Technology should not replace people but rather activate their best potential and create structures for optimal scalability. In this episode, Eric Brewer discusses the keys to scaling your business in the real estate industry. He covers topics such as Novations, wholesale structures, and finding the best buyers for your properties. Eric explains how technology can help unleash your team’s potential and facilitate business growth. He emphasizes the significance of having the right personnel and utilizing technology to ensure everyone’s attention is on the correct tasks. Join us and learn how to scale your business with technology and the right people.

About Eric Brewer

Since 2006, Eric Brewer has done over 3000 residential real estate deals in both Pennsylvania and Maryland. His experience covers a wide range of deal types and strategies including novations, wholesaling, flipping, construction, direct-to-seller marketing, turnkey rentals, and property management. He is currently the owner of Integrity First Home Buyers based in York, PA, which does nearly 350 deals per year and is comprised of 40+ staff members.Since 2006, Eric Brewer has done over 3000 residential real estate deals in both Pennsylvania and Maryland. His experience covers a wide range of deal types and strategies including novations, wholesaling, flipping, construction, direct-to-seller marketing, turnkey rentals, and property management. He is currently the owner of Integrity First Home Buyers based in York, PA, which does nearly 350 deals per year and is comprised of 40+ staff members.

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Hey everybody, it’s Jordan Samuel Fleming here with another episode of That Real Estate Tech Guy and I am absolutely delighted that my co-pilot for today’s episode is a phenomenal investor and educator, Eric Brewer. Eric, welcome to the podcast. Give us a little introduction to yourself and the different things you do in real estate investing.

I started in real estate in 2006. After about an eight-year career in the car business, and just before the car business, out of high school, I spent and did my time in the US Army. When I got started in real estate, I was predominantly a fix-and-flip guy, buying stuff off the MLS, doing retail renovations, taking them to the MLS, and selling them. In 2008, obviously, the financial crisis happened. It got really hard for me to sell my inventory, but it got really easy to buy bank-owned properties, HUD properties, and short sales. And that was where I cut my teeth in real estate because, when you start in 2006, 2008, came like this. I was just maybe finally starting to figure stuff out, and then someone pulled the chair out from under me. 

Now, we have a business that does a mix of wholesale, Novation, turnkey, and fix and flip. I think last year we ended up with 397 closed deals. I keep maybe 10 or 15 rentals a year. So that’s the real estate investing side of our business. Over the course of my real estate career, I implemented EOS into my business about six years ago and recently went through scaling up certification with Vern Harnish and the Rockefeller Habits in an effort to really just empower myself to do a better job of leading my business and growing as an owner. I also went through the process of getting certified. I do some coaching and some consulting, and I have about a dozen or so folks that I do one on one coaching with. And then I also discovered Novations back in 2008, 9, and 10. 

It started as an effort to circumvent FHA seasoning requirements. And the seasoning requirements for FHA start when you record a deed. So I was trying to figure out how I could eliminate the recording of a deed when I took equitable interest or ownership of a property. And slowly but surely found that Novations could be applied to wholesale real estate. And last year, we did about 160 Novations at almost $4 million in profits without doing a single renovation on any of those. So I think that the big thing a lot of people have a misconception about is that historically, Novations were taught as a fix-and-flip strategy. What I teach is a wholesale-style Novation transaction on wholesale condition properties. But being sold to retail buyers.

Can you explain exactly what Novations are? Because I hear that term all the time from people. And I must admit, I love an accurate and succinct definition.

If you think about normal wholesale real estate, the mechanism that’s used as an assignment is, you get a property under contract, you assign your equitable interest to a cash buyer, and then the difference between the two is your assignment fee or your profit. So that mechanism works for the standard way of wholesale. In Novation, the actual language means a replacement or new. When we know they are an agreement rather than assigning it, this now becomes a lendable transaction, meaning we can sell to retail buyers using mortgages like FHA, VA, Fannie Mae. That’s the technical explanation of the difference. Assignment, your contract is still in play. You’re assigning your interest. So there’s technically two contracts in play. When you novate, you actually conditionally release your original purchase agreement in exchange for the new third-party retail agreement, which is financeable. That’s what creates the opportunity to take your deals to the open market and sell to a retail buyer at retail prices. That changes everything. It changes the way we analyze a deal. It changes the actual deals that go after because, typically, in wholesale, you go and you look for the most messed up house on the block. Normally, that is an indicator of some motivation and the opportunity for a discount. So when you start to do Novations, you no longer have to just buy ugly houses.

A conversation I have all the time with customers and with people on this podcast is all about the buyer, the methodology, the lists, and the way of finding the best buyers. And the wholesale structure is so dependent on you being able to know that you’ve got them in your pocket and being able to find someone who’s going to take over the assignment of that contract. This allows you to find houses on the open market. But you’re still not putting down the cash that you would if you were doing a fix and flip. 

A typical wholesale requires you to go to closing, fund the transaction, and close the transaction. And those are oftentimes very profitable deals. The challenge for that would be like in my market, where 75% of buyers are using FHA financing. Even if you were to close on that same deal and resell it, you’d have to hold it for at least 91 days before you can even write the contract. And then you have all this risk. If you bought something around May of this year and thought that you were going to wholesale it and it went to the market in July, it could have nosedived by 15, 20%. That’s why I say it’s a wholesale-style transaction because the risk is minimal to zero. It doesn’t require you to be like a lot of investors. 

We’ve taught this now to just over 300 investors. For those who are doing wholesale, it’s a very easy pivot because wholesale was really just a marketing and sales business. But to your point, a big part of wholesaling is building that robust buyer’s list. When you take your property to the open market by way of MLS, you have access to the world’s best buyers list. So that whole segment of the business is almost nonexistent for you. And you can focus all of your energy on locking up contracts on the acquisition side.

I’ve had Paul from Town Square on the podcast. And I had Eli from my Audantic the other day on the podcast. And both times we spent a lot of time talking about the need to find the right buyers and the understanding of what a good buyer’s list allows you to do when you’re looking for properties. The Novation side of things, allows you to essentially bypass that concern, knowing you’ve got a much wider market for a retail sale. 

I’ve spent quite a bit of time with both the folks at Town Square and Eli and Chris over at Audantic, and specifically, we dove into the demographics of the buyers, which they track at a super granular level. And the most active investor buyer is a new investor. They buy more property than any other Democrat. Say the guy buys zero to two properties a year, that investor buys more of the inventory than the folks that buy three to five, five to 10, 20 plus. They also pay the highest price. If you think about when we bought our first investment property, most people paid too much. So in the eyes of a seller, who better to get your properties in front of than the newer investor? A lot of times, they have FOMO. They want to get started. They’re eager, and as a result, they’ll pay more for a property. So what’s the second part of the majority of those buyers, when they first start out, are working with a real estate agent? They’re shopping the MLS. They don’t have direct-to-seller marketing. They’re not on a buyer’s list. Yet if someone’s never bought an investment property, they’re not going to be on a buyer’s list. So when you are able to take your properties to the open market on the MLS, you’re exposing it to the people that buy the most property and pay the most for the property when they buy it, which is a newer investor and a retail buyer.

Moving on to your real estate, right before 2008, that’s a school in itself. But that also means that you’re seasoned enough to have seen a lot of changes in a lot of ways in which technology has evolved for the real estate Investor sector, just massively. Can you give us a little more sense as you look at the real estate investment arm of your activities? How have you seen technology become either a greater factor or more integrated into your business as it’s grown?

I think it’s had a massive impact. And those that have been able to embrace the development of tech have been able to capture more market share, while those that have resisted it have probably forfeited some opportunities. When I started in 2006, my marketing budget was predominantly newspaper and billboard. The way that I would generate leads was with a good old-fashioned print ad in the newspaper on the side of the billboard. 

Today, while we still do billboards, we do not do newspapers. I don’t even know if the new newspaper is still in circulation. But I think social media has become the new newspaper. So everybody goes to see last night’s sports scores to catch up on their news or to see the latest breaking social events. And it’s also provided the opportunity. No one was doing nationwide investing, whether it was buying rental properties outside of their market or doing wholesaling outside of their market. 

Tech has provided the opportunity for people to comp properties, regardless of where they are. What I think from everything from lead generation, if you look at the developments that have taken place with like cold calling and texting, all of the software that allows investors to 10x their efforts when it comes to that stuff, PPC and Facebook, those marketing methods, and all the developments that have come through like targeted ads on those platforms, QR codes, the use of QR codes that we’ve used on direct mail, right where we saw, we would send direct mail and we had a phone number. Every once in a while, we’ll throw a QR code in there, and we’ll watch our web traffic drastically increase. We’ll watch our lead count increase as a result of that direct mail. Different driving for dollars apps, where historically that was done at a very manual level. Now you can literally take a picture of the property and the app will send six mailers to them, skip trace it for you. 

As an investor,  that’s a great way to lead gen at a very inexpensive level. For our CRM, we use Salesforce. I’ve invested north of six figures into my CRM, we have like 12 pieces of automated communication that go out to every single lead instantly when it comes into our system. And it comes from a call tool, or it comes from a web form. And then, through tech and API connection, it goes directly into Salesforce. It does not require any human interaction. So it happens literally like that. And oftentimes, with leads, he who’s first wins. You can be the best guy. And if you’re 30 minutes late, because you’re relying on a voicemail, or a Google number, that pushes leads to you, and you call them three or four times a day, you’re done. So literally, I mean, I look around our business, and you know, everything that we do, that provides an advantage to us like dashboards, we have dashboards and televisions, all throughout our offices that display our KPIs and how we’re tracking and where we might need to refocus energy. And there’s one in our lobby that shows every single day, when I walk in, where we are in regard to our monthly revenue targets. It shows the percentage that we’re at in real-time. Every time someone buys or sells a house, it updates that so everybody knows every hour that they’re in this office, whether we’re losing or winning. So I mean, tech is literally, there’s still that human interaction of this business. I think it’s the one thing that a lot of eye buyers have tried to figure out, whether they go 100% tech, and there still apparently needs to be that human interaction, but when you find the right blend of those two, you’re going to have a significant advantage.

To me, technology’s never been about replacing people. It is about activating the best potential. And creating the structures to allow scale to happen, because scale is where everything falls down. There should be a human element. I see technology as the method for getting everybody on the absolute optimum path. If you’re doing 300 and some odd close deals a year, then you’re going to have a structure in place of a human, and you’re going to have enough of a headcount that those tools are not just nice to have. Can you explain the difference between a management view of technology in that sense and maybe how someone on the acquisitions team may be focused? 

There’s a good friend of mine, Brandon McCurdy, that works with Sharper Business Solutions, and he says, “You know what, the use of tech and systems and process and its absence, it requires talent to overcome the lack of that tech or the lack of that process. When we have the right tech, and we have the right process, it allows that talent to only operate in their area of talent.” I think most people would agree that salespeople suck at follow-up. And we just treated them like a puppy, and we rub their nose in it and said, You know, I’m just gonna force you to stare at this until you behave better. We know follow-up is important. But if you think about tech, 75% of our follow-up is now automated. It happens at an automated level. When there’s required human interaction, the acquisitions agent doesn’t have to go search for her to call. The CRM says, Hey, you talked to Jordan seven months ago. Here’s the notes that he made about when he was selling, why he was selling, why he wasn’t selling now, and what’s important to him. We’ve predetermined that today’s the day that you’re supposed to call him and just have some dialogue. 

When you have good systems and processes, whether you have four employees or 40, those processes will allow those people to do the work that actually counts, not the manual labor, or the stuff that we have to do in the absence of tech or processes. When we onboard employees these days with tech, like Asana or Salesforce, their entire 90-day onboarding process is automated in that software, where they’re completing tasks and knocking out those milestones over their first 30 and 60, and 90 days. And at the conclusion. It’s easy for us to see that they’ve participated in all the training. They’ve gone through the milestones that they needed to complete in order for them to qualify to go out and start to buy homes, start to sell homes, or transition into their full-time position. So, yeah, processes. I mean, it’s literally when you see someone that wants to grow or go for business in the absence of tech, and the absence of process. When you scale, you’ll just be scaling chaos.

There’s a misunderstood or misconception around the follow-up and the automation. It’s not that you’re removing the agent. You’re letting them focus on exactly what they need to focus. It’s that you’re making sure that the human element who’s going to close those deals and talk to those people and build those relationships have exactly what they need to focus on at any given time. How do you look at the follow-up structures that you build in Salesforce? Do you ever go through a review process of tweaking those structures and tweaking those stairs? How do you approach that?

We assigned 12 different lead objects. From a priority perspective, number one gets communicated with first at a manual level. And then number two, what’s the duration and frequency that we want to communicate with each person? So we went through 12 different lead objects. Number one was a new lead, no contact. We said that when a new lead comes in, and we haven’t spoken to him. That’s the number one priority. So inside Salesforce, we assign that the top level of priority. If you have a pipeline of 100 people that you’re communicating with and a new lead comes in with no contact, this automatically goes to the top of the list. Number two was an appointment that needed to be rescheduled. So we thought that Hey, someone that came in, said, Yeah, I’d like you to come out and make an offer in my house and then cancelled and wanted to reschedule. We feel like they’re at least 50% through the sales process. The sooner we can get them back into the sales process, the better. 

We went through every single one of those circumstances, wrote appointments, maybe we talked to someone. Number three was like what we call it in the lead object, and Salesforce was pre-appointment or hot. So someone that we talked to had a meaningful dialogue and sounded, felt, and looked like a pretty hot lead. But they weren’t ready to schedule an appointment. So then we went all the way down to post appointment, hot post appointment, warm post appointment, nurture, and we assigned, wrote a priority to that and then said, Okay, so someone that’s post appointment. We went out to the house, we made an offer. We were physically at the house, they said no. And we think that they’re six months out. 

We have predetermined sequences that probably last, I think it was like 120 touchpoints over the course of 24 months for that lead. And 90% of it was automated, but to your point, maybe every third interaction, it would show up in that person’s pipeline. Hey, we’ve texted him, called him, emailed him four times. You haven’t spoken to him in 12 weeks. It’s time to give him a call. So that’s what we did. So what we found was like from the lead management side, if they worked an eight-hour day, they spent maybe three hours actually on the phones. The other five hours were a blend of screwing off and looking for people to call. Like, who should I be calling? So if you think about it, they would either literally have a stack of leads on their desk and they would start at the top of the stack and they’d work their way down. 

So the warm to cold stuff would just fall further and further and further down. And they would just stack because most of us in this business have a pretty robust marketing budget. We’re in love with new leads. So we just fill the top of the stack, but we never pay attention to the middle and the bottom of the stack. And through that automation, we’re able to communicate with lukewarm to cold leads consistently because if you don’t, if you talk to somebody today, you have a good conversation, you don’t buy their house, and you don’t really communicate with them effectively over the next six months, they’re gonna get another 10 postcards. They’re gonna see someone else’s billboards, someone else’s television, at someone’s Facebook ad. They’re gonna see a bandit sign. 

To me, follow-up is like installing a set of blinders on your clients so that as they go by a billboard, they go, No, I’m not gonna look at that. I’m already dealing with Jordan. Nope, I’m not gonna listen to that radio commercial. I’m already talking to Jordan. So what you do is effectively install blinders on people. When you do follow-up, they’re just not receptive to other people’s advertising. So it’s like running defense. And if you think about sports analogies, defense wins championships. I see follow-up as a defense.

I describe it to people as if you think you take a feather and you keep blowing it up, so that is the top of the pile. Because if you’re in their consciousness, at least every time they get a little text message reminder, it’s a little thing. It’s not that they’re there ready to buy, it’s not. But you’re just pushing that back up to the top into their consciousness. So that time where they’re like, Alright, I gotta do this. They’re like, I know exactly. They know they want to talk to you because you’ve just kept yourself within their radius. And that is such a critical sales tool that people give up on the way..

Fast Five Questions

1. What technology product has had the biggest impact on your real estate business?
   Salesforce CRM
2.  What’s the biggest mistake you’ve made with technology and your business?
   Not embracing it soon enough.
3. What is your best advice on how to integrate technology into your business?
   Hire someone that knows more than you do.
4. What is the one thing you wish you’d known when you started out in your business about technology?
   That I didn’t have to do it myself. We struggled with Salesforce for three years. It’s a huge beast law, the CRM czar, and they have massive capacity. They’re fully customizable. That’s also the downside. It’s fully customizable. So unless you tell it what to do, it will do nothing. So I think for me, we now have a full-time Salesforce engineer on staff, so when we want to get something done, what used to take me 60 days through Upwork and all these other consultants and stuff like sending an email gets done in literally two hours. Things that used to take us 60 days, take two hours now. So I think that’s that full commitment to saying hey, the quicker I can innovate and move and embrace and take advantage of tech, it’s a constant advantage I’m going to have, so just said, Hey, I want to get a full-time person here. That always gives me the ability to make things happen at the snap of a finger. That was a big, big win for me.
5. If someone was just starting out in real estate investing, what are three bits of technology you would recommend they bring on first?
   Some type of operating system like we use, whether it’s Monday, or Asana. Like a task management tool. And then, particularly when you’re starting out, the biggest thing you need to be able to do is generate leads. Texting, when you’re able to do it at a compliant level, is a super inexpensive way to generate leads. And the same goes for cold calling. It has to be done in compliance. You have to observe, like the Do Not Call list. You got to see a lot of people get in trouble, probably because they didn’t have the right tech, like the texting software that we use, the cold calling software that we use runs all of our lists through Do Not Call list, known litigation, and all that stuff. So we know when we go out and hammer the throttle on that stuff that we’re compliant. And we’re able to generate leads for a fraction of what we have to pay through inbound services. So I think if you’re just starting out those two things would really give you an advantage.

How to reach Eric Brewer

You can follow me on Instagram at Eric_Brewer_Invest.  I’ve been teaching Novations now for about two years. I caught wholesale 2.0. We used to chase down ugly houses from super distressed sellers who were willing to sell their houses at 50 cents on the dollar. What we’ve done with Novations is we’re now able to embrace the larger part of the seller population that doesn’t have a messed up house, doesn’t have a messed up marriage, and isn’t going to sell it for 50 cents on the dollar but might sell it for 80 cents on the dollar. Reach novations at brewermethod.com.

Eric, thank you so much for joining us today. It’s been an absolute pleasure having you.