In this world of connectivity, outsourcing has become the go-to solution for many businesses. Yet there is still much to be said when you, as the owner, are hands-on because nobody knows the business like you do. In this episode, Jason Bible and Robert Orfino discuss the importance of not entirely relying on outsourcing and instead, being better at something yourself. Setting it against the real estate backdrop, they talk about their experiences of trying to outsource Airbnbs and the accountability process that comes with it. People can only take you 90% of the way, the 10% is how you can become better. Understand what it takes to outsource and its limits, and discover the key to business success.
Listen to the podcast here:
Be Better: The Key To A Successful Real Estate Business with Co-Host Robert Orfino
Rob and I were putting stuff together for a couple of different Airbnbs. Let’s call it the energy corridor Airbnb. I don’t want to give away that location. It’s a big secret. I had somebody send me a note. She works on the west side of town, has a handful of Airbnbs. She goes, “It’s good you didn’t mention the neighborhood and the city.” I sent her a little message back on Facebook and I said, “It’ll be our little secret. This’ll be between you and me,” and the hundreds of thousands of people that read the blog. It always amazes me when tenants move out and that was a relatively clean house, how people live. It’s always a shocker.
That was relatively clean. There’s a downward spiral the last many days where you stop caring. The problem is you had a cat in there, I don’t know if you allow pets, but there was definitely a cat in there.
I think there were birds.
Where there a lot of feathers?
It wasn’t the feathers, it was the seed. It had that little seed in there. I was like, “I think there were birds in here too.” It’s not bad. It’s funny when you go through the house. Maybe it’s the last few months they mentally checked it.
It’s a couple of weeks because then the focus is getting everything in boxes, not cleaning things.
It’s always a little bit of a surprise. Anyways, we’re covered. I love that little house. We bought a zillion houses over the years. There are only a handful of them that I get emotionally attached to that I’m like, “I like this little house,” and that is certainly one of them. We’re converting that one over to an Airbnb and we’ll see how it does. If it doesn’t work as well as an Airbnb, we’re going to convert over to corporate rental. To give you a little math on this one, we bought it for $50,000 and some change. We’re in $110,000 maybe into the house. A review of the comps, it’s worth somewhere between $180,000 and $200,000. It was flooded from Hurricane Harvey.
It’s in that magic price point below the median house price, which is where all the action is at. That’s where the fun stuff is at, median home price and below. That’s where we see all the appreciation. The problem is it only rents for $1,350 a month. What I’m trying to do is hold onto this thing for as long as humanly possible to the $240,000, $250,000 and then we’ll decide, “Do I want to pay the thing off?” It’s one of those little houses where it’s on a good side of town. I wouldn’t mind living there once the kids are up and out of school, even though it’s got a great school district.
You don’t want to live there.
It’s close to our other office.
They haven’t built the high-rise you’re going to move into. It’s coming. In a few years, they’re going to break ground and you’re going to be eyeing that thing up going, “Senior, junior, sophomore, four years.”
Let’s go ahead and buy one of those penthouse suites up there. Curtis is dragging me around to the Heights and I’m sitting there. He took me over to his house and I’m like, “I might need to start shopping. I might need to go ahead and buy that house here.”
Here’s my only question about the Heights. Can Sarah walk home from a restaurant at 10:00 at night alone?
No, Uber. You’re not walking anywhere.
Definitely your neighborhood, she can walk home from the community.
You can sleep in the front yard.
In my neighborhood too.
You could leave a $100 bill out in the front yard and somebody would pick it up and knock on the door and say, “Is this yours? I think you dropped this.”
There are not too many things in my life that I care about. A lot of them are motion, activity and making sure I’m not dying of boredom. I keep doing new things. There are two main things, my wife and my dog. I definitely fit that Texas profile, my dog. It’s like, “Wherever I live, here’s the only question I ask, can my wife and I walk home from a restaurant at night? Can she walk home alone?” My wife has a tendency to walk bad neighborhoods without being aware. She used to live outside of Detroit when I first met her and I’m like, “Let’s go ahead and build some shelves.” When you come out and you’re doing some guy things, you’re first dating, you want to prove your worth and like, “Why don’t I get you some shelves to help you with sorting your laundry closet. Let’s go to Home Depot.” We go to Home Depot and we’re in the hood. This Home Depot has a sixteen-foot gate just to get in the parking lot. It’s like the siege of a castle.
This is like when you’re traveling internationally and they put you in the American hotel that’s got the mirrors to put underneath the car. Before they even let you on the compound, they’re checking you for bombs.You can't outsource accountability. Click To Tweet
I’m like, “Do you normally go to this Home Depot?” She’s like, “I’ve been here a few times.” I’m like, “You are never coming back. Do you see the big yellow gate? That’s there for a reason.” She is painfully unaware if she’s in a bad neighborhood and she’s like, “I don’t know how you could tell.” I’m like, “Check cashing places. No brand name markets or brand name restaurants.” It’s like, “This taco place or this burger place or this little market place.” That’s what I think about Galveston. When you get to a certain block, all the brands stop. Even Taco Bell doesn’t go past a certain avenue. That’s bad. I don’t care what you’re telling me about the gentrification and how great it is, odd stuff, no. Corporations have decided not to move into that neighborhood for a reason.
One of my faculty advisors when I went through my security management program, which is criminal justice, he worked for Yum! Brands, which is Pizza Hut, Taco Bell. They’re the pioneers in those neighborhoods. He said they had to undertake this project. Do you remember when they introduced the Bigfoot pizza? It was this huge box. He said, “We have a couple of locations in Southern California that we had to figure out how to get the pizza through the bulletproof glass. I’m sitting there and I’m like, “This is crazy.” He started talking about all the incidents. He worked closely with the risk management team. It was mind-blowing. That’s when you start doing the mental accounting of, “If these brands are not in this neighborhood, we’re on the wrong side of town.”
Which makes me still feel a little concerned about some of our properties because I’m driving through the gardens there and I’m like, “I don’t see a Burger King.” You’ve got to go right over 610, there it is. McDonald’s is right there. Exxon is right there. I’m like, “We’re not that far off.”
The stuff is getting delivered to the house. We ordered $10,000, $15,000 worth of stuff.
Now we’ve got to get it together because when we do flips with apartments, from day one, I’m Airbnb-ing that apartment. I was thinking about that driving in, I was like, “I’ve had that thing listed for a few months. I’ve probably lost $10,000.”
Do you mean flip houses, not apartments?
When it’s listed for sale, I’ll do the apartment. I’ll stay in the main house, but I’ll rent it.
We’ve got a property down in the Heights that have got a garage apartment on it. That’s one of the reasons I like the Heights because you can get away with doing that. What’s cool is if you’re flipping the house and it’s got a garage apartment, immediately Airbnb the apartment. What’s nice too, if you’re flipping a house, you’ve already got this rental income coming in. If for some reason you need to refinance it, hold on to it long-term because maybe the deal isn’t working out, you’ve already got income coming in.
It would have been a lot less painful because that was a big carry. That was $6,000 a month carry. I’m like, “I could have probably cut that almost in half. I could have been breathing a little bit.”
I almost thought any houses we flip, we convert them to Airbnb. We got to stage them anyway.
For sure, that’s what we’re doing. The ones in New Jersey, I’m seriously contemplating. I’m 90% of the way there to put them on the market. I don’t want to keep remote managing for me even knowing I have a team. I know there’s a ton of equity in them, so I want to pull up the equity and finish off my debt. I’m like, “Block off Sundays and have showings on Sundays,” because the cleaner comes in any way.
Most of them are out Sunday afternoon anyways. Your business travelers come in Sunday night and have them check-in at 6:00.
You do your showings between 10:00 and 4:00 and Sunday. I got to put some brainpower to that. You know we do these bus tours and we have Fast Track on the bus tour and they are fantastic at what they do.
Elijah’s out there. He’s patient with everybody. If someone says, “What does this cabinet door cost exactly?” He’s nice.
It’s right off the shelf or you can get it milled. He’s like, “Why don’t you buy that door?”
He’s good with those questions that would drive me bananas.
We have our wholesale guy on the bus tour. He’s like, “There’s not enough room in this for Fast Track.” I’m like, “What are you talking about?” He’s like, “They’re going to blow the deal.” I’m like, “What are you talking about?” He’s like, “I only have $40,000 repair.” I’m like, “Elijah is about to go in there and give you a real kick in the ass. He’s about to tell you the real number on this.” That’s a big shocker for people and what we do in this class is we’re going to differentiate between a flip standard, a hold standard and then the nonsense that every wholesaler tells me.
This is probably one of the most critical ones for the acquisition part of it. Last time we talked about money and once you figured out money then you figured out money, but this one is going to be very serious. The Fast Track did the house that we were at, they don’t want Airbnb. You can tell it was done well. There are all these little things that they do that other flippers don’t do. They do the tile above the shower nozzle, which is a big thing. Most people don’t do the tile above that. They save on it because it was a pain in the ass to cut. You can see they did that. You can see the granite. Most houses I look at, I can see the granite, I’m like, “I think this is a Fast Track house.” They did a good job but that was designed for, “Are we going to put this on the market or not?” Some of the stuff we don’t have to do. You don’t need to put white shaker cabinets in all of your C-level rentals. You have to have that balance in there.
Some people have this belief that, let’s say I go from a brush nickel fixture to an oil-rubbed bronze that’s a couple of bucks more. Some of those trim pieces and some of those fixtures get inordinately expensive very quickly.
I found a little, I don’t even know what side of town it’s on, south of the 10, east of the 45. There’s a little supply house down there. It’s got three buildings all on different blocks and stuff. I went down there and I was looking at a kitchen faucet for $19.99. I was laughing. I was holding it and it weighed like a feather. It was all plastic. I was like, “People are putting these things in houses.” That’s the thing, you need to understand the material costs and what level you’re going to use. I was looking at that stuff saying, “I don’t want any of this stuff in here.” The guy doing our jobs was like, “It’s really cheap.” I said, “Let me look to see what cheap is.” On some of this stuff, it makes a lot of sense. On all that finished work, we’ll never buy a finished anything from here.Being a landlord is the easiest thing to do in real estate. It is mind-numbingly easy. Click To Tweet
There was a company, it’s here but it’s not here, HD Supply. HD Supply out here is for big civil engineering jobs, big mainline valves and things like that. HD Supply in California is like Home Depot and everything is 10% to 15% less than Home Depot. One of the things is they’re all Chinese products. The doorknob from Home Depot might have a diameter of let’s say four inches and the doorknob at HD Supply has a diameter of 3.25 inches. By looking at them, you can’t tell until my tiny hands engulfs the doorknob and I’m like, “What is this, a dollhouse?” You then realize everything is a little bit shaved. Everything has got a little steel shaved off, a little less copper and that was this place. I’m like, “We’re not going to do that.”
For the commodity materials because a lot of construction is based on commodities, on the commodities point, that was good. They cut that overhead. The little 1x1s that we use for the railings on the porch were much cheaper. We are very happy about that stuff, but the finished products were horrible. You’re going to get a guy who says, “I can rehab this at $10,000,” but he’s going to use all this sub-quality material which adds to your CapEx or you’re going to constantly be going back and fixing.
I think that’s the important piece. Let’s define quality when we’re talking about real estate. You’re putting non-durable products in your property. I’ve got vinyl plank flooring in this particular house. It looks great, but I noticed they scratched up like, “How did you scratch this up?” If there were any other product in there, it would probably be completely destroyed. Ceramic tile will be fine, which is funny because the ceramic tile that’s in there, I remember this when I was walking the house. We kept that in there after the flood. It was fine. It’s the only thing that will survive a flood is a ceramic tile.
In some of these places now, what we’re doing on these rentals is we do the ceramic and then we do a four-inch ceramic base. You could take a hose and clean out your dining room if you had to.
I feel a trumpet pressure coming on, but I don’t know for what. You’ve probably been to other landlord workshops. They probably tried to sell you a big package from Trump University that you must need in order to be a landlord. Being a landlord is the easiest thing to do in real estate. It is mind-numbingly easy. I think it’s simple. Wholesaling is hard. Flipping is the second hardest thing. To be able to do both of those things well, it takes a very sophisticated business. That’s what I had before, it’s not easy. Being a landlord, you don’t even have to know any of the numbers. You go and you put it in our contract, you take it to your lender, the lender tells you what it’s worth.
You get your contractor and he tells you what the rehab is going to be. You’re all within the option period, so you’ve got $100 at risk. You make a decision, “Are we going to buy this thing or not?” You send it over to Jerry Todd Property Care and say, “Jerry, look at this thing. What’s it going to rent for?” He goes, “I don’t know. We’ve got six other ones in the neighborhood rent for $1,400 a month.” You sit down and you put all the numbers on a spreadsheet, which we give you if you’re part of our group, and then you go, “Do I want to make $500 a month or not or $300 or whatever it is? Do I want to do this deal or not?” You’ve got a week to figure it out and you do the deal or you don’t. It’s that simple.
Jerry got me $1,405 for a three-bed, two-bath in Texas City. It’s the one up the northern part of town. It was one across the street from the other one, from the AHB one. I’m all in at $110.
He’s banging away on those duplexes I got, $1,100 to $1,200 a month. I’m like, “That doesn’t even make sense.” Whenever I talk to him, he goes, “We’re going to put it out there for this and let’s see what happens.” I’m like, “Okay.” Our properties are typically the best ones in the neighborhood anyway. It’s amazing what they rent for.
I find myself being deficient in this area, when to outsource and when to do it yourself. It comes down to who’s going to do it better based on the time available. That comes down to a lot of what we do. There are a lot of folks that will tell you to outsource everything, which I don’t believe. There are a lot of folks that want you to get VAs that are all over the world, which I don’t believe. There are very specific things that we look for from our virtual assistants. There are things that we want to do ourselves. Before I moved to California several years ago, I felt like I needed always to cut my own grass. Clearly, I could have hired someone for $40 a week or whatever it was to do that and that was not going to be a problem for me, but I felt like I needed to do that.
I’ve got a buddy of mine, he makes a ridiculous amount of money between him and his wife. He’s told me a zillion times when we’re hanging out. He’s like, “It calms you down. I have to do my own grass.” I’m like, “I don’t care. Do whatever you got to do.”
Moving forward, that’s a sweating 90 minutes in the summertime in Jersey. I’d rather take that 90 minutes and become better at something and it’s not lawnmowing. I could figure out the most efficient pattern because I had round trees and all this other stuff, but I’d rather take that 90 minutes of my time over the weekend and be better at something. If you’re outsourcing it, there’s a way to maximize your outsourcing, which you do you. We have property managers, but we have a property manager that manages the property managers, sitting down and making sure, “Where are we at? How can we maximize?” In that case, what we do with our properties, as we get these things up and running, we’ve got a number of different property managers. They all get a visit from Jason once a month or a phone call that says, “How do we make this better?” It’s always looking for improvement, “What happened last month? What was the $150 taken out of the balance for? It says Handyman and I want to know what.” How do I stop that from happening on all my other places?
I got this directly from Eddie Gant. He said, “You need to do this.” Here’s the reality, you can’t outsource accountability. That’s where people get messed up as they think like, “I can outsource anything. I could sit on the beach and play golf all day.” I’m like, “You can’t outsource accountability if you want to build a successful business.” If you want a successful real estate investing or real estate portfolio, you can’t outsource accountability. Somebody has got to be accountable and ultimately it’s your money, it’s your investment. Nobody cares about your money like you do. You can’t outsource that accountability, so somebody has got to check in every now and then.
We talked about that in the Airbnb class. One of the things we talked about was outsourcing Airbnb and there are a number of companies. We talked to a guy, he’s doing it, it’s great and the numbers look pretty good. I went up and I spent about an hour looking and here’s what they don’t do. They don’t maximize your profile. How can they? We spend an hour every morning making sure that our profiles and our pricing is where it needs to be.
This is in real-time. Our property management company does Airbnb, which is not available to the public just yet.
We’re struggling to figure out if we even want to put it to the public.
It’s a lot of work. There are a handful of algorithms that Airbnb runs in the background, but we also want to manage that process to decrease occupancy and maximize our gross revenue.
There are little tricks of the trade you have to do and you have to tweak it. You have to touch it every day. Not a lot of time, but you’ve got to touch it every day. You got to at least look at it. It can be five minutes or it can be for fifteen minutes. When we started having 75 Airbnb properties, it could be a 90-minute process every morning. I can only imagine these companies that are managing 200, 300 are not doing that. They’re not tweaking, as a matter of fact, we know.
I’ve always loved the Ace Hotel. I always thought it was a great business model. I think the founder passed away a couple of years ago, so their growth slowed a little bit. It’s an interesting business model.
I hadn’t looked at my reviews on Airbnb in a long time. My partners are tuned into that. The reviews are perfect. This mother and father talked about their three girls that came up for a softball tournament and everything was perfect that they needed. A washer and dryer, which was great, and it was heavy duty. This place was like a house and everything we wanted. We baked, we cooked. I’m like, “Absolutely perfect.” I’m checking on that stuff and then looking through.
Let’s go back to that. Do you know what’s amazing about the experience? They came up for a softball tournament. They probably had a great time, but they’re always going to remember the house like, “Do you remember the house we rented for the softball tournament? It was so much fun.”People can only take you 90% of the way; the 10% is how you can become better in your industry. Click To Tweet
There were board games sitting on the shelf, that type of thing. We’re talking about being better. We should talk about who’s accountable and understanding the accountability process. That’s a much more fine-tuned target. We have a great property manager for the stuff we’re doing at the beach. We’re overwhelmed by setting up at this point eighteen, twenty units we’re getting pretty close to here. Lights are coming in. Beds are coming in, all this crazy stuff.
I was vacuuming, putting the furniture together.
What sucks is that my back hurts so much at this point because every day I’m lifting something. I’m not in the strongest shape in my life here. Every time my back does a little tweak, all I hear is Tom Perry in my eyes saying, “Why wouldn’t you outsource that stuff?” I’m like, “Shut up, Tom.” He’s in my head every day. I’m lifting this couch, he’s like, “Why wouldn’t you outsource that?” I’m like, “I don’t know.” “You’ve got to get done now.”
That’s the thing is it has got to get done now, that’s the big problem. I’m sitting there and I’m loading up the back of my truck. My wife can help. She is stronger than most dudes, husbands. I can usually have her help me move stuff around the house. I’m literally squatting. I’ll get these mattresses and these beds all in the back of my truck. One time, I woke up and I’m like, “My hammy’s a little sore. What’s going on? I’ve been lifting all this stuff. These mattresses are heavy.”
That mattress is like you’re fighting it, like it’s going to swallow you.
You’re fighting the mattress, you’ve got to cut it open, you got to get all the stuff off of it. This is what drives you crazy about king mattresses. I can’t tell which way they go until I put them on a bed because they’re not quite square. Whoever designed the king mattress needs to be punched right in the throat. I can’t tell which side is the long side until you put it on the bed. These platform beds we have are so light that they’ll move with the mashes. I’m like, “You got to be kidding me.” You got to wrestle it around. The whole time I’m doing these Facebook Lives or taking these pictures. In the back of my mind, we’re going to use it for some social media thing and then I’m never going to do it again, unless I have to.
We almost have the team built.
It’s like, “Remember when Jason used to do this?” It’s like, “I remember that. I don’t want ever to do it again unless I have to.”
There are a lot of people out there that will get you 80% or 90% of the way. The last 10% is how you become better or proficient in your industry. We have a great property manager who’s taking care of the stuff for us fantastically, but there is a Monday through Thursday strategy on Airbnb, which he is not employing. There’s a Monday through Thursday strategy that we went over in our class. We said, “This is how we tweak it.” We are at 90% occupancy for a house in the middle of nowhere, and then we’re at 86% occupancy on that small house near the university. We’re doing fantastic, $13,000 gross from two properties in New Jersey. That’s the 10% that keeps pushing back at me like, “Are you sure you want to sell these?” I’ve got good rates on them. I’m going to sell them if I can get owner financing. I’ll do the owner finance on it. I want a nice deposit and then I’ll carry the note. My note said 4.50 or 4.37, so we’re pretty good.
Don’t get me wrong, he is going to get Friday, Saturday and Sunday or he’s going to get Thursday, Friday, Saturday. He’s going to get probably $4,000 to $5,000 a month for us. It’s perfect. The house, the mortgage is $1,900 and the overhead is maybe $700. We’ll make 100%. It’s a 50% margin. It’s wonderful but we could make $7,000, we could make $7,500 if we were a little bit better on that part. Unfortunately, time eats up so we can’t but when we get to it next spring, that will not be an issue for us. It’s a matter of identifying where we can tweak, where we can become better and where you can better allocate the time instead of pushing a mower to focus in on your landlording, on your flipping, on your wholesaling, whatever you’re doing.
I’ll never forget, I had to stop mowing my yard when I got into grad school. I was in grad school at night, working during the day and we were expecting our first kid. We had our hands full and at the same time, I had started investigating real estate. I wasn’t in real estate yet. That wasn’t until our second kid a couple of years later. You can imagine all this stuff going on, and then I remember distinctly having the conversation of when my wife said, “You can no longer mow the yard. You do not have the time.” To be quite honest, I was terrible at it. I can do a lot of great things but for whatever reason, I can’t mow a yard. I can’t get the edge right. The first time you get the guys to come out and mow your yard. It’s four dudes jumping out of a car. By the way, they’re doing your house, your neighbor’s house. They get it, they edge it, they weed it and 30 or 20 minutes, you stand there and you’re like, “What am I doing?”
They do three houses in a row in my neighborhood in about 30 minutes. I’m like, “That looks great.” It’s a $120 half-hour right there. How many stops like this can you get in a day? I know from the HVAC world that every HVAC truck on the maintenance side must make $1,000 a day. On the install side, it’s $2,000 to $3,000. You want to make $2,500 a day on your install team and $1,000 a day on your maintenance team. They run it by the truck. That’s our whole thing. Can we make $500 a day? Can you make $1,000 a day with everything you’ve got going on? If you make $750 a day, that’s a good living. That’s pretty good making $21,000, $25,000 a month.
You start figuring these out and trading things in and out and it’s like, “I think I can do this business. I got my twelve rental doors, that covers six days of my $1,000 and keep on going on.” It’s important to analyze what you’re doing, taking a look and find these little areas that you can be better. It doesn’t need to be this whole big make-over every single time. You don’t get to come out of the class saying, “I’m going to be awesome. I’m going to do this, now I’m this.” It’s taking the nugget and working on the nugget. That’s important. I hear a lot of people talking about, “I used to own these properties,” but every month there was something wrong. It’s like, “You ran it like a slumlord. That’s the problem.”
I hear this all the time where it’s like, “Real estate is maintenance-intensive.” I’m like, “My personal house isn’t. What are you doing to your rental properties?” That never made any sense to me getting all these maintenance calls. Why? Do you get maintenance calls at your own house?
There are little things like you walked by and you’ve already got to catch the eye of it. We have one property where they have a storm door on it and it doesn’t shut all the way. I’m like, “That’s got to get fixed. Put that on the handyman list. It’s got to be done now because when people start coming in, they’re going to complain about it.” The little half-inch gap lets in bugs and all kinds of other stuff. All doors need maintenance. The more they’re used, the more maintenance they’re going to need. We had Henry down there, he was on fire. There was a little gap. There was maybe a 3.25-inch gap above the front door. It’s like, “I noticed that gap.” I’m like, “You’ll get bugs from it.” I’m like, “The porch was kind of like.” He was like, “I’m going to bounce it. I know what to do.” He fixed it. Will that gap come back? Yes, but from the start coming in, we’ve got a good one year on the door. Becoming any landlord in general, you tackle these little things upfront. I can’t talk highly enough about Jerry Todd when he says, “Make every single light fixture carry A19, which is a regular 60-watt screw-in. That saves on so much maintenance.” I’m looking at my house, I’ve got probably seven types of light bulbs in my house. I’m like, “It’s time to upgrade.”
What’s funny is that our Airbnb in the energy corridor I flipped, I turn all the lights on the house and I’m like, “What temperature are these bulbs at?” Temperature is how they measure color in the light. I’m flipping all these bulbs on and I’m like, “I don’t like any of these blue ones because it’s not comfortable. It looks like you’re in surgery. I’m like, “We’ve got to switch all these out to a softer temperature.” I’m sitting there looking at that. I can guarantee you what folks that are doing in Airbnb classes, they’re not teaching any of that stuff.
People get uncomfortable. The other thing is I’ve seen different light bulbs that affect people. Women get headaches from different types of light bulbs. You’ve got to be on top of all that stuff, being better. Give me a text at (281) 401-9008. This has been the Texas Real Estate Radio Network. Have a great day.