Hey, everybody! It’s Jordan Samuel Fleming here with another episode of That Real Estate Tech Guy. And I’m delighted to have Rick Howell as my co-pilot for today’s episode. Rick, thank you for joining the podcast. Give a little introduction to yourself and what you do.
My name is Rick Howell. I’m a house flipper, a real estate rental guy, and all of the above here in Toledo, Ohio. And we mainly focus on fix and flips and buy and holds.We coach other real estate investors who are looking to systemize their rehabbing business or take it to the next level.
Compared to wholesaling, fix and flip is about money, tracking expenditures, and making sure you’ve got your finances right. How do you approach that? What are the ways that you manage that to make sure you’re making the most money out of a fix and flip?
Knowing your numbers. So that’s a really good question for the difference between the fix and flips and wholesaling. Wholesaling is a great way to get into real estate. With the fix and flips we found, we’re able to do a lot less deals and make bigger spreads. The challenge was getting to understand the numbers and how all those pieces worked and making sure we were buying right. We have a very systematic process from the time we close on a deal on the front end to actually selling the property, which we call our playbook. And it starts with a very detailed scope of work, both from the demo all the way to the actual scope of work of what’s going to be reinstalled in the property. And we’re able to dial down our numbers, usually within 10% from the estimate to selling the property. The way that’s worked over time is that we’re very boring. Every one of our rehabs is exactly the same. We use the same products and contractors. Generally, every once in a while, they have a shelf life, but we try to stay in the same realm of contractors for everything. We use the same suppliers, and we have a very cookie-cutter process, like an automobile going down the assembly line.
Fix and flip usually means a lot more potential rewards. But if you don’t get your numbers right and you don’t control the process, it can go really wrong. But to get a fix and flip basically right, you’ve got to preload with a good understanding before you make an offer. Is that true? And if so, how does that enter into your process?
When we first meet with a seller, we have tools. And every one of our tools is what walks us through the process. The first tool would be the Repair Estimator. So when we come through buying real estate, it’s totally emotionless. It’s all about numbers. So when we first meet with the seller, we find what their pain point is and see if we’re a good fit to work together. If we can solve their problem, and if we can solve their problem, what’s the exit we want to use, which we’d like to focus on fix and flips. That’s not the only exit we do, but that’s the most profitable. But it all starts with a tool called the Repair Estimator. So we literally walk through a home and check boxes of what we need to do to renovate it. After we get done checking all the boxes, we just simply add up the numbers, and if we’re able to get the numbers to where it’s in our Buy Box, and we can make a profit on it, then we’ll move forward with it on a fix and flip. We also keep other exits in our back pockets. Just in case we can’t move it on a fix and flip we can still help the seller get out of their situation. I’m licensed as well. We could list the property. We have a team of auctioneers that we work with. We have other investors in our network that can get better numbers with us because we sub everything out. So it might be a better fit to wholesale the property to an investor who maybe does all the work themselves. So we just try to give as many options as possible.
Technology is my primary interest in all these things. I’ve actually built repair estimators for fix and flippers before. And I remember the balance that you had to strike between the excessive granularity of an estimate and being too broad. How do you thread that dial? Is there a system you use in particular that does it?
That’s 100% true. When you’re first getting started, you will usually get caught up in the game of getting too caught up in the weeds, like you said, granular. Over time, you’re able to simply look into a bathroom and say – “Hey, this whole bathroom needs to be redone”. And I can put a number of $3,300 to do the whole bathroom. This all happens over time. So at the very beginning, it’s all about your team and making sure you’re partnering up with the right contractors that can give you good numbers to get started. That’s where I would start. Because you can get caught up in the leads of being too perfect. But I would say four or five flips. And you’re going to be able to look at each room and say within 10 to 15% exactly what you’re going to be in for that room.
If you’re looking at a fix and flip, you have the repair costs and until you sell it, you’ve got some element of holding costs. Until it’s sold it is essentially a drain on your finances. So if you are looking at a property like this, how important is the back end of ease of getting rid of it of a buyer network that you understand or the type of exit you think you can plan for your calculations?
We use other tools, and you mentioned one that is called a Deal Analyzer. And what we use to analyze the deal plugs in every single number needed within your holding cost. And that could be your taxes. That could be your interest on your private money loan. That could be all of your maintenance as you’re going through the process. Depending on where, and what market we’re in at that time, in this market in Toledo, Ohio, we’re shifting into the winter. So we know our timelines to hold the property could be a little bit longer while we’re going through the holidays and due to the winter times. Now, if we’re down in our other market down in the Tampa Bay region that doesn’t usually slow down at all maybe for a short period of time right around Christmas and New Year’s, but other than that, it just keeps rolling through. So we usually give ourselves a timeline with our model that we flip. It’s usually about six months max from acquisition to selling the property because our flip itself is dialed into it only takes six to eight weeks to get the job done.
We invested in a tool called the Rehab Valuator. That’s been perfect for us.
Tell me a little bit about why that particular product is such a good fit for you. What stands out to you for that product?
Simplicity. My background is in construction prior to real estate. So tech was not my world. So I needed simplicity, personally. And I also needed support. So a company or for all of the tech things that we use, we use many different platforms for our business. It's always about support when I run into a brick wall, which I always do where I can raise my hand to someone and say - “Hey, could you please walk me through this?” - and then we can turn the page on that. Plus with the Rehab Valuator, it allows you all the areas and the tools to plug in that you said granular. It lets you get really granular. And once you build a template for a house, the template really doesn't change, what changes is just the property address.
So for a fix and flip operation, you've got a lot of exit options you can offer a potential seller. But you still gonna have an element of lead acquisition. So what technology are you using? What systems do you have in place to make sure that your team can find the best leads whether you're spending on marketing, or you're getting inbound leads, and managing them?
Our first platform is that we have a dialer called Tools. We have a text platform. We use Lead Sherpa as our texting platform. And we use InvestorFuse as our main marketing CRM. So all of our different marketing strategies, whether it's direct mail with a specific phone number, call tools, or text, whatever it is, all funnel into InvestorFuse. Then InvestorFuse disperses it accordingly to where it needs to go. Once we have the lead come through the funnel and we decide we're going to write an offer on a property, once the offer is accepted and closed, it now comes out of the InvestorFuse platform and ends in the construction. Yep, we're in it. We're into the construction. And actually, it's another good thing for our construction aspect in managing all of our projects. We use a platform called Basecamp. We've built out just a project management platform inside of Basecamp that just allows us to duplicate project after project after project. Just another template process. Its design goal, which started in 2009, 2010, has always been based on the E-Myth Principles to be able to fire myself eventually. And because of all the tech stuff and all of the platforms that we've been able to use every going through the process, I've been able to fire myself from something. Before it was me on the cell phone, then a dialer, and then doing all this stuff. But as we improve our systems and processes on the back end, it allows me to free up my time to do other things.
You said all of your flips are the same. To me, what that says is, there's a good system and a good process in place. Because you found what worked, and you're gonna repeat it. So is it Basecamp that is allowing you to essentially build out the process of the fix and flip process?
Yeah, the Basecamp allows you to build out what you want. So from the second we close on the property, the project manager, then that first day goes out and initiates the playbook that's in Basecamp, which starts with a demo scope of work. And it just rolls right it's literally a checklist for everything all the way down to sticking the realtor sign in the front yard at the end of the deal. It just keeps repeating over and over and over again.
Having this more robust process and system in place, you mentioned you've been able to kind of spy yourself from bits of the process. But has it also meant that you've been able to start to scale more because of it? Or do you see that as a possibility?
Yeah, we've got the opportunity to scale it, especially with the way the world is going right now that the leads just keep growing and growing and growing and growing. We're a very small family-owned business. it's me, a project manager, I have a couple of cold callers and a couple of marketers. I should say they do multiple things. And then my sister that handles all the books and all the behind-the-scenes keeps us moving forward. So we have the ability to plug in more project managers if we choose. Right now we're getting in between, I think 30 or low 30 deals this year. And we're happy with that. I mean, it's great income, it's freedom, and I don't have a whole boatload of employees to deal with. I know people talk about scaling and they keep preaching about these big teams and all these sales. Maybe it's my age. I'm more about simplicity. And how much revenue can you drive with as minimal responsibility for employees and their families as possible. And the systems allow that.
There are going to be people who want to build a certain level of business to have a certain lifestyle that they want. And then there will be people who want to scale and all three of those stages are perfectly valid in themselves. But actually, if you scale, if you're able to use technology to scale efficiently to the level you want, it means you're maximizing profit at the level that you're most comfortable with.
Yeah, you're generating as much revenue as possible. I've always been taught. My first coaching mentor built their entire business off of the E-Myth Principles. Before I started doing coaching myself, I traveled the country and coached and spoke with another company that started with one flip. And now they've got a pretty big, pretty big fan, Merrill, where I worked hand in hand with and I learned from those guys for years. And I watched them build off of just stacking bricks on top of each other. But every team within that organization was based on the E Myth Principles of how we can improve this system to be able to fire ourselves from it and have it be able to run automatically. So that's kind of what we do just on a much smaller, smaller scale.
You mentioned the education element, the coaching element of your life as well. When you're coaching people, do you also bring them through the technology that will help them be able to deliver?
100%. The first thing we teach is the number one the only time I work with a student is if they have some sort of ability to marketing investment. Right? So if they have the capital to do a marketing budget. A lot of people that get involved in real estate, they get really involved, they invest all the capital they have. And don't leave anything left for the marketing budget. If they have some sort of expenditure to be able to invest in the things they need, if they need direct mail campaigns, if you need a dialer, if you need whatever platform works in your market, because every market is different. In some places, text messaging gets you nothing. In other places, text messaging kills it. So like in our market here, direct mail does really well. Well, if you invest all your money in a coach, and you have nothing to do with being able to drive leads, it's not going to work out too well. So that's kind of the fundamental base of how we build our coaching program is what kind of marketing budget you have to be able to start driving leads to your business.
When you do have people in your coaching program, are you also trying to drive them not just in terms of a marketing spend in technology like around dialing or texting or better, but where you got tools like InvestorFuse that you use or tool tools like your construction management or Basecamp? You're essentially trying to give them a playbook that they can run.
We open up the doors to our entire business. So we go through InvestorFuse, we go through the cold calling platform, which is called Tools. I highly recommend InvestorFuse. For me, we've been in with InvestorFuse since one or two or something like that. Since then, since the first got started. We don't deviate from that. And all I can teach people is exactly what we're doing. So I'm very transparent about that when we sit down to see if we're a good fit to work together. Often I found that people are really good at painting visions and this and that and everything. I'm not really good at painting a vision, but I can share with you exactly what we're doing, how it works, how you can take a three or four-man crew and make yourself a million-dollar business off using these systems and processes. That's all it is. When we first got started, I remember going to my first real estate seminar and everybody goes to the seminar and they tell you to go to the back of the room and all that stuff. And I was that guy 100%. Making the investment, I was a believer in what I saw. But then once I made the investment and got involved with the coaching, I realized, holy crap, I didn't know about all these other expenditures that were going to come. So it's all about just stacking bricks. So when I first got started, I learned it. You have to start with one thing. You're gonna wear all the hats while you get started. And eventually, you're going to take one hat off and hang it up as you go through the process. But the most important thing is to understand what you want your business and your lifestyle to look like. And that's where we start.
That Real Estate Tech Guy Fast Five
- What technology product has had the biggest impact on your real estate business?
- What is the biggest mistake you've made with technology in your business?
Trying to learn it from top to bottom myself without reaching out to the resources that were available.
- What is your best advice on how to integrate technology into your business?
First, find out what your pain point is that you need to eliminate. Okay, whatever process you're doing, that would be what we call a drainer. Find a way to outsource that and automate it with a platform.
- What's the one thing you wish you'd known about technology when you first started in real estate?
I would say the mindset of Done is better than perfect because when you first get started, you get thrown 50 different things that you don't know which one to go with. I would say choose one, implement what you've learned, find out if it works best for you and then move on.
- If someone was just starting out so brand new to real estate, what are three technology products you would recommend they bring on first?
First, I would say 100% InvestorFuse. Another, Rehab Valuator evaluator, and if they're just getting started - a texting platform. Lead Sherpa, that's that's all I really know. That's what we use, Lead Sherpa.
How to find Rick Howell
It’s @RickHowellREI on Instagram, as well as Facebook and Tik Tok.
Rick, thank you so much. And everyone, thanks for listening.