Don Costa Shares How He Earned An Extra $1.2MM By Adding Wholesale in 2018

Steve Trang: Hey everybody. Thank you for joining us for today's episode of Real Estate Disruptors. Today, we have my good buddy, Don Costa with Flip Talk, and he flew in from Fresno, California to share how he started flipping in 2003. And last year added wholesale to add an additional $1,800,000 in revenue. If this is your first time tuning in, I am Steve Trang, broker and owner of Stunning Homes Realty, founder of the OfferFast Homes app, the only MLS for off market wholesale properties.

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Go into iTunes, subscribe, and give me a five star review. If you can write what you like about the show, that'd be even better. And this is a live show, so please post your questions for Don to answer. You ready?

Don Costa: I am. I'm good.

Steve: Alright. Perfect. So first question, simple, is what got you into real estate?

Don: Yeah. That's a great question, you know. And, you know, I think like a lot of us in this business now today, where I was an entrepreneur. That's what I wanted to do. It wasn't necessarily real estate.

Real estate just happened to be the path that made the most sense once I found it. So real estate is my widget, right, as an entrepreneur. What got me into it was, I just saw the opportunity for wealth. I saw the opportunity for being able to do something with my life that, that I didn't feel like I could find anywhere else. So

Steve: Gotcha. So when did you identify real estate? What's the way to go?

Don: About 02/2000, 2001. I I started really looking at real estate, taking it seriously to a large degree. I didn't really get into it until 2003 but I started circling it around 2001. I think mindset, like a lot of us, when we started in this business held me back for a few years. I thought that I had to have money, I thought that I had to have connections, I thought I had to have a lot of things in place to get going and so I circled, I went to auctions, I went and you know, I went and knocked on doors and talked to homeowners but never really pushed the domino over per se until about 2003.

Steve: So Now there was somewhere I think you're you're a bouncer. Like, what was your journey to your first real estate transaction?

Don: Well, I spent my twenties in in nightclubs and restaurants. So I was a bouncer. I was a bartender. I was a door guy. You know, I It's just

Steve: funny to me that picture you as the mean bouncer that's that's throwing people out.

Don: Well, I think that's that the perception is the mean bouncer. Right? Like, you know, my talent was talking people off a ledge. You know, talking people down. And that that's a talent that served me well in real estate too, solving problems.

Right? Yeah. So, you know, I'm not a big guy per se as far as height and everything else. So my talent was really the fact that I'm soft spoken, I'm not intrusive, you know, as as an individual, and so I'm able to talk people off a ledge. So but what got me really going in in the first, I guess, domino that fell over for me was I got married in 2003.

I was, I was between jobs. I had had had had quit my job, started a business. That business didn't work out. And, my wife basically was like, you know, you need to get a job. And I was like, I wanna go back to school.

And she's like, no. You need to get a job. And I'm like, well, I'm not gonna go work for somebody else in the capacity that I've been working for them. And you don't want want me to go back to school. I don't have any kids right now.

So I'm just gonna pull the trigger and try to get into this real estate investing thing. And I felt like that was my last opportunity because once I had kids, I wasn't gonna be able to do it. So I started interviewing mortgage companies. I wanted to learn about the, financing side of the business and I was actually honest with the gentleman, I was interviewing with. He asked me why I was there and I said I'm here to learn how the financing works so I want to start flipping houses.

Houses. He literally sits back in his chair, he thinks about it for a minute, he leans forward, he looks at me, he goes you go find some houses and I'll put up the money. And so looking back on it now that was that was more of a mindset shift for me. I went out and started knocking on doors because I thought I had one of the problems solved. I thought I had the money behind me and realizing now that I didn't need that guy to tell me that to be successful in this business, right?

But at the time You

Steve: didn't know that.

Don: I didn't know that and I thought that I needed that and that that became the power behind me, the wind in my sails. I started knocking on doors and realizing I was good at making deals happen. And so that's really what got me going.

Steve: Okay. So you're at that time flipping or

Don: Started flipping. Yeah. Mhmm.

Steve: Alright. So tell me about your first flip.

Don: So first, I first flip, well, there was there was a handful of them basically where I knocked on the door. I was acquisitions. He would handle the rehabs and, we'd split the profits.

Steve: That guy that was backing you.

Don: That guy was backing me. Well, there's a longer story of that because what happened was that was the way it was supposed to happen but he never sold the properties. He put his daughter in one, he'd do something else with another one, another one. So I never got paid but I was good at finding deals.

Steve: Yeah.

Don: And so what my first flip what happened, I had separated from that guy, was knocking on a door for a homeowner in pre foreclosure working on subject to which is something that was what I used for a number of years and I had a competitor there and she had gotten the property in contract. I was talking them out of the contract and, I went over to her and I was like, look, you have money and I'm better at you at this. So why don't you let me lock the deals up and you put up the money and let's put the profit? Yeah. And so she ended up funding me my first flip.

Steve: So Gotcha.

Don: Went in and did the rehab that I ran and I handled and I made a profit on. And for me, that was game on.

Steve: And that was 2,003?

Don: That was yeah. 2,003. Mhmm.

Steve: And how much did you make on your first deal?

Don: $25,000.

Steve: Okay. That's pretty good for a first deal. Mhmm. Right? Like, well, I've told people that are first getting the business, like, just don't even expect to make money in your first float.

Don: Right.

Steve: You know? So Right. That's a huge win.

Don: I had an advantage, though, because I started in 02/1945. And in that market, you could make all the mistakes in the world and still make a profit.

Steve: Time was on your side.

Don: Time was on my side.

Steve: Gotcha. So then what were some of your early struggles?

Don: My early struggles, I think, early on was getting out of my way and people and and the same thing most people struggle with. I was I was young, I was I was immature in in a lot of senses and and when it came to managing people and managing a business, I thought I had to control everything. That was huge. We were really good at identifying deals, really good at making money, really good at, at at at well, let me take that back. I thought I was really good at it.

Like I said, I was in a market where if it took you an extra month or two to rehab the house, you made more money. So I would say my early struggles was identifying flaws in my business because they they weren't apparent.

Steve: They

Don: were masked by the market.

Steve: Mhmm.

Don: And so like project management, people management, that was that was really the early struggle early on.

Steve: All your mistakes are

Don: covered up so you don't

Steve: really worry about that. All your mistakes are covered up. Up, so you

Don: don't really worry about that. Are covered up. Yeah. So they didn't feel like mistakes or struggles at the time. I felt like I was a winner and everything I touched turned to gold.

But the reality was I I wasn't running a solid business, and that was really, you know, the the issue that I had early on.

Steve: Okay. And then you were saying that there was this rise. So from 2003 to about 2008?

Don: 2008.

Steve: You had this rise and you're doing really well. You're feeling like an all star.

Don: Oh, feeling like a stud.

Steve: Got it figured out.

Don: Yeah. I was a rock star.

Steve: And then something happened.

Don: The market turned.

Steve: And what happened when the market turned?

Don: Well, you know, I had, I had started a real estate company, a mortgage company, probably a management company. I had three offices, 40 some odd agents. Oh. I wasn't paying attention to my core business, which I the one thing I was good at, which was real estate investing, flipping. I was a bottleneck in my organization.

Every decision had to come through me. I had opened a restaurant and nightclub with some partners. I was working on the sunglass line.

Steve: Sunglass line.

Don: Sunglass line. Money was going out in every direction. So when the market turned, nobody thought it was gonna be as bad as it was. Nobody thought it was gonna go down as quickly as it did. And I thought everything I touched turned to gold.

So I wasn't gonna be affected because I wasn't I was a tool. I was an idiot. And,

Steve: You're confident like a lot of us entrepreneurs are.

Don: Confident and so I just didn't react and my business was like a bolt with holes in it. It was just, you know, it was sinking and and it was sinking so fast you can't bail the water out fast enough, right? The money stopped coming in and the money was going out and suddenly I was insolvent and, it seemed like almost overnight and I just kind of started to lose everything. It started to fall apart on me and I tried to hold different things together and, you know, it was a really humbling experience, extremely humbling experience.

Steve: And it's something that there's some nervousness right now. So a little bit of anxiety. Mhmm. Like, no one's screaming that the crash is around the corner. And I don't personally believe that we're gonna have a crash.

Don: I think so.

Steve: But there are a lot of people right now that are flipping. Mhmm. What lessons can they learn from your experience in 2008? That's if they're a flipper.

Don: Don't speculate. You know, a lot of people when the market gets hot will bet that, you know, by the time I sell, it'll be worth $10,000 more. I think that's a mistake. You know, run your numbers on what the numbers are right now and if they make sense, do the deal. Don't don't bet the market.

Make sure that time is on your side so you get in, get out, get paid basically. You get in, rehab the the project, get it back on the market. Don't don't get to a point where you're not paying attention to your business and projects should should take thirty days, take five months,

Steve: you know

Don: what I'm saying? Yeah. Because time's time's what catches you. You know, if you're running an efficient business and you're in and out of projects, say an average of ninety to a hundred days when you're rehabbing, you're going to see the market shifts and changes. You're gonna be able to react to it.

If it's taken you six months to get out of a project or a year to get out of a project and the market starts to change, you know, and you got, like, 10 or 20 deep, you're not gonna be able to react in a manner that's gonna make sense and save your butt if you need to save your butt. So I would just say that, you know, make sure you got good people in place, good systems and processes in place, make sure you're managing your the time of your projects profitly properly and efficiently and, and don't bet the market. That's That's my advice. I don't think it's gonna crash.

Steve: Mhmm.

Don: You and I had this conversation in in Houston. I I feel like there's pent up demand and we might go on a little run. That's my bet.

Steve: I feel the same way.

Don: But, but again, I don't have a crystal ball. So it's just a guess. And I'm not gonna bet on that. I'm just gonna I'm just looking at a little more optim optimistically right now than most, I think.

Steve: So then is there, like, a certain amount of properties? Like, man, I don't wanna have more than x amount of flips going on at a time. Because, like, you know, there are people that have got 20 flips going on, 30 flips going on. Like, is there a number like, man, that is just way too risky?

Don: You know, I think that it's for every organization, it's wherever you start to see inefficiencies in your business. We got up to about 65 projects in inventory at the beginning of the year. And

Steve: 65.

Don: 65 projects in inventory in some stage of something going on. And, the wheels started to come off the bus in our organization. We started seeing cracks. I have this year three losses, that are gonna total about a $100 on three different properties, because of, you know, just some minor inefficiencies that happened in our processes.

Steve: It can sound minor.

Don: Yeah. Well, if you think about the volume we did, it's not it it's and and the fact that I it's been the seven year run and I haven't had a single loss. Yeah. It's not that bad. But, so we've had to pull back and make adjustments.

And I think that if somebody's smart about that, they're pulling back, they're making adjustments, they're watching their business, they're not just putting blinders on and on and thinking everything is gonna be okay, then I think they're gonna be fine. You know, for us, it's just we we we had to hit a point where we saw flaws. We're pulling way back. We're working through all our systems and processes. It's going through all of our pricing, going through all of our everything.

And then we're we're kind of rebooting everything and going again. So

Steve: Yeah. So we're in a mastermind together. And one thing you mentioned in the mastermind, if I remember correctly, is that every year, you like to tear everything apart Mhmm. And rebuild it from scratch.

Don: Pretty much.

Steve: So talk about that for someone that's in the business. What does that mean?

Don: Well, I you know, for I I think it's part of my entrepreneurial ADD that I will I get complacent. Right? But at the same time, I believe that complacency in your business is can be a death nail.

Steve: Mhmm.

Don: And so every year, I we tear it almost completely down to a large degree and rebuild it. Like, in 2018, we were having our acquisitions managers answer the phones, book their own appointments, and do that kind of stuff. We had we brought in lead managers and trained and did a whole new systems and process for lead intake, lead flow, follow-up, all of it. And, that was a significant change in our business and how it operated and how smooth things went. So, 2019, we decided we're gonna go 100% close over the phone.

Mhmm. And so we started changing all of our systems and processes again, kind of tore everything down, you know, rebuilt it. I kind of just teed everything up. I had a COO start in July 0. And teed everything up for her to come in and start kind of going through the business.

And even still, this year, normally, it takes me a quarter to kind of reboot. Mhmm. This year has been almost a year of a reboot because we're going through multiple change in how we're closing, change in how we're running things, bringing somebody in to run the organization. I need to let her have a certain degree of implementing systems and processes that work best for her and building some of her own team. And so but the change has been really, really good.

I think one of the reasons I continue to do it right now is because I I know that my business can be better Mhmm. Operationally. Like, I know I can get it to a point where it's gonna be able to run 100% without me efficiently and so all these changes are designed to do that. And instead of doing some major change all at once, we each year we kinda go, okay, this is the next step, this is the next step. And I think we're finally at that point where I'm gonna feel good about letting go.

We'll see.

Steve: Well, remember, once we feel good, it's when we get humbled.

Don: Yeah. It's when we get humbled.

Steve: So is it still then an iterative change? Like, are you making, like, subtle adjustments, or you're doing, like, massive changes?

Don: Through this year, it's more subtle adjust. The some of them are massive, but there's more subtle adjustments, you know. I don't think in the beginning of 2020, we'll make it look like we'll tear it down again like we did the last two years. Mhmm. But we're gearing like, right now, we're preparing to go into 2020, and the goals we have set for 2020.

And everything we're doing right now is building the efficiencies and systems and processes and training the sales team and and all of that to be ready for to meet meet the goal we have, which is, you know, pretty aggressive.

Steve: Gotcha. So one thing that, was impressive too, then we were speaking offline in Houston, was that you even though you had this horrible, I wouldn't say failure, but lots of bad things happening at the same exact time in 2008

Don: It was failure.

Steve: You were able to walk away from it without filing bankruptcy

Don: Right.

Steve: Which almost everyone

Don: Mhmm.

Steve: Filed b k at that time. So how did you do that?

Don: A lot of praying. You know, I I had a million dollar judgment against me from the restaurant closing down at the time. The landlord went after me for closing down the restaurant. I didn't have the money to pay an attorney, so he got an obscene obscene judgment against me.

Steve: The what? The judgment?

Don: Obscene judgment.

Steve: Oh, obscene.

Don: Obscene. Obscene. So, it was just under 1,000,000. It was like 900 and change. And that was really the one that was gonna push me into bankruptcy.

You know, everything else was was smaller. I knew that I could at some point in time settle it or

Steve: Wait. And these are were like friends and family, private lenders, hard money lenders. Who were these people that you're settling with?

Don: Probably not

Steve: settling but negotiating with?

Don: Negotiating with mostly mostly peep debtors, you know, like the landlord or different debtors were the ones that I was negotiating with a lot. I didn't really have friends and family money. I had private lender money. That was, you know, that was that was a tough one to work through and, you know, it it's it's definitely that was an eye opener. You know, I borrowed a lot of unsecured money.

Mhmm. I don't do that anymore. I everything I do is tied to a property and it gets paid off when the project sells because it gives you a false sense of security, you know? Mhmm. So but, the, the landlord was the one that was a tough one and I I actually he went after me in court several times, tried to pierce my corporations that I had set up to start doing real estate under and, I just kept hitting him with $25, $25, $25, you know, settle with you for $25.

And after about two years, he finally agreed to settle. I don't think he figured I would complete the agreement. We agreed to $2,000 a month for, I think it was like thirteen months and, or twelve and a half months or whatever it was. But anyway, we agreed to $2,000 a month and I think he probably thought I was going to pay him something and then then in default and he'd be able to go out and move for the rest but I actually honored that agreement and settled a million dollar judgment for $25.

Steve: It's not bad. So

Don: and that's that's really what kept me out of bankruptcy. Everybody else that I had to deal with for the most part, you know, has worked with me. So it it hasn't been it hasn't been detrimental in that sense. So

Steve: Gotcha. Okay. So then 2008, bad things happen. Mhmm. Through 2011, it was it was still rough.

When did you see sunlight or, you know, see light again?

Don: 2000 so 2008, bad things happen. You go into survival mode. You start looking at the pebbles in front of you instead of the big boulders that are gonna solve your problems. Right?

Steve: Mhmm.

Don: And, I went into fear and depression and everything else. I tried to find a job, couldn't get a job. And this went on. We had the restaurant. I was holding on to the restaurant and nightclub, and fighting with the city, trying to get conditional use permit stuff and stupid thing is, like, they want us to close at midnight and then they wouldn't let us have dancing and we fought with them for four years.

At the end of two thousand I think it was 2011, we decided to close it down. So at that point I basically, sunk into a chair in depression and didn't know what I was going to do, didn't have money, had situations like taking my family to Taco Bell and have my credit card decline, having to collect my family and take them out of Taco Bell, you know, with my kid basically asking me why the mean guy wouldn't give us our food type of thing and and just stuff that was like soul crushing moments. And, one day sitting on my couch watching news, I posted an ad on Craigslist saying you know, an experience flipper looking for a private lender, must be close enough to have a cup of coffee. And I had six people respond, one of them I met with probably a half a dozen times and, we just talked for hours but he never committed to backing me on a deal and it was the last conversation. I was sitting there with him at Starbucks drinking a Trenta iced black tea and it was about three hours into the conversation.

I had to pee so bad but I didn't want to leave the conversation and, I got a text from my wife that said that our water got shut off and I was sitting there and I was like if I don't close this guy in this conversation right now, I'm SOL, I'm done, right? So I had made a commitment. I was like I'm going to close him and I did. I got him to commit to backing me on a deal. By By the end of the conversation he's like go find a deal, I'll fund it.

I went home, thank goodness I had been rehabbing houses in the past so I knew how to turn my water back on. I turned it on and then found the money to pay the bill but he decided he was going to back me on a deal. I went out, I started networking, everything I could do, found a deal in June 2012, sold it in September 2012. We made $20, I got 10, it was gone before I even got it in my hand but I was back in business. It was proof of concept again and the real estate was going to work for me again.

Steve: Gotcha. And they just kinda kept rolling from there.

Don: Yeah. And we we I closed two deals, one November the November and the October 2012. And then, and then we closed a couple more right after the first of the year and just it started like one here, two there, three here, one there, you know, and just started perpetually building itself.

Steve: Now one thing I heard you talk about as well is not being a prisoner of the lender.

Don: Right.

Steve: You wanna talk about that?

Don: Not being a prisoner of the lender. Tell me that tell me the context where I talked about it because there's a lot of ways I can go with that conversation.

Steve: Well, basically, it's where once you realize the lender needs you more than you need them.

Don: Right. Because there's there's there's another way which is you need to control the project because you don't don't want 15 people coming in and telling you what color the cabinets need to be. That's that's one way you need to not be a prisoner of the lender but but that's more of a prisoner of yourself. Like a lot of people would when it comes to private money, they'll go in and they think they need to have this detailed explanation of a project and they need to come in and pitch this project and sell the lender on their project and how great they're gonna be. And, and they'll just tie themselves up in knots and be nervous.

And and I always say that you need to go in and understand that you both bring value to the table. You're on equal terms. Own your value in the conversation. They have money. You have a way for them to make money with their money.

So they're not better than you and you're not better than them. And so own your value in those conversations and that goes a long way, number one. Number two, go in there and have a conversation about goals and whether or not they align. Don't go in there to pitch a project because you're pitching a project, you're missing the point. The lender is not betting on the project, they're betting on you.

Steve: Right.

Don: So the conversation needs to be about how do our goals align? You know, where are we as far as being able to do business together, and does it look like it's gonna work? And if it does, great. Let's do one and see how it goes. Mhmm.

If you run your meetings like that with that kind of confidence, you're gonna have a lot of success getting private money.

Steve: Gotcha. And then, for someone that's newer, how can they negotiate a lower rate when they're borrowing from a lender? I mean, it's different when you got a trucker. Right? You got a trucker.

You can negotiate.

Don: You can ask for whatever you want.

Steve: Yeah. But if you're newer, like, how do you how do you negotiate? You

Don: know, again, I first, I wanna say when you're brand new, one of the most creative ways to borrow is joint venture with the lender, which is how I started. When you don't have money to stroke a payment, when you have money for a down payment, if if you go in with a lender and you say you put up the money, whatever it takes and I'll do all the work, whatever it takes, we split the profit, that's like the best way to get started. Mhmm.

Steve: That's how I started.

Don: You're covered. Yeah, I think that's the way most of us who are successful started. You can run your projects from a position of power, you can have your head right because you know the money is there. So that's my advice. Number one is don't worry about getting going, worry about getting that traction, worry about getting that experience the right way by having that problem solved.

Just have something to put up with the money and split the profit with them. That's how I think they should do it. If you are really worried to hook up on the interest rate, then I would say that you it still comes down to a conversation of you're the horse they're gonna bet on and you need to show them that whatever happens in their project, you're gonna get to the finish line. If you can make somebody comfortable with that, the interest rate is gonna be a non issue, you know. It's really going to come down to how can I make their goals as a lender happen for them, you know, in that project?

If somebody is completely unrealistic, say no, you know. Right. And and no has a lot of power, no has a ton of power. Somebody is asking for 16 points, you'd be amazed how many times I said no and people backtrack and said okay well what will it take? Yeah, I'm at eight, ten?

And then they say okay. It's like so there's a lot of power in saying no so know your value, sell them on you're the horse that's gonna get to the finish line, and then be willing to say no. And that's probably the best trick to getting the best interest rate regardless of where you stand in this business.

Steve: Gotcha. Now there's plenty of players in your area.

Don: Not like your area, but yeah.

Steve: Not like our area. Yeah. But, I mean, literally, Matt g is coming next week.

Don: He is.

Steve: Alright. So you got you. Yeah. Matt, I don't know how far you are from Michael Ray, in Modesto. How far is Modesto from present?

Don: Hour and a

Steve: half fresh. Okay. That's pretty far. But how how is your operation different than your local competitors?

Don: I don't know that it is completely different. You know, we Matt Matt has been more of a whole seller for a long time. We've done deals together back and forth. He does do some rehabs. I consider him a friend.

He's got a smaller operation, and in a sense, he runs he just runs a little leaner and, which really works for him. I I I more so I want people to handle most of it. So, so other than that, I don't know. I mean, we're all in the same market. We go off to the deals.

I'm extremely competitive. I think that's one of the ways that that my operation is different and I don't necessarily wanna say that out loud, but I am extremely competitive and I will I will go hard after deals, hard after marketing. I'll give my team permission to pay a little more and they probably shoot on things sometimes to lock them up. But at the same time, I think like other markets, there are a handful of people that, like, we're friends and will pick up the phone and say, look. We're both going against each other on this property.

It doesn't make sense to beat each other up. So, you know, let me take this one and let you take the next one type of thing. So we do have some of that going on

Steve: Oh, really?

Don: In our market. Yeah.

Steve: Well, that's good. Yeah. And so one thing that we've talked talked about too. Right? Like, you've been you've been doing flipping since 2003, and then a lot of flips.

Right? I mean, do you have an eye ballpark idea how many flips you've done?

Don: Since 2003? No. I mean, I know probably in a thousand plus. Ish.

Steve: Yeah. But in 2018, you decided we're gonna start wholesaling too. Mhmm. What was the reason for that?

Don: Because we were, going to I'd sent out 1,200,000 postcards in 2018. I was gonna go on a huge I'm gonna figure out exactly what works and track all my marketing crazy blitz. And when you're when you're rehabbing, it fits in a box or it doesn't. Mhmm. And everything else is garbage to you.

Steve: Yeah.

Don: And I felt like we were gonna be throwing away a lot of leads. I really struggled with adding the wholesale component. I felt like it was gonna cannibalize my rehab business. I felt like my my team was gonna take the easy way out on deals Mhmm. By doing that because they're two fundamentally they're different businesses in a lot of ways.

Steve: Yeah.

Don: And, so but I also knew that we were gonna have all these leads that we needed to capitalize on, and so we decided to go ahead and and see if it would work out for us. It was more of a let's just see what happens and it worked out really really well.

Steve: So Okay. So it did not cannibalize?

Don: It did. It had an impact. You know, I'm not gonna lie. It it had an impact on my business. You know, when you're rehabbing at a high volume, you need to be buying and selling, buying and selling, buying and selling for your capital cash flow, everything that makes sense.

And my DISCO guy got so good at getting the number we wanted on a wholesale deal that he got he got me saying yes to a lot more properties than I should and I created a gap. Mhmm.

Steve: And that gap had implications, you

Don: know, implications, you know, near the 2018, 2019, wherein our in our cash flow, you know, our organization, went from, you know, a 100 plus thousand dollars a week in gross profits to basically, you know, break even to to, you know, we're having to write a check on some things for about a month, you know, because of that, just the ripple. And, you know, that I saw it coming. I prepared for it. You know, we shifted to to wholesale a little bit more during that time to cover cover that capital gap. But, you know, a lot of businesses, if they weren't prepared, that would have really hurt.

Right? Yeah. So, so I we we created a we created a hole in in our in our flow and that had an impact. Did we mitigate it? Yeah.

Did we have we have we sense rectified the situation and found a little more balance? Absolutely. Yeah. So but, you can't touch water without making a ripple. Everything you do in your organization is gonna have an impact positive or negative.

And it did. We had to work through it. We had, you know, when we set the lead managers in, we had communication issues. We had to work through it. You know, we bring in a COO.

There's other issues we have to work through. So everything you do, every change you make in your organization, you just gotta know that even though it seems really, really good in the moment, that there are gonna be implications, positive and negative, and you gotta be watching for those. And that was huge for us.

Steve: So in 2017 Right. How many flips did you do?

Don: 2017, I we were, like, a 122.

Steve: Okay. And then what is your target profit for a flip?

Don: I mean, a target profit, we wanna be about 30,000 a flip on average. In in 2017, we were closer to the the the 20 low $20,000 mark. In 2018, we were $29,000

Steve: Okay.

Don: Per flip. Yeah.

Steve: So you so you switch, and then you go to 2018. So you had 129 flips. Is that what you said?

Don: 139 flips. 139

Steve: flips. And in 2018, how many flips did you do?

Don: Oh, no. 2017, we did 122. 2018, we did 139. Okay. And we did 50 deals.

Steve: You did more flips.

Don: Did more flips and we did 58

Steve: a wholesales. And you did 50 a wholesale. So, did it really cannibalize your business?

Don: Well, it didn't cannibalize, but it created, it created repercussions through the organization. Gotcha. If that makes sense.

Steve: Yeah.

Don: So, when you look at just rehab revenue, like I said, it impacted the cash flow. Didn't impact necessarily the revenue of the organization as a whole, but it impacted how we cash flowed our rehabs. Had we, decided not at some point the wholesale and just rehab, that would have organization. You can you can be losing money every single month if you're cash flowing. You can stay alive for a long time.

You can be profitable with no cash flow and you're out of business.

Steve: Right.

Don: So that's the point I wanna make is And I

Steve: think that's a really hard concept for most people to Right. Understand is that you can make money and be and go out of business.

Don: Right. Right.

Steve: Yeah.

Don: I've done it before. So I've done it before. So I'm really my biggest thing about my business and how I do everything is about cash flow, about, you know, having proper cash reserves, how how about running your business in in in a healthy manner and having proper cash flow through your organization. Yeah. And that's how I look at my business all the time.

So that's the reason why I wanna bring it up and just point it out that there's gonna be implications, good and bad.

Steve: Yeah. So for you guys who don't know what we're talking about, a book that helped me a lot really conceptualize this was Scaling Up.

Don: Right.

Steve: Right? I think it was like the Rockefeller Habits Rewritten or, like, two point o or something like that.

Don: I haven't read it yet, but it sounds like a good book.

Steve: Yeah. So, actually, I have my accountant who I met with today, who I've just recently converted her to be my CFO today. And her first assignment is to read simple numbers, which was the same guy that wrote the financial section of scaling. I was like, you need to read this. You need to understand it.

You need to run my business

Don: Right.

Steve: Or manage my my finances exactly how this guy says to do it because that was a book that came highly recommended by Rafael Vargas. Okay. So going back to your, to 2018, so you're about 29 k for Flip. Mhmm. And what about wholesale?

Don: 20.

Steve: 20. So why Flip?

Don: Well, okay. So that's a fantastic question because right now, it's I'm I I wanna say that I have a personal struggle with that. We may are making really, really good money in our market wholesaling, and it seems like a no brainer. Right? We had, a large 6 figure payday on a wholesale transaction, that we didn't even see that we closed via text message.

I'm like, why why are we flipping? But, the markets the market's changed. Yeah. Okay. I have I have private money available.

I have contractors. I have everything in place to be a good rehabber, all the systems and processes. And there's gonna be a point. Like, right now, we're taking advantage of the wholesale opportunities, but there's gonna be a time where you're gonna have to add value to move product. You're just gonna have to.

And I don't wanna have to reinvent the wheel there. You know, I wanna keep at least most of the infrastructure I have in place alive and healthy so that when the market swings back and I have to add value, I have the ability to do that without having to go out and hire everybody again and figure it all out again. So it took a lot to build it to where it is is right now.

Steve: And that's

Don: that's part of my that's part of my, I guess, struggle in letting that part of it go, and I I'm not gonna let that part of it go. I think I think it would be not unwise business move to do that

Steve: Yeah.

Don: You know, at this point in time. So we're again, it's balance. How do we keep everything functioning the way, you know, in a healthy manner, and how do we, capitalize on the opportunities in the market now? And that's that's the daily struggle.

Steve: Gotcha. Yeah. We choose not to flip at all.

Don: Right.

Steve: But we flip because there are some properties we can't move. So we made a commitment to the homeowners, so we're closing on it. And we do the bare minimum to get it to get it ready. So I guess then one thing you also mentioned was that you're going a 100% virtual now. Mhmm.

So what were the roadblocks or the, you know, limiting beliefs that transition you from going in person belly to belly to virtual? Because you're still in just Fresno.

Don: No. We're not just Fresno. We're not. No. We're we're, we've been Bakersfield to the Bay Area for a number of years now.

Steve: Oh, really? Yeah. Okay.

Don: Yeah. We're in multiple markets.

Steve: Alright. So you're flipping?

Don: Yeah. We could we could do the volume we do for just Fresno. That wouldn't happen. So but but we're we're we're rehabbing within, like, a two hour circle. Wow.

Okay. Everything else is is wholesale.

Steve: Gotcha.

Don: Yeah. Gotcha.

Steve: Okay. So then, you're driving two hours at one at at one point, closing these people and then flipping it. Mhmm. And now you're closing them over the phone and either wholesaling it or flipping it.

Don: Right. And then some of our markets are, you know, three hours away and so we'd have boots on the ground in those markets. Mhmm. So, the reason why we decided to go virtual was because I had boots on the ground in multiple markets and the thing is with boots on the ground is you have to keep them fed, right? You have to keep them busy, you have to keep their appointments booked in order for them to be successful.

You can't just be like, alright, you know, here's an appointment here and here's an appointment there. It doesn't work. They're not gonna stay with you. So all my marketing was geared towards keeping everybody, you know, everybody's appointments full And I looked at it and I said that doesn't make any sense as an organization. I need to be able to market when it makes sense to me as a company, not just to keep somebody busy.

Steve: Right.

Don: Even if they're successful in that market, it's still, you know, I shouldn't be doing a drop there for another month and I gotta do a drop there just to make sure that I have appointments for the the guys. So, that was one of the things that that kinda caused me to think, okay, there's gotta be a better way to do this. And so I started looking at closing over the phone, which some people are were already doing. Mhmm. But it that's a mindset shift in itself because everybody thinks belly to belly is where it's at.

And so we started testing it, kind of sticking our toe in the water, and I noticed that we were getting better deals. And I was like, why? You know? And and it's still my it's I don't have a proven theory, but my thought process behind it is that there's there's not that need to get the

Steve: contract before you leave. Mhmm.

Don: You know, there's you're on the phone and let let me call you back. Let me look at this. Let me do that. You know, there's not that rush to try to get the contract before you leave the appointment that you may overpay a little bit more or offer a little bit more. And I think there's even though there's emotional connection over the phone, I don't think it's quite as much of a tie.

Like, there's always somebody's always selling something on an appointment. Right? Mhmm. They're selling you. You're selling them.

And sometimes we're like, well, I really wanna help this person out so I'll give them a little bit more. I don't think there's as much of that over the phone either and so I think that part of the not needing to close in the first phone call and not having as much of a tie to the seller gives us an opportunity to buy a little deeper and that's what I feel like we're seeing.

Steve: So Interesting.

Don: Whether or not we're getting as many deals as we would if we're belly to belly, I can't say. Probably not. We're still doing a lot of deals, so I'm not gonna complain. But, what I what I am able to do is market in a way that makes sense to my organization now, spend the marketing dollars in a way that makes more sense to my organization. And, we're able to sit and listen to what the team's doing and listen to the phone calls and just have a better feel for the, the interaction and negotiations than we did when when we had boots on the ground, and it's helping our training processes and everything else.

So, and what it does is it allows me the opportunity to basically spread across The United States like locusts if I want to. Right? I mean

Steve: Right. You know, wholeheartedly. Yeah. So one of the other things I remember you speak to right in the mastermind was that you're you're consistently testing everything, seeing this is still like even though this was, you know, the way it was done in 2015, 2016, you're still testing to see if that's a seller case in 02/2019. So talk about that methodology.

Like, how are you going back and testing what's working, what's not working?

Don: We split test everything we do. If we change the list, if we change the postcard, if it's the, you know, first quarter, second quarter, third quarter, like, we're we're changing the phone number on everything we do. And we're we're split testing and we're running reports, you know, and looking at, okay, what were our calls, what were our appointments, what were our, contracts, what were our you know, now we're not doing appointments that change a little bit, but, you know, what do we make, you know, overall on this particular split test? Did we make any money at all? There there are some some split tests we did that we made $0 or some that we knocked it out of the Park.

Some of my split tests for DirectML, it was, you know, $1,800 a deal. You know, some of them were $5,000 a deal. So, being able to see that at a granular level is huge as an organization because you can you can figure out how to redeploy your capital each each year. And you wanna go back and test, but like things I I was able to see from 2018 going on 2018 you know we thought we had to mail every thirty days. You know in 2019 I see that mailing every sixty to ninety days makes more sense.

You know you know that may change in 2020, we'll watch. So, you know, we get to see those things, you know, and see, you know, which lists are the higher profit margins, you get to see like which lists are low hanging fruit lists, which lists are high hanging fruit lists, so the low hanging fruit are you get the call, you get the appointment, you get the contract, high hanging fruit is you get the call, you get to work for a little bit for the appointment, you got to work for a little bit for the contract, but it still produces. And so we get to see that so now we can stagger those in a way that allows our lead flow in our organization to make sense. So it I don't know if that answers the question or not, but

Steve: it doesn't make sense. So It gives

Don: a lot of clarity.

Steve: So for me, the challenge is right. Like, I love the idea of split testing, or I'm a marketer. I love the idea of split testing. How the heck do you manage that? Like, you got who's you're not checking the numbers.

No. You're not running the numbers. Who who's doing that? How are you guys split testing?

Don: So, I am actually I've been the one that through 2018 and most of this year have been the ones deploying the marketing. Like, I'm the one that sets everything up to go out because I wanted to make sure that that the the I guess, the control was controlled. And so but my I have Cass and, Natasha in the office. My office manager and her assistant, they're the ones that compile all the reporting on, you know, basically what's coming in, what split test produce what, what properties we buy, how much we make, and all that kind of stuff. So and then I get to look at that reporting.

So you

Steve: just gotta tell them how to do it?

Don: Just gotta tell them how to do it.

Steve: Gotcha. Alright. So and, guys, Don is a wealth of knowledge. So, please, if you guys have questions, ask. Fire away.

Jason Toledo wants to know why flipping over developing.

Don: I'm a time guy. And so in my market, you know, you got, you know, a couple months, couple, you know, two months of just plan check, you know, and then they might kick it back to you and you got, you know, resubmit and you got all that, you know, by the time you build something, you're a good year or more in to the project and I might get it out, get in and get out, get paid so that's one of the reasons why. The other thing is is that my main market where I have the most control our our dollar per square foot isn't all that great.

Steve: You know

Don: if I was in The Bay like and it's you know dollars a foot or $500 a foot to add square footage, then I would probably be adding square footage or building. But in Fresno, when you're, like, a buck 40 a square foot, you know, it doesn't make sense at the end of the day to spend all that time in developing a project, not to me at least as a as a you know, I I make far more money money rehabbing in Flaming.

Steve: Gotcha. Alright. Let's see what else was there. And Joey wants to know how did you turn your water back on?

Don: With the with vice grips.

Steve: Yeah. He's gonna pop the lock, Right?

Don: Yeah. Basically. They they they'd have this little wire thing. You gotta break it, and then that you might probably got a $45 fine for that. And then I used Vise Grips to turn it on.

I'm not gonna lie.

Steve: Yeah. I used to you know, when I used to do REO, I had to turn on an awful lot of water. Even though you ordered the water on Mhmm. The city hasn't made it out there. So Right.

Had a lot of practice with that as well. BJ, who wrote the Simple Numbers book, I honestly don't know. I just know it was the same guy that was in Scaling Up. And then Alvarez wants to know what database are you using for tracking, or how do you guys track?

Don: For our marketing? Mhmm. We're we're, all of our marketing is is in Excel. Every single, like, you know, the order, the quantity, the phone number that's tied to it, the split test, it's all in Excel. And then the reports there's I mean, Podia is supposed to do it for you.

I don't it's always imperfect, you know? So I, we always go through and just make sure our numbers are accurate and pretty much everything I get at this point is in Excel. I I wish I hope that there we can find a better way to do it, but that's where we're at right

Steve: now. Yeah. That's that's good to know, though. Right? Yeah.

You're still using Excel. Excel is still good. Rick Boyd wants to know, do you keep any of your deals? Sometimes. What, what conditions?

Don: I need to buy them, basically the same that I buy them as a flip, and they need to have a renter in it that's paying. So

Steve: Gotcha. Yeah. So I guess I answered the other question. CA, are you best at any buy and holds?

Don: Yeah. From your time.

Steve: So Michael Ray wants to know. There's something I know he's been he and I talked about a little bit. Should he create an agency or build a team under an agency to sell his flips? He's got this thing where he thinks listing agents are lazy. I don't know where he gets this idea that realtors don't wanna work.

Don: Well, I think like in any industry, there's the good, bad, and the ugly. Right? There's there's

Steve: the ones yeah.

Don: The ones that work hard and the ones that won't, but he probably just gets the bad apples.

Steve: Yeah.

Don: We we have a real estate. I set up a separate corporation in California. You can have a broker record for your corporation and your corporation is licensed to sell real estate. He manages all the agents underneath. Yeah.

So, I mean, Mike can do that. I love Mike by the way. He's a cool guy. So he can definitely do that. It's a shiny object though to a certain degree.

Like you need to have like I had somebody that was in place that was like, Yeah, I'll be the broker and I'll handle it. So unless he's got that in place I'd probably just, you know, try to build a good relationship with somebody he can count on.

Steve: Right. So you own a brokerage?

Don: I do. Why? Why not?

Steve: Because I own a brokerage. And mostly, it's less fun than it looks.

Don: It is. So control. We we did it. We have the only agents we bring in are agents that are seasoned, and we don't have to babysit and do their own thing. We give them, like, a 95% split.

And then the broker in or that organization basically handles, like, all of our, resales. He manages all of our our resale listings. So, it it's more so just for that, just to be able to have it, have access to the MLS, have act have have control of our listings.

Steve: Mhmm.

Don: And, and then we have the agents in the office and they produce enough to cover our overhead. It's not we don't use it as a profit center, but it definitely offsets costs Right. And, gives us some control. We never did it, designed it to build an agency, to build a brokerage. It was more so to be a piece to the puzzle.

And I think that's the reason why it works well for me is because it's not something I'm chasing with half my day trying to build a brokerage.

Steve: Yep. Makes makes complete sense. Matt Smith wants to know how are you defining success in a

Don: year from now? For for me right now, I spend more time with my kids. Honestly, I need to learn to shut it off, spend more time with my family unplugged, and then I want to impact lives as I can. So if I can do both of those in a year, like, just absolutely impact life, change lives like you, build millionaires, and, and spend more time with my family, that's that's success for me. It's not about for me, it's not about money.

Mhmm. I'll tell you right now, it it it's it's never been about money. When I got into this, it was about the hunt. I liked the hunt. I liked being able to get a deal.

And now it's just about the impact I can make. So

Steve: Makes sense. And I don't need to make a lot of money. I just need to make enough to buy the Cardinals. So

Don: Fair enough.

Steve: That's

Don: Alright.

Steve: That's that's that's a personal thing.

Don: Alright. I'll go in halfies.

Steve: How do you stand out from other wholesalers and flippers?

Don: I you know, that's a fantastic question. I don't know if you even thought about it. We just, we put our head down and do our thing and don't worry about other wholesalers and flippers. I mean, that's really what it comes down to. I I'm I'm competitive, so I always gotta have an adversary.

So I usually pick a target, somebody ahead of me. And then once I pass them, I forget about

Steve: them. Yeah.

Don: So but as an organization, we we just we try to be honest at the cool, do what we say we're gonna do, and produce a good product. And, you know, I can't say that other people don't do that, you know? So, I don't have a good answer for that.

Steve: That. You know. Trying to be the best version of you.

Don: Be the best version of us. Yeah.

Steve: Rick Boyd wants to know what's your favorite data source?

Don: To buy data. You know, we went through a lot of with that. I mean, lead source is a great source of data. It's probably one of the best ones out there. It can be pricey.

Lead source? Lead source. Lead source. I apologize. Yeah.

Bad word. List source. Thank you. Correct me. List source is is probably one of the best ones out there, as far as buying data.

There are there are a few more out there as well. We get some data from, some list brokers that do the, data aggregation or whatever where they're going through and figuring out, like, who's gonna sell and whatnot. I can't say 100% that I feel like that has paid off. Mhmm. We've definitely made our money back and then some.

So but we've made just as good money from ListSource and that person and the my postcard guy pulls our data for us and we make just good money off of that too. So, I think it I think good data is obviously very important but also making sure that you're deploying your marketing and tracking your marketing and following up on your marketing is as important or more important.

Steve: Yeah. Well, well, before I ask this question, is that Todd or somebody else?

Don: No. Not Todd.

Steve: Okay. So, we're talking about follow-up, and I know this is something that you love to rant on. Yes. So follow-up. Talk about the importance or how much how important follow-up is in your business.

Don: Follow-up is huge. And right now, it's especially huge. You know, I I was talking to, Christina Krause at, an event, and I was saying that follow-up was, you know, roughly 40 ish percent of my business. And and she's like, you know, I'd expect you to say 70 or 80. And and I walked away from that conversation, she's probably more correct in the sense that, you know, everything that's not booked an appointment on the first call is follow-up.

Steve: And

Don: Mhmm. Probably, I would say 90% of your business is that. Right?

Steve: Right.

Don: So, a large portion, at least half the money we made last year was was follow-up, you know. This year, it's a large portion. We got 18 contracts yesterday, total in for this month, and that was almost a 100% follow-up. Like all we're doing right now is just mining our database. Mhmm.

We're going through because we're doing all this new all these new systems and processes in in the sales side and I don't want to deploy dollars that it's gonna be thrown away. So I'm like go through the dirt. Just go through all the dead leads, all the all the cold leads, everything, go through the dirt. We pulled 18 contracts out of our dirt. So that's it's huge.

And that it's just an example of people are going for the low hanging fruit all the time, and there's so much gold in your database. And, and and I just that that's where that's that's where we're gonna concentrate. Like, we're gonna concentrate really hard on that. We're still gonna be doing all the outbound marketing. In 2020, we're gonna be doing really, really heavy outbound marketing, but I'm gonna have a team set aside just to mine the dirt in our database because that there's a ton of profit in there.

And if you're not doing it, you're you're you're dumb. That's that's the best way to put it. So, yeah.

Steve: Yeah. We incorporated, Scott's, FU Fridays.

Don: Right.

Steve: Right? Everyone comes in at noon. Mhmm. We order lunch, and they all have to follow-up.

Don: It's important. You're pulling deals out of that. Right? Yeah. Yeah.

Yep. It's it's huge. I I I met with a guy, and I always tell this story because it it's it it just such it had such an impact on me, but he had scribbled out this whole process on this whiteboard on follow-up. And I do not to this day remember the process. That's irrelevant.

Didn't matter to me. What mattered to me was how important he thought follow-up was. Mhmm. And I took that back to my operation that he thought it was so important. And in 2018, when we put all the lead managers stuff in place, we told him your primary purpose here is follow-up.

You know, we put all these systems in place. Acquisitions, if they don't put their notes in the system within seven days, we take lead away and the the the LM follows up and reassign somebody else. If they don't have it closes in thirty day, then we take it away and the LM starts to do follow-up and they can close it over the phone or assign it to somebody else. We started putting all these these systems in place and they start paying off in dividends.

Steve: Yeah.

Don: You know? And then this year, we're like, okay, well, we're doing these things and we need to test you guys out and test your skills out so let's just go in and mine our database and I'm like, 18 contracts this month from our database and I'm like, why am I spending money on marketing? You know? So You

Steve: had to market at some point. Right. Michael Ray asks again, are you a flipper first or a wholesaler?

Don: I am just somebody that wants to make good money and run a good business first. So what makes sense at the time at this point in time?

Steve: Yep. And then, wants to know, if someone's asking for retail too far from where you need to be, do you cancel the lead, negotiate it down, or move on?

Don: We for for a long time, we would send our acquisitions people out on the appointment, when we had acquisitions people because I've learned the hard way just because they ask for retail on the phone does not mean that's what they're gonna take in on the appointment. There's been many times where they've asked for retail on the phone and we've gotten a great deal on the appointment, so we don't cancel. If they have a heartbeat, if they say they're open to selling and they're they're somewhat flexible or negotiable, we would send our people out. On the phone now it's it's kind of the same thing but it's more it's we just keep them in in follow-up and we find that you know six months a year down the line we get the deal sometimes it's something as simple as now the comp has went up and it made sense.

Steve: Mhmm.

Don: They didn't want retail like one time a lady wanted 65 and our number was 60 and we couldn't come off of 60 it was as high as we can go and then eleven months later we bought the property at 65 because the comps went up. It made sense.

Steve: Yeah.

Don: So so I would say that I wouldn't kill it. I would I would for for me if you're going out on appointments, I would go out on appointments and use every John Martinez or every ninja trick that you can possibly every every, Steve trick that you can use on the sale appointment and and just throw everything out there you think is not gonna work. What do you got to lose?

Steve: 100%. There are things that we throw out there that are just crazy. Right. But you never know. Stevie wants to know what's your main marketing channels?

Don: Direct mail is is my primary marketing channel. We do we do some text with Lead Sherpa and we do we do a little RVM more for follow-up. We do some cold calling but 100% direct mail. I'm an old school guy. Direct mail is my primary data source.

Steve: Direct mail seems to be really popular in California. We got Scott. We got you. We got Todd Toback. Mhmm.

All you California guys really love direct mail. I don't know well, I I take that back. Rafael in Florida also loves direct mail. So maybe it's just a coastal thing. I have no idea.

Don: Maybe or maybe it's just we we've gotten to the point where we can deploy enough of it that it makes sense. Because you got with direct mail, you gotta be aggressive to to a large degree. What do

Steve: you mean?

Don: Well, I mean, you can't send out, you know, a thousand postcards every couple of months and expect to have huge success. You might pick up crumbs here and there, but you really gotta be consistent send out enough for it to make sense.

Steve: So how much do you how many are you guys sending out?

Don: Two well, twenty eighteen, I sent out 1,200,000 postcards, which is nuts because I spent $400,000 on paper. Yeah. It's hard to wrap my head around. This year will probably be about 400,000 by the end of the year. I wasn't as aggressive, but we we have a lot of follow-up stuff going

Steve: on that's really paying off. Gotcha.

Don: I love

Steve: it, though. Yeah. If you could quit your if you could start from scratch again, would you only would you focus on wholesaling or flipping?

Don: Well, if I was brand new today, I would I would start with wholesaling. I think eventually I would go into flipping. Look. The market wholesaling is sexy right now. And it might always be sexy but, you know, in 02/2010, I think flipping may have made more sense.

I wasn't in the market at the time. I was too scared to get in so I don't know but in a market cycle like that, wholesaling may not make as much sense. So I just want to make sure that when I say to people you got to be prepared to take on whatever the market dictates. Money is made when different market cycles change and you can adapt to them and so you gotta be in a position to adapt to them. So, you know, if you want to be a wholesaler now because it makes sense, great.

Put some pieces in place so you can take action to flip when it makes sense. If you're a flipper now, I think you're leaving some money on the table by not capitalizing on some leads you could be wholesaling because the market is right for wholesaling right now. So, but if I was starting out, the fastest way to check is wholesaling.

Steve: Yep. Completely agree. Matt wants to know, is there anything that gives you an unfair advantage?

Don: Matt who?

Steve: Matt

Don: Smith. The, just, you know, I think that, my mindset gives me an unfair advantage. There's not much that I'm afraid of anymore, as far as taking action. And, you know, we're willing to get in and fail and make mistakes and and learn from them and readjust. So, you know, that that probably just I guess my life experience.

I've already been through the biggest failure I could possibly be through. I lost everything. I mean, how, you know, what do I gotta be afraid of at this point in time? I know what not to do. So

Steve: Ed wants to know how should a newbie learn how to repair estimate repairs?

Don: That is a fantastic question because it it it really is market driven, to a large degree. But but, you know, the whole $20 a foot for cosmetic repair kind of holds true across the entire United States, you know. So I think if you do $20 a foot for cosmetic repair plus windows plus AC plus pool, you're gonna be okay if you're wholesaling because you're not closing on that property to get a get a good idea that it's not $5,000 to repair the burnt out kitchen. Right? So a 30,000 square so our 1,500,000 square foot house is gonna be $30 to repair.

I think that's a fair, but really getting into, you know, Home Depot and looking at thing what things cost and and and, you know, doing a little bit of math and doing a little homework and educating yourself is really the best way to do it. I mean, that's how I did it. I can tell you every floor plan and every home money depot in my market because when I got back in 2012, I was in every single one of them constantly. You know, I knew what a contractor pack of baseboard cost. I knew how many feet linear feet it was and I knew how many linear feet by average that an average 1,500 square foot house is which is about 700 and change linear feet.

So you start figuring that out, you know, and you get a really good idea of what things cost. It helps you with repair costs, it helps you negotiate with contractors. So educating yourself on what real numbers are, It's it's time and it's work. But, again, I think that $20 a foot for a good cosmetic repair is a good number to start with.

Steve: Yeah. Evan and Clay were out here. And, one thing they said I thought was a good idea was just call your person that you sold it to and ask them how much much did you spend in repairs.

Don: See, that's why I love those guys.

Steve: Right. And

Don: because they're smart. Yeah.

Steve: Not only do you learn Mhmm. But also your flipper feels like you care.

Don: It's true. And and the other thing too, you know, you can do when you're selling to to a a rehabber is to say, basically, you know, I'll I'll give you this this deal, but I want you to walk me through the project and explain what you're doing and why so that I can bring you better deals. Yeah. You know? Exactly.

So yeah.

Steve: And then Bernard Mac wants to know, what a successful step by step follow-up process. That might be too much too intensive a question. What a successful follow-up process looks like?

Don: You know, first of all, it is just shy of getting yourself put in jail for harassment. So, the successful so like I said, we to try to just define the whole thing is probably take too long, but Yeah. But we have this, like, you know, they come in, they don't book an appointment, they go into a sequence of, you know, we're gonna call them in a week, we're gonna call them in, you know, probably every week for a few weeks and every couple of weeks after that. If they get booked on the appointment and they cancel, they go back into a follow-up. You know, we're gonna call them every week and then every couple weeks until we get them booked.

If the AM didn't put the notes in the system for seven days, it goes back to follow-up. You know, thirty days on the contract, it goes back to follow-up. And we have different sequences for different scenarios with the property, you know, whether it we feel it's cold or warm or or dead. But everything, including dead, they call and say, take me off the list. They still go into some kind of follow-up sequence.

Yeah. We bought from those. The you know, six months later, a year later, somebody said, take me off the list, ends up selling to us. So, we do the, automated and because we have the Podio system. We do the automated text, automated email campaigns, but live, you need to be calling live.

Your Your people need to be calling and just building a relationship. You know, the biggest I would say the biggest advice to a successful follow-up system is real people. But that's I think in everything. Answering the phone, real people. The biggest success for our organization is we put real people in the seats answering the phone live, doing live follow-up, and actually having that that point of contact in our organization.

Steve: That's good. King Theas wants to know, are you using local or Filipino callers? We we're

Don: I have an office. We use local people. And I'm not a heavy, heavy cold caller. Like, we do cold calling to a certain degree, but it's not like that's we don't pound the payment cold calling. I wanna be clear

Steve: on that.

Don: Yeah. But I have an office. I'm I'm old school. I work out of my office, and we have about eight people on the phones.

Steve: And Spencer wants to know how do you know when to scale?

Don: Well, I think that's different for all of us. You you need you need to have a vision of where you wanna be and and you need to hire before before you are ready to hire people. You need to hire for where you wanna go. You need to do things for where you wanna go. So the, the answer from, I guess, from my perspective is it's probably different for all of us.

For me I hired my first hire on my first project when I had no reason to hire him and couldn't pay him anything. I just went this is the beautiful company I'm going to create, this is what you're going to make working for me, this is the life you're going to have and he went okay and I couldn't pay him. So but I knew I needed that component to my organization at some point. He was my project manager today. That's what I hired him for.

So, so I had that mindset right out of the gate that I wanted to put the pillars in place to hold my organization sound, and and that's it's gonna be different for all of us. I wish I had, like, you just know. But, I I wanna say the biggest mistake I think people make is they scale when they're not ready, and they they scale too fast too soon. A lot of people will will hire too many people, and then just try to let them go without any supervision and that's I've just seen so many people lose money doing that.

Steve: Yeah. Dedicating versus delegating. Right. Yep. Michael Ray points out that you lost a lot of weight.

Don: Thank you.

Steve: And he wants to know how that's changed you personally or mindset?

Don: You know, well, personally, I just feel better. Mindset wise look. I mean, I'm sitting here on podcast, and I'm talking to people about being successful, and I'm like a three hundred pound dude. Like, that those two things do not equal. Right?

So it was the realization that if I'm gonna have a conversation with people about how to be successful in business I need to look successful in my life right number one. Number two I'm a dad of three young kids. I'm in my 40s and they're you know teenagers and I have a five year old girl. I want to be around for a while. So, and it's giving me more confidence I think you know and in a lot of ways you know it makes me feel more comfortable in my own skin.

So everything you can do in your life to make a change. I mean I was broke and I built a business and now I'm making money. I was unhealthy and now I'm getting healthy. I mean everything everybody struggles with I struggled with too and everybody's watched me over the years make money, get healthy. I was terrified of public speaking.

Now I'm on stage. I was terrified of the microphone. I have a podcast. I'm sitting here with you. Every fear I've ever had, every obstacle I've ever had, it's documented.

You've watched me overcome it and it's made huge changes in my life, positive changes in my life and I just I want to say right now, Mike, like nobody out there has an excuse not to take action to have the life that they wanna have.

Steve: I completely agree to put that. So right now, what is your monthly overhead in your operations?

Don: A lot.

Steve: Couple $100?

Don: My my payroll is is roughly about $40,000 a month right now. Office is $3,000 a month plus insurances and whatnot. So my my fixed my fixed expenses, are pushed right around now about 50 ish

Steve: Yeah.

Don: A month. So, and then, of course, you got marketing and everything else that goes in that commissions. It's something that turns into a lot of money. Yeah.

Steve: Yeah. The cost of sales. Yeah. But you're happy to pay those.

Don: I'm happy to pay the money. Yeah.

Steve: Yeah. What is your biggest struggle right now?

Don: Getting out of my own way. I I have a couple couple of of struggles right now. One is, the same thing. I think we all I just gave this speech about not being scared and taking action, but I still have mindset struggles like everybody does. There are things that I feel like, you know, am I worthy of accomplishing that?

And then I gotta do the gut check and be like, yeah. You are. So that's number one. Number two is, you know, I was actually sharing this at lunch. You know, I I hired a phenomenal individual to be CEO of my organization.

She's doing a fantastic job. You know, she's she's going through our sales department and just rebuilding it to and, you know, she'll be going through my organization rebuilding it so they don't ever have to be there. Mhmm. And, I realized, you know, that that's like, I'm letting go of this thing that I spent the last several of my years years of my life building. I've been out of like I don't see the properties.

I don't I don't I don't know where they're at. I've been out of the day to day operations, but I've still been the one that held it together. Mhmm. And I'm finally letting that piece go. And that's probably my biggest challenge right now is is the realization that I'm letting go of this thing, and I'm actually struggling with it.

I'm actually struggling with am I really letting this thing go?

Steve: Yeah.

Don: And that's what I've always wanted. Right? So, so again, it's getting out of my own way and getting out of my own head.

Steve: You know, it's funny. About two weeks ago, my, my right hand person pulled me into the conference room. She said, I'm letting you go. Right? Because on our on our traditional team, you know, I'm still, like, involved somewhat, but she basically said, like Right.

You're clearly focused on the podcast. You've clearly focused on coaching. You're you're focused on public speaking. Like, I've got this. Right.

Go. And it was a little sad, but awesome that I have someone in place.

Don: It's like it's it's the weirdest balance of mixed feelings. Right? It's like, this is the coolest thing ever. Like, they got this, but it's like, I'm not needed anymore.

Steve: Yeah. You know? They don't need me. Yeah. So, what is your superpower?

Don: I am really I'm I'm a visionary, I think, like a lot of us. I am really good at seeing the big picture of something and then and then making it happen. You know, I can I can take something, build the process around, and hand it off to somebody else really, really well? I'm not just the visionary that can't get his hands dirty. So, my superpower is being able to see something and bring it into reality and then let it go, which is kinda contrary to what I just said.

Mhmm. The baby is hard to let go, but I've been able let go different pieces of my organization really well. And, and that's that's been worked really, really well for me.

Steve: So you sound like Michelangelo. You can see that it wasn't it takes like that. I the they're like, how do you how do you create these magnificent pieces? It's like, no. It's it's already there.

I just

Don: It's already there. Mhmm.

Steve: I just revealed it.

Don: Yeah. Yeah. I I don't wanna say I'm, like, somebody as great as Michelangelo, but yeah.

Steve: Alright. Fine. I'll go with maybe Leonardo.

Don: Yeah. Yeah.

Steve: Yeah. Is there a book that you've gifted more than any other?

Don: How to Win Friends and Influence People is probably it's the book that changed my life. A lot of people think that that Think and Grow Rich or whatever is where most people got their start, but I was, I was I was in in I had a questionable childhood, and I was I was hard to get along with in school. I fought a lot, with people because of things that were going on at home. And, I had a principal one day say, you know, you need to read this book and she gave me the book and the book fundamentally changed my life. Really?

Yeah. It it did and and, and that led me to Turn Grow Rich and then Turn Grow Rich led me to other books and then Rich Dad Poor Dad was one that I ended up reading. But that's the one that put me on the path and honestly, I mean, it's a dated book. I think they have updated versions. I made my kid read it, but if you want to be good at acquisitions, if you want to be good at business, you know, that book should be like your bible, you know.

It really, it really touches on just, you know, how to to interact with people and and win them over and, you know, and and and accomplish a lot of great things with your life.

Steve: You've got this, mastermind coming up. I do. What's that about?

Don: So we we have, put the group called Inner Circle Elite and it is, you know, basically we're we're we're kind of like a hybrid of your typical mastermind. We're not doing the hot seats you typically see. We're actually rolling up our sleeves and going to work on on each other's other's businesses and, it's just part of, you know, my wanting to change lives, my wanting to, you know, help people be better, help businesses be better, help people build better businesses. And, we're our first meeting is November. We're actually we closed applications.

We got enough people in the room for that meeting to be comfortable for the first meeting. But we'll be doing more in 2020. It's an annual thing and, it really if you want to be part of a mastermind where you're gonna roll up your sleeves and actually go to work on your business, not just talk and not just share but actually go to work, put a plan together, walk out with a ninety day action plan for the next ninety days till the next meeting, this is gonna be the group for you. And, the differentiating factor in this one is is operator. I have a business.

I know I don't have to ask you what your struggles are. I know what your struggles are because my business has them too. Yeah. And so that's I just think it's huge. And I feel like that, you know, I'm gonna be able to make a good impact with it, and I can't wait to to do it.

Steve: And I think you have a lot of value to give. And then on top of that, Ryan Shalaba's in there too.

Don: Ryan and, Mike Halper, Melissa, Johnson are all part of the founders of the organization. Ryan Ryan's a 26 year old kid who runs a phenomenal business. He runs in house construction teams. He's smart as hell and, you know, Mike's a superstar star sales guy. Melissa, you know, her husband Danny Johnson is the Flipping Junkie, Flipping Junkie Podcast.

They've been rehabbing for years. You know, we're all operators. We're all people that bring a lot to the table.

Steve: Yeah. Well, I don't know the other two, but I met Ryan, a couple months ago. Right. I'm just blown away, super impressed by him. So if someone wants to get on the wait list, how do they

Don: do that? Go to beinthisroom.com, and, there there will be a a button to get on the wait list. Just put your email in, and we'll let you know, when we open up applications again. So we had such a phenomenal we did a couple of Facebook lives, a little bit of Facebook advertising, and we had such a phenomenal response. I I'm humbled and overwhelmed, by that and we we're trying to build the right community so we are vetting people that you can't it's not a pay to play.

If you're not ready, if you don't have a real business right now, go ahead and get on the wait list and we'll send you out information when we have a, because we got some other stuff coming out that you might be interested in. But, but we're really looking for people that have their business in place, have been business for, like, a year and, that are doing deals. They don't aren't asking the basic basic questions that are really looking for the fundamental pieces to make their business work better.

Steve: Right. Makes a lot of sense. And then Matt Smith says you crushed it on the stage, your whole scaling life.

Don: I appreciate that.

Steve: So I'm gonna let you think about what last thoughts you wanna give, and I'm gonna make a few quick announcements. So, guys, Biloxi real estate round of life, that's this Friday. So if you guys wanna check it out, go to bit.ly/rerlive. And then I'm finishing the year in New Orleans with Chris Rude on December. If you wanna go check that out, that's skillathon, bit.ly/2019skill.

And then Max and I have been getting blown up about our workshop, where we go over everything in our business. And, we are we are charging 5,000 for the event. If you guys wanna find out how you can come for free, please visit disruptors.com, disruptors. And then next week, we got Matt g. Come is he in Fresno?

Don: He's in Fresno.

Steve: We got Matt g coming in from Fresno. So we got two flippers or two investors for Fresno Fresno back to back. So last thoughts.

Don: You know, I'd I'd get out of your own way. I think that's that's what I wanna share with people is is my my struggle when I lost everything as I was in my own head and in my own fear, and I wallowed in my own pity for way too long and I think a lot of people do that and I just think it's important for everybody on here whether you have a business and there's something you want to do that you're holding yourself back on or you're trying to get started, get out of your own way. It's worth it. It's gonna be hard. You're gonna struggle.

You're gonna fail from time to time. There There are gonna be days that suck but when you get to the other side it's so much worth it.

Steve: Oh yeah.

Don: And and it's just just do it.

Steve: Yeah. Yeah. And how can someone get a hold of you?

Don: Flip Talk, donfliptalk dot com. You can reach out to me. I do I do respond sometimes slow. You can find me on Facebook just about everywhere. I have a group.

I have a Flip Talk podcast page. I have a personal page. I'm at 5,000, I think just shy of 5,000 on my friends list personally. So if you want to follow me, you can follow me on my pages and and, and yeah, I mean, email me if they want to get a hold of me. Otherwise, just say hi on Facebook.

Steve: Alright. Cool. Thank you.

Don: Alright, buddy.

Steve: Appreciate it.

Don: Alright. Thank you.

Steve: Thank you guys for watching.