-I-A-L-A-B-B-A, all you have to do is type in “S-C-I” and I’ll probably pop up. You can also find me on Instagram at @UrbanInvestor as well and then our website is www.homebuyersofpittsburgh.com. That’s where you’ll see all of our flips and keep up to date on what we’re doing.
Mike:Awesome. We’ll have those links down below in the show notes. Thanks for joining us today, my friend.
Ryan:Cool, man. I really appreciate it.
Mike:Thanks for sharing your story. It’s good stuff.
Ryan:Anytime.
Mike:Everybody, this was episode number 411. We appreciate you joining us today. We’re going to keep these episodes coming at you. If you haven’t yet, please give us a rating, positive rating, preferably, on iTunes, Stitcher Radio, Google Play. We’re everywhere, anywhere you can listen to podcasts, we’re at. YouTube, you can subscribe to us. Of course, you can watch us or even listen to us on FlipNerd.com. Appreciate you guys. We’ll see you next time.
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