137: Building a Virtual Real Estate Business

SHOW NOTES FOR EPISODE 137: BUILDING A VIRTUAL REAL ESTATE BUSINESS

Can you grow a successful real estate business without even seeing the properties you buy?  According to Brian Ellwood, yes, you can, IF you have the right team in place.  In this podcast, Brian Ellwood, author of Fire Yourself, shares the secrets of how he went from part-time bird dogger to owner of a multi-million dollar virtual real estate enterprise.

What You Will Learn

• The book that changed Brian’s life from W-2 slave to budding entrepreneur
• How his first non-W-2 “job” yielded $333 per hour
• How hiring an acquisitions manager increased his business’ profit 10 TIMES!
• How buy ‘n hold is a better strategy than fix ‘n flipping
• How it is important to regularly “inspect what he expects” from all employees
• Why the companies that do best have both a “visionary” and an “integrator”
• Being a good leader doesn’t mean you are a good manager

About Our Guest

Brian Ellwood

Brian is a real estate investor who does business in Tennessee while living in Colorado.  He has a unique approach in that he has created a system that allows him to fix and flip properties from a distance, remotely.  Brian is also a buy and hold investor.

He loves to coach, teaching others how to build virtual real estate businesses in any market while creating a portfolio of low-risk rental properties that generate passive income.

More About Brian

• Grew up outside of Nashville
• Went to the University of Tennessee (English Major)
• Got corporate job in Nashville for 4 years
• Bought house
• Got “first time home buyer tax credit” of $9,000
• Did not like job so quit
• Developed passion for personal development
• Listened to lots of podcasts
• Read lots of books
• Got job at natural food market at $9 per hour

His “Lightbulb Moment”

• Read Rich Dad Poor Dad
• Met guy at market who was wholesaler
• Asked him to mentor him and started bird dogging
• Found house for mentor, took pictures, druggie living there with pit bull – had to buy him breakfast to see the inside of house
• Mentor ended up buying the house
• Invited Brian to lunch, handed him $1,000 for finding the house
• Brian figured, for 3 hours of work, he earned $1,000 or $333 per hour
• He said real estate is what he wanted to do
• Did 7-8 more deals like that, making $1,000 per deal
• Worked for mentor for a year

Getting Serious About Real Estate

• A few years later, found a partner
• Started a company
• Grew to 11 employees
• Doing 50-100 deals a year
• Today:
  • 9-10 counties in mid-Tennessee
  • Doing 5 flips at a time
  • Buying 2-3 rentals a month
  • Heavy into coaching/education now
• The process:
  • Put a team together
  • Acquisition manager (sales rep)
    • runs comps to get value
    • schedule appointment with seller
    • gives rough repair estimate
    • makes offer (contingent on further inspection)
  • Brings in inspectors, contractors, realtors, property managers to confirm repairs (may have to renegotiate deal with seller if more repairs are needed)
    • try not to “over rehab” beyond what neighborhood bears
    • recommends just painting and carpeting for first 20 and easing into more complex rehabs
  • Believes team building and effective delegation and outsourcing is the foundation of successful businesses
    • He’s in a mastermind group with other successful flippers
    • Biggest problem: persons trying to do everything themselves, can’t let go, working 80 hours per week
  • He has multiple exit strategies
    • Example:
      • buying house for $50K
      • spending $20K for rehab
      • listing for $99K
      • goal: make $20k on sale
      • (Plan B) If it can’t sell to make $20K: keep it as a rental for a few years and try to sell later

Brian’s Buy ‘n Hold Strategy

• Brain has found that buy ‘n hold is the most important part of real estate investing and creating passive income
• In the beginning, he went for the quick cash you get from flipping
• Now, when they look at new acquisitions, their first goal is to try and keep the property as a rental
• If it looks like it won’t work as a buy ‘n hold, they will flip or see if there is another option
• When he coaches, he asks his students “What’s your number?”
• Brain’s goal: Own 75-100 homes to generate $200-300K per year income
• Is interested in multifamily but is used to buying SFRs

Biggest Mistake

• When team was biggest, didn’t manage people well
• Team wasn’t following processes and systems
• Bought 3-4 houses with foundation issues (each costed $20K to repair)
• Inspector’s recommended that they hire a structural engineer ($700) to check foundations but ignored their statement
• Ineffective management
  • Had on-site guy that really wasn’t spending time “on-site”
  • Much miscommunication
• Lesson learned: Now, they do much more due diligence – they “inspect what they expect” from their employees
• Another Epiphany: Being a good leader doesn’t mean you are a good manager

Successful Entrepreneurs

• Ernst & Young study of top entrepreneurs
• Book: Rocket Fuel
• Top companies had a pair of leaders – a Visionary and an Integrator or a Starter and a Finisher (Steve Jobs/Steve Wozniak – Henry Ford/James Cousins)
• Visionary – Dreamer. Passion. Idea generator. Key relationship builder.
• Integrator – Systems and processes. Good manager.
• Brian’s company never had the “integrator” – He’s more the visionary

Biggest Success

• Hiring an acquisition manager
• Before, they couldn’t get past generating more than a few $100,000 each year for the first 3 years
• Not enough time in the day
• Hired Joe McCall to coach them. He recommended hiring an acquisition manager whose sole purpose was to generate deals

Advice for 50 Plusers Looking at Real Estate Investing

• Need to pick the type of investing that will help you meet “your goal”
• Start with “What does your perfect day look like?” – What is the lifestyle you seek?
• What do you need to generate (cash wise) to achieve that lifestyle
• Choose the market (population growth, economy)
  • Find a mentor in the market you want
  • Learn the market inside and out
• Learn how to analyze/underwrite properties
• Market to find the deals
• Find the money to do the deals
• Grow a rental portfolio

The Future of His Business

• Acquire 100 SFRs
• Buy multifamily properties
• Acquire more units
• Would not miss flipping
• Wants to continue to educate others

Rap-It-Up

• Favorite real estate book: Millionaire Real Estate Investor by Gary Keller
• Favorite business book: Rock Fuel by Gino Wickman
• Most valuable web site for success (other than your own): Facebook (most useful tool for connections and marketing)
• Favorite app: Slack (replacement for email)
• Favorite quote: “There’s always a correlation between diluted focus and a diluted bank account.”
• If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? He would use the $1,000 to live.  Too small of an amount to do much.  He, instead, would put together a list of private money lenders to loan him the full purchase price of rentals.  He would find the deals from wholesalers, realtors and property managers who he would email and call regularly.  Then he would piece deals together.

How Can You Reach Brain

• Just launched new podcast called “Virtual Real Estate Investing”
• fireyourself.net
  • Get a free book by Brian called “Fire Yourself” on how to hire your first acquisition manager
• virtualinvestingclass.com
  • Teaches free live webinar every Thursday evening on virtual investing

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Episode Sponsor: Meno Studio – menostudio777@gmail.com