Investor Cheat Code Podcast with Mike Simmons

Today we're going to talk about getting things done. Whenever you're starting something new or you're trying to build something you're unfamiliar with from scratch, the tendency is to get overwhelmed. It helps to break it down into smaller pieces so you can keep putting one foot in front of the other. I talk to new investors all the time, and I always tell them: you have to figure out what you're going to do first, and focus on that step alone.

Real estate is not that complicated, but it might feel that way to someone who's just getting started. Most of real estate success, and maybe even business success in general, comes from not giving up. It might sound cliche, but it's true. It's the people that don't give up who end up succeeding. But you need to have a plan, and take massive action in a purposeful, thought-out way.

Here are a few bite-size pieces you can break real estate into:

networking

learning to evaluate a deal

finding a good deal

If you find a good deal, everything will fall into place. But you have to compartmentalize and do things one step at a time.

This week I'm sharing part two of my most downloaded interview ever--last year's interview with J Scott.

J Scott is a full-time real estate investor who specializes in rehabbing single family homes and building new construction “spec” houses.  J and his wife, Carol, started investing in 2008, and since then have purchased, rehabbed and resold nearly $15M in residential real estate.

J started in real estate fairly late in life. He earned an electrical engineering degree, and then got into corporate life.  He worked for a number of tech companies early in his career, such as Microsoft, DirecTV, and eBay. He worked for companies like these for 15 years. He met his wife in 2006, and by 2008 they knew that they wanted to get married, but they were both  working in the corporate world and putting in tremendous hours. They rarely had time to spend with each other. They reached a point when they decided to quit their corporate jobs and figure out another way to make money so that they had more time to spend with each other and eventually start a family.

J’s wife one day approached him and suggested that they flip the house. J thought she was joking so he jokingly replied “okay.” They ended up flipping a house, and then flipped another four houses over the next couple of months.  According to J, what started as a lark has turned into their business and livelihood over the last six years.

J and his family have recently moved to Maryland from Atlanta. When they made this move, it was very disruptive to their business. Although J grew up in Maryland, he had not lived there for over 15 years, which  means that he basically had to start his real estate investing career from scratch in a new city.

I asked J to outline some of the steps that he has taken so far to start building his business back from scratch in a new city. Two of the most important things you should do when building a real estate investing company according to J:

Build a network

Find a realtor

I discussed with J the formula he uses to qualify leads. In other words, how does he calculate what is a good deal and what he is willing to invest in? Here is the simple formula that Jay uses on all of his deals:

ARV — Rehab costs — Fixed costs — Desired profit = Purchase Price

Example: (ARV)$200,000 — (Rehab Costs)$50,000 — (Fixed Costs)$20,000 — (Desired Profit)$30,000 = (Purchase Price)$100,000

When I asked J about the biggest mistakes he sees new investors making, his answer was pretty simple – they need to jump in and start investing after spending a reasonable amount of time educating themselves. You should never wait for the perfect deal, because the perfect deal rarely comes along. You have to get off the sidelines at some point and get in the game.

When I asked J how he’s able to get so much done and still spend time with his family, he gave me some great tips. I am not going to detail those here–check out the interview on my podcast to get his method!

Links

133flip.com – J’s personal blog where he documents his deals and give tons of knowledge away

The Book on Flipping Houses: How to Buy, Rehab, and Resell Residential Properties – J’s book on how to get started flipping houses.

The Book on Estimating Rehab Costs: The Investor’s Guide to Defining Your Renovation Plan, Building Your Budget, and Knowing Exactly How Much It All Costs - J’sbook on estimating rehab.

Today I want to talk about being productive. The problem is that sometimes people think that being busy makes them productive. That couldn't be farther from the truth--sometimes, the less you do, the more productive you are.

Some people make endless to do lists. They're trying so hard to get so much done. They're being pulled in too many different directions. They end up going too fast and having to retrace their steps. They end up completely overwhelmed. Sometimes the lists get so long that you're not really getting anything done. You're just running around like a chicken with its head cut off. You're not truly productive because you're not making the best use of your time and effort.

What I would suggest is that you make a list of only three things you want to get done every day. A lot of successful, busy people I've interviewed do this. Start your day with a list of three things you need to do. More things will pop up during the day--maybe you get an email you have to respond to, or some other task needs your immediate attention. Your business is dynamic and it's changing every day. Keep your list of goals short so you don't get overwhelmed as more things pop up. And if nothing at all comes up, great! You have an uneventful day and you can start looking ahead to tomorrow's goals.

Don't think that being busy and running around all day means you're productive. Make sure you're not so overloaded and frazzled that you're really not the best you that you can be at work. Make sure you're making efficient use of your time and effort, and allow flexibility in your schedule to handle anything that might come up.

 

Today I'm going to talk about something I learned early on in my career that I think is very important for new investors to be aware of. One of the biggest mistakes that new investors make is to act like a teenage boy on a first date, as Sharon Vornholt once put it in her interview. They're a little too excited or too aggressive, and just come on too strong.

When you're new in real estate, you don't ever want to force a deal. You should never take something that isn't really a deal and try to force it to be one. A lot of investors are guilty of doing this, and new investors in particular are so anxious to make money that they'll do anything for it. If you do that, you're going to end up losing money or losing your reputation. Before you make that mistake, you usually have a gut feeling. You have this instinct that the deal isn't good, but you ignore it because you so badly want to make money. Maybe you underestimate rehab or overestimate after-repair values.

Now let's say the numbers work, but something is just not sitting well with you. There's something about the house that you just have a feeling won't appeal to people. For example, I went to look at a house last week. The numbers looked something like this:

Purchase Price: $80,000

ARV: $180,000

Square Footage: 2500

The house was a 5 bedroom, 2 bedroom property right on the water. On paper, it looked like a great property. But I went and looked at the house, and a couple of things weren't looking great. The neighborhood was a little strange and unappealing--not unsafe, but not great either. The house had no front yard and not much of a backyard. It also sat right by a main road and you could hear all the noise from that road. When I went inside, I saw that while technically there were 5 bedrooms, but 2 of them could only be accessed by going through another bedroom. This means that walls would have to be moved around, and even then it might not become a true 5 bedroom. The layout was very bad overall.

I spent about a half hour looking through the house trying to figure out how I could change things, but when I left I realized that I was trying too hard to make this a deal. If I go into a house and can't immediately completely see how it's a deal, it's not really a deal. Even though it looked phenomenal on paper, I had a feeling I'd have a hard time selling it. I had to listen to my gut and I passed on the property.

I had another similar situation a few days ago--listen to the full episode for the details on that one.

In those two deals, I was reminded of the fact that sometimes you just have to forget about the money and go with you gut. There are many great, safer deals out there, so don't be careless in your excitement to find a deal.

Today's episode is a replay of my interview with J Scott. J is an incredibly savvy house flipper and new construction “spec” builder. I think this is one of the best episodes on the show, and I want to make sure all my listeners get a chance to check it out!

J Scott is a full-time real estate investor who specializes in rehabbing single family homes and building new construction “spec” houses.  J and his wife, Carol, started investing in 2008, and since then have purchased, rehabbed and resold nearly $15M in residential real estate.

J started in real estate fairly late in life. He earned an electrical engineering degree, and then got into corporate life.  He worked for a number of tech companies early in his career, such as Microsoft, DirecTV, and eBay. He worked for companies like these for 15 years. He met his wife in 2006, and by 2008 they knew that they wanted to get married, but they were both  working in the corporate world and putting in tremendous hours. They rarely had time to spend with each other. They reached a point when they decided to quit their corporate jobs and figure out another way to make money so that they had more time to spend with each other and eventually start a family.

J’s wife one day approached him and suggested that they flip the house. J thought she was joking so he jokingly replied “okay.” They ended up flipping a house, and then flipped another four houses over the next couple of months.  According to J, what started as a lark has turned into their business and livelihood over the last six years.

J and his family have recently moved to Maryland from Atlanta. When they made this move, it was very disruptive to their business. Although J grew up in Maryland, he had not lived there for over 15 years, which  means that he basically had to start his real estate investing career from scratch in a new city.

I asked J to outline some of the steps that he has taken so far to start building his business back from scratch in a new city. Two of the most important things you should do when building a real estate investing company according to J:

Build a network

Find a realtor

I discussed with J the formula he uses to qualify leads. In other words, how does he calculate what is a good deal and what he is willing to invest in? Here is the simple formula that Jay uses on all of his deals:

ARV — Rehab costs — Fixed costs — Desired profit = Purchase Price

Example: (ARV)$200,000 — (Rehab Costs)$50,000 — (Fixed Costs)$20,000 — (Desired Profit)$30,000 = (Purchase Price)$100,000

When I asked J about the biggest mistakes he sees new investors making, his answer was pretty simple – they need to jump in and start investing after spending a reasonable amount of time educating themselves. You should never wait for the perfect deal, because the perfect deal rarely comes along. You have to get off the sidelines at some point and get in the game.

When I asked J how he’s able to get so much done and still spend time with his family, he gave me some great tips. I am not going to detail those here–check out the interview on my podcast to get his method!

Links

133flip.com – J’s personal blog where he documents his deals and give tons of knowledge away

The Book on Flipping Houses: How to Buy, Rehab, and Resell Residential Properties – J’s book on how to get started flipping houses.

The Book on Estimating Rehab Costs: The Investor’s Guide to Defining Your Renovation Plan, Building Your Budget, and Knowing Exactly How Much It All Costs - J’sbook on estimating rehab.

Today I want to talk about action. I could have a weekly episode on this, and I still don't think I would be talking about it enough. All the successful investors I've ever interviewed, despite the many differences in their business models or systems, have one very important thing in common: massive action. Every single one of them takes massive action. They all go 100 miles an hour and do multiple things every single day to build their business and to drive it forward.

When you're starting out and you don't have employees or anyone else taking action for you, you have to take massive action. If you do one thing today to build or grow your business and then sit and wait for a couple of weeks, it's going to take you months or even years to get your business off the ground. If you take deliberate and massive action every single day, you will get results. You'll make mistakes, there's no doubt about it. But you can either make those mistakes six months from now, or you can get those mistakes out of the way tomorrow, learn from them, and move past them.

I have met so many people who seem passionate about real estate over the past 8 years, but most of them never take massive action. Massive action is the only path to success in real estate.

There are people who will hear this and it will inspire them to take massive action right now, and there are people who agree with me but won't do anything about it. Real estate has been good to me and a lot of people I know, and it can be good to you, but not unless you take that action.

Today we're going to talk about what you need to know before you start investing in real estate. How much information do you need? What's too much? What's not enough? I have a strong opinion on this and I've become more and more adamant about it. As I interview successful investors, I notice that they share my opinion on how much information you need to start.

I always get a lot of questions from people like you who are interested in real estate investing. Often, aspiring investors ask me many questions that they really don't need to know the answers to to get started. Today I had someone ask me about the closing process and I had to say: you don't need to know! The closing process is not important when you haven't even made your first deal or started networking yet. Don't worry about what happens at the end when you haven't even started the beginning yet. Once you've found a great deal and gotten started, everything else will fall into place.

So what do you need to know to get started? You need to thoroughly understand the step that you're on right now, and start preparing for the next. You definitely don't need to understand the next four steps in the process yet.

Today I'm interviewing Joe Fairless, the founder of Fairless Investing. Joe controls over seven million dollars in real estate. He's also the host of a top-rated investing podcast called Best Real Estate Investing Advice Ever.

He started investing in single-family homes in 2009 while working a full-time advertising job in New York City. He made the switch to apartments when he realized he could achieve his financial goals much faster by buying lots of "homes" at once. He raised over one million dollars and is currently working on a 300-unit development deal. Joe consults beginning investors who want to buy apartment communities.

Joe's background is in advertising and his initial plan was to climb the corporate ladder. His career progressed very quickly because he cared about his work. But eventually he found that advertising wasn't fulfilling him and he didn't feel like he was growing or contributing to a greater cause anymore. That's when he decided to make the transition to investing.

In researching Joe's career for this interview, I got the impression that he's interested in enjoying life--his business doesn't rule him and he always wants to be "doing more good." Joe addresses this in the interview and talks about the importance of enjoying the process. He keeps the balance by doing things he cares about. He spends the majority of his time working on his business, but he says that his business is his balance.

That said, he has learned to automate certain things. He has two interns who contribute work for this podcast, so that he can focus on the content. Joe says that it's important to bring on someone who is hungry for information and give them a piece of the revenue based on their performance. As they elevate to the next level, so does your business.

In his real estate investing business, Joe raises money and buys multi-family properties with investors. He shifts his focus based on where it's needed and he describes his method for goal-setting: at the beginning of every month, Joe writes down all the outcomes he wants for that month. If he's ever confused about what to focus on, he looks back at that list and makes sure that those outcomes are on their way to getting accomplished. His portfolio currently consists of single-family homes in Dallas Fort Worth and a 168-unit apartment community in Cincinnati. He says that he's not from Cincinnati and he'd never visited it before, but he followed the opportunity. He had a team member introduce him to the deal and he looked at the job growth and job diversity there. He wanted to make sure that he was on the path of progress, and in the interview he goes over the indicators he looks for in a market.

Joe's business acumen is very impressive and he credits modeling his business after those who have successfully gone before him. He does his research when he goes into anything new.

I asked Joe how he would grow his business if he were stripped of his business right now and dropped somewhere new. He says it's really simple: he would create a podcast and start adding value. He says that creating a podcast would allow him to exponentially increase his connections in the industry. Then he would find ways to add value in their life: He would focus on multi-family development and partner with someone who is doing that. He would work for free while doing his podcast and try to get in on a deal with them by traveling and doing asset management. He'd build his track record that way and start raising money for his own deals. The important thing to take away from this is to look for ways to add value for other people. What can you do for them? How can you add value for them first? That's the best way to befriend a successful investor--not asking for them to help you. That is a huge piece of advice. Focus your energy on trying to add value and you'll be surprised by how open and helpful p...

Today I want to talk about getting help in your real estate investing business. I tend to be very impatient and I'm a little bit of a control freak, so I often have trouble asking for help.

I'm very lucky that I have my wife as my partner in my real estate investing business because I can share responsibility with her and get help from her whenever I need it. We make a great team. We complement each other; she's good at and likes doing a lot of things I'm not good at or don't like doing. Having your spouse as a business partner is great because you really share the same goals and understand the work you put in.

When you don't have a partner in your business, it can be tough because you have to do everything yourself. It can be very overwhelming. I recently hired a virtual assistant. Hiring a VA can be a huge help; you can find one on Craigslist, oDesk, and many other places. It's important to understand that if you really want to scale your business, you need to hire people to take on some of the things that you can teach. It's ultimately going to make you more successful because you'll be able to do more with your time. Any teachable component of your business can be handed off to someone, whether it's to your partner or to a virtual assistant.

Now, when you're starting out I strongly believe that you should learn how to do everything yourself. You can't teach someone to do something until you know how to do it very well yourself. But once you've developed systems that you know work for your business, you can start downloading tasks to someone else.

Allow yourself to delegate certain things. It can be difficult! But I've learned from my own experience as well as from my successful guests that you can really free up hours of your time by delegating tasks that you don't need to be doing yourself.

Today we're going to talk about how to get unstuck in your business. Sometimes you start to feel bogged down in business; things aren't working or aren't moving as fast as you'd like, maybe you just received a rejection. You feel like you're knee-high in mud and you just can't move.

Here are a couple of methods you can use to get through this:

Get out of the house and go driving. Turn on the radio and relax. You don't need to think about your business.

Find out when the next real estate investing seminar in your area is and GO! Surrounding yourself with like-minded people is critical.

Invite a fellow real estate investor out to lunch. Tell them how you're feeling! They have likely been through this and can give you advice.

Go for a walk. A little exercise and fresh air can go a long way.

Go to the gym. Exercise can put you in a better state of mind and give you energy.

Go through all the business cards you've collected over the years, and start contacting people you've met networking. Don't ask them for anything, but rather see if there's anything you can do for them.

Read a good book on real estate investing or business in general. I've found that reading biographies of successful people really inspires me.

All of these methods will allow you to change your routine, get out of the rut, and do something different.