April 4, 2018

JF1310: Making $490k A Year With Flips - While Working Less Than 20 Hours Per Week with Elliot Smith

Elliot and his wife flipped 28 homes last year that made them $497,000, and they only worked 20 hours a week or less! In 2018 their plan is to work more and complete more deals. Hear how they were able to make that much money while working so little. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

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Elliot Smith Real Estate Background:

  • He and his wife (both 28 years old) own a real estate investment company, C&E Real Estate
  • In 2017 we flipped 28 homes with a gross profit of $497k while working under 20 hours a week
  • We believe in putting people first and profits second
  • Buy and holds, fix and flips, and wholesaling
  • Based in Vancouver, Washington
  • Say hi to him at www.summitthousebuyers.com
  • Best Ever Book: Pitch Anything

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Joe Fairless:  Best Ever listeners, how are you doing?  Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

With us today, Elliot Smith. How are you doing, Elliot?

Elliot Smith:  Good, thanks.

Joe Fairless:  My pleasure. Nice to have you on the show. A little bit about Elliot — he and his wife own a real estate investment company called C&E Real Estate. In 2007, they flipped 28 homes with a gross profit of $497,000 while working under 20 hours a week. Based in Vancouver, Washington. With that being said, Elliot, do you want to give the Best Ever listeners a little bit more about your background and your current focus?

Elliot Smith:  Yeah. That was actually 2017, so last year, not 2007. But what we’re doing basically is we go direct seller for most of our properties and we’re buying and rehabbing them, in Vancouver market and also Eastern Washington and Tri-Cities. We have a full partner in Vancouver that helps manage the rehab process, and then we’re solo in Tri-Cities. So we will wholesale sometimes, but mainly we’re just going direct seller, buying properties at a discount, and then fixing them up and reselling them.

Joe Fairless:  What are some of the most effective ways that you’re getting the homes at a discount?

Elliot Smith:  We basically do a lot of direct mail. Sometimes we do some cold calling as well, but for the most part I think what sets us apart is just our abilities when we’re actually dealing with sellers.  I think we have a lot higher closing rate than most people do, just because we can feel out what their needs and wants are, and help solve their problems a little bit better than most of our competitors can.

Joe Fairless:  Can you tell us a specific example, maybe tell us a story about you doing that – maybe the problem and then how you approached it?

Elliot Smith:  Yeah.  One, for instance, we sent a letter, the brother had passed away, and so we were buying the house from the other brother who was handling the estate. And when we went there to the appointment, there was not just us, but there was a realtor there as well. The property needed work, and so after dealing with them, the other realtor that showed up, she knew us and our credibility, so she was like, “Hey, you probably should work with these guys… Even though you could probably list it and get a little bit more money.”

Tt that point, we were able to solve the problem with no inspections, as is, and kind of abide on his timeline and be patient with him. The guy did nickel us up a little bit, but we still got a really good deal. But we were able to be there at the right time and not pressure him, not have to have a deal. I think that’s the important thing – if we get the deal, great; if we don’t get the deal, then that’s okay too.  So we’re never pressuring anybody to sell us their property. We just basically — when we say it’s on their timeline, it’s totally on their timeline, and we’re not pushing and pushing and pushing this on. We’re making them feel comfortable that, “Hey, we are the right choice; we are professionals, and this is how we can provide value to you.”

Joe Fairless:  How do you balance the desire to close deals with not having a pressured timeline?

Elliot Smith:  I think that balance comes from the way my wife and I live our life. We live basically debt-free. The only debt we have is our small mortgage and then rentals, and we live well below our means, and so we don’t have to close a deal.  So if we get the deal, that’s great, but if we don’t, we don’t need that to live. So I think that really sets us up for success in that realm because we’re not saying, “Oh, I gotta have a deal because I’m going to pay my car payment or my high mortgage payment or these things next month, because if not, I can’t afford it.”  And so I think that really puts us in a solid situation to be patient, and if the deal comes, the deal comes; if it doesn’t, then that’s okay too.

Joe Fairless:  Can you tell us the numbers of the last deal that you did?

Elliot Smith:  We have six going right now, that we’re working on right now. I can talk about that one that I was just talking about, how we solved their problem. We bought it for $110,000. We’re probably gonna be all into it for $50,000 on the rehab and we pre-sold it for 235k.  So we’re all in at $160,000, pre-sold it for $235,000, we take out a couple of commissions, we’re probably going to make right around $60,000, somewhere in there [unintelligible [00:06:28].13].

Joe Fairless:  Over what period of time from start to finish?

Elliot Smith:  We bought it in November and the only reason we haven’t closed on it yet is because of the 90-day FHA, so we’ll close in 95-96 days.

Joe Fairless:  You’ll close in 95-96 days — okay, wow. Three months, $60,000 dollars profit.

Elliot Smith:  And that’s a split. I have a partner in Vancouver, so I split everything with my partner.

Joe Fairless:  And how do you structure your partnership? Who does what?

Elliot Smith:  I’m pretty good at finding the deals and dealing with the homeowners, and he’s good with the homeowners as well. But we run the marketing, we run the phone calls, we run and set up the appointments, and he’s really good at putting it back together and managing the rehab process. So he’ll put them put them back together and then he’ll sell them, and then we’ll kind of split them 50/50 from there.

Joe Fairless:  You find the deals and you secure them, and then it sounds like he does the rest?

Elliot Smith:  He puts them back together and then he’ll sell them.

Joe Fairless:  Cool. Is that where the less than 20 hours a week thing comes into play, where you flip 28 homes but work less than 20 hours a week?

Elliot Smith:  Yeah. That was totally 2017. We moved back to our hometown, so we’re trying to do it. We’re going back and forth between Tri-Cities and Vancouver, but this year we’re kind of ramping up to try to work more hours just to build up our reserves more and learn more. Because a lot of the time-consuming stuff is — we do a lot of time-consuming stuff answering phone calls, doing the marketing, things like that, and then this stuff is time-consuming putting them back together, so we kind of split that up. And I also have my wife who runs half of our business, so put us both together and we’re probably working 40 hours a week. But she runs half and half for us.

Joe Fairless:  Got it. So between you and your wife, you’re working 40? Did I hear that correctly?

Elliot Smith:  She’s probably working 20, I’m probably working 20, and we work different times. I’m a very up and down salesman more like, and she is more linear to [inaudible [00:08:30], and so she’s way more structured, and then I’m more like, I’ll burn out, work all day, and then I won’t work for a couple of days, or I’ll just like do minimal stuff and then I’ll go golfing. And she’ll be like, “No, I’ll just work four or five hours a day, get my stuff done, the things I gotta do.”

Joe Fairless:  How come you three decide to fix and flip versus wholesale primarily? I know you do wholesaling, but why not wholesale exclusively?

Elliot Smith:  Because I feel like we have the opportunity, we have the financing and the money, that we can make extra money. Again, it goes back to we don’t need to make a check right now. So if we can hold it and flip it and we can make 5k, 10k, 20k, 30k more, then it makes more sense  to load a pipeline that way for us.

Joe Fairless:  What are some things that have evolved over your business as you’ve gotten the system down better and better?

Elliot Smith:  I think just dealing with the sellers has gotten better. The follow-up has gotten a lot better. We finally hired an assistant last year, and so she’s been a big part of our business. And then just really bringing the partner on, especially with moving back home and being two and a half hours away from Vancouver, my partner is invaluable. And so just the team, I think, that we’ve built over the last two years has really been the most important part. We’re way better as a team than we would be just my wife and I, and I think everybody adds so much value in their own core area that they focus on, and as long as we stay in those areas, then we’re very successful. And so just trying to learn that, and then also learning how to work with your wife, which is not the easiest thing in the world, that took a lot of time and learning the system and how to work together. I think it has really paid dividends as well.

Joe Fairless:  What’s some advice you have for someone who’s looking to start working with their husband or wife?

Elliot Smith:  I think that you really have to set your expectations who does what, and the biggest problem is I’m very visionary and she’s more like implementer, so if you look at it the wrong way in that you’re not equal and say, “Hey, you need to do this, you need to do this” and you forget everything they’re doing, then your wife tends to or your other partner tends to think, “Well, screw you. You’re not seeing what I’m doing on a daily basis. I’m doing all of the little things that have to get done, and you’re just trying to focus on just big things.”

So really trying to line out, okay, what are our roles, and who makes decisions in each area? So that’s really important. Somebody is the boss of something, but we’re both the boss together of the whole business. So on certain decisions we make decisions together, and then there are certain areas like marketing, the systems, managing our assistant, things like that, Christie is in charge of. And then I’m in charge of anything that has to do with the sellers, with the buying of properties, which properties we’re buying, what’s our plan, who we’re going to partner with, how we’re going to do it.

Then our partner in Vancouver, we don’t ever question him on what he does when he puts the houses back together. He is 100% in charge of that, because he’s way better at it than we are. Christie is good at it, but we tend to do too much, and he’s very good at like, “Here’s what it means, and here’s how we maximize our return.” So mainly just staying in your lane of what you’re doing, instead of trying to boss each other around.

And then also, the biggest thing that we have to get over is if we give feedback to each other, it’s not that we’re attacking each other, but sometimes it can come off like that, like “Oh, I’m attacking you” or “You’re attacking me because I’m not doing enough, or you’re saying I’m not doing enough, and I’m saying you’re not doing enough,” so it’s definitely hard, especially with our personalities where I’m kind of more that bipolar, super-high and super-low personality, and she’s a very linear personality. It was very difficult.

Joe Fairless:  Very helpful. Thank you for sharing that, that’s for sure. When you were talking about how your business has evolved, you said the follow-up with the sellers has gotten better. Can you elaborate a little bit more about that?

Elliot Smith:  Yeah.  When we first started, I was working 70 hours a week, so I only had time for the low-hanging fruit.  So if the seller – I knew there were some motivation factors, then I would push them and that would be the lead that I would chase.  But the leads that came through that were like warm leads, like “Hey, I might sell in a couple of months, or I might sell in six months,” I would forget about them, because most of the time I’d answer the phone while I was driving and I didn’t have a good system to follow up with them, and then they get lost, and then all of a sudden you’ve just wasted money on the leads.

I answer all my calls through CallRail. All our calls go through there. She’ll go back and listen to our calls and take notes for me, enter everything in Podio, and then actually goes physically on my calendar and sets appointments for me to follow up with people and what I need to talk to them about.  So she was basically forcing my hand to follow up with people, because I do forget.  So she goes through that, and then I also would not always put the correct information in the CRM, so she’ll go put the correct information in the CRM, let us know if it’s a lead or take it off the list, and then what we talked about, and then “Hey, you said you’d follow up in two weeks”, so then I’ll follow up in two weeks and try to go over that.

Joe Fairless:  What a smooth system. I haven’t heard of one as efficient as that.

Elliot Smith:  And then she’ll also sometimes — on leads that we haven’t heard from for a while, she’ll just go through and spend a day and just follow up with leads that we talked to like a year ago and just be like “Okay, just touching base with you” and just seeing if we can retrace and refine, find some motivation from people that we talked to a while ago as well. So she’s really good on the phone as well, so if I can’t do it, or if I’m out of the country, she actually answers the phones for us.

Joe Fairless:  From a legal standpoint, is it fine to record calls?

Elliot Smith:  You need to tell people that you’re recording the phone calls.

Joe Fairless:  Okay. Whenever they call, you’re like “Hey, I’m recording this, just FYI, for…” What do you say exactly?

Elliot Smith:  Just say, “This is being recorded.”  I have an automated thing on there that’s just saying “Hey, this is being recorded.”

Joe Fairless:  Do they ever ask you why?

Elliot Smith:  No. It’s just the same as like when you call into a top corporation and they’re like “Hey, this is being recorded for quality insurance,” I’ve never been asked why. Most people understand.

Joe Fairless:  Got it, cool. Good stuff. Based on your experience, what is your best real estate investing advice ever?

Elliot Smith:  I think really getting good at talking to sellers or talking to people, like do you have a heart for people, or are you just chasing a dollar? I think that’s really the key that sets us apart. Our whole team, we care about people first, and then after that, if we make a profit, that’s what runs our business, but we care about putting people first.  So we try to do the right thing. If we go into a property and the house is one we probably shouldn’t buy, they probably should list it, after we talk to them, we tell them that. So we never try to force people to sell to us, and so we actually care about people, and I think that’s an important thing to have.

Joe Fairless:  Can you tell us a specific example of when you walked into a house and you said, “This should be listed instead of selling to us” and just tell us why and some more details on that?

Elliot Smith: Yeah, and we do it pretty often. So we do the appointment and we walk the house, and basically we just have a conversation with the seller – what are your wants, what are your needs, what are your timelines, what are you thinking, what do you need to walk away with? …things like that. And if the house is in good shape and even if they’re borderline, like we could probably buy the property, or they could sell it on the market, if they can make more money and their timeline is working, they don’t need to sell it right away and the property doesn’t have that much work so it could finance, then we usually are very upfront with them. And we’ve actually bought houses where we were like, “Hey, you can probably get more money selling it as an open market,” and they say, “Well, we still want to sell it to you. What’s your price?” But most of the time, what you run into is people think they can’t sell it on the market, because they don’t have any money to do any repairs, and we’re like, “No, you can actually go this route and it would finance, or you could have some of these repairs fixed at closing.” So we do it pretty often, actually… That’s one example.

My partner also is a realtor, so he can list the property as well, so sometimes we’ll say that as well. But 75% of the time they’ll list it with somebody else.

Joe Fairless:   We’re gonna do a lightning round… Are you ready for the Best Ever Lightning Round?

Elliot Smith:  Yeah.

Joe Fairless:  Cool. First, a quick word from our Best Ever partners.

Break: [00:16:40].18] to [00:17:08].19]

Joe Fairless:  Best ever book you’ve read?

Elliot Smith:  I would say Pitch Anything by Oren Klaff.

Joe Fairless:  Great book. I highly recommend that as well. Best ever deal you’ve done that’s not your first and wasn’t your last?

Elliot Smith:  We bought one November of 2016. We bought it for $100,000, we put $40,000 into it, we sold it for $35,000, and we made $121,000.

Joe Fairless:  How did you find that one?

Elliot Smith:  Direct mail.

Joe Fairless:  What’s on your direct mail piece?

Elliot Smith:  It’s pretty generic. All our direct mail comes from Open Letter Marketing and that’s — if anyone wants to use what we’re using, that’s where they can get it.

Joe Fairless:  Do you have a process for doing a certain number of direct mail pieces to an address?

Elliot Smith:  Yeah, we just don’t stop mailing until they call us.

Joe Fairless:  Oh, really?

Elliot Smith:  Yeah, so we mail them every month until they call us. So that deal actually that I just talked about, we had mailed it for 18 months straight before they actually called us.

Joe Fairless:  Every month for 18 months straight?

Elliot Smith:  Every month.

Joe Fairless:  And what type of addresses do you put on your list?

Elliot Smith:  We have a pretty big list. We’re mailing 7,000-9,000 letters a month. So most of our leads are driving for dollar leads.  We’re just building our own lists. We’re driving around, building our own list of properties that we’re interested in buying.

Joe Fairless:  All 7,000-9,000, are those all that you’ve manually put in there?

Elliot Smith:  Yeah, I would say 85% of them were all that we manually went and got ourselves. We went and drove neighborhoods, and wrote down addresses.

Joe Fairless:  That’s a high-quality list.

Elliot Smith:  Yeah, it is high-quality.  That’s the thing — most people, they want to just order a list that everybody else has ordered, and send the same thing that everybody else is sending, and they expect to get different results. So then they’ll mail for 2-3 months and then they stop. We understand that it’s a long game, so we want to send quality letters, which we do, and then when wanna send it to leads that we know we want to buy.  Sometimes people are mailing the same place, but sometimes we lose them, and sometimes – the majority of the time, we’re the only ones there.

Joe Fairless:  So earlier you said you have a generic direct mail, but then you just said you have quality letters that you send out.  So can you elaborate on the quality letters that you send?

Elliot Smith:  It’s more just a nicer envelope. We do different letters sequences, with different things in the letter – so different fonts, different wording, and we just go through a process. And again, I don’t want to get in too much in detail just because I’m kind of part of a group that I can’t give too much detail in what it actually says, but for the most part, you’re basically looking to send a letter that says, “Hey, my name is Elliot. I notice you own a house at 123 Main Street. If you’re interested in selling, give me a call.”

A lot of times what you see on letters is people will send out family letters like, “Hey, my wife and I really want to buy your house. I really want to be in this neighborhood as an investor.” We try to make the letter more about them and more to the point than more about us, and that’s the thing I think that really works, because you see a lot of these letters that are all about the investor and the investor’s needs and what the investor is looking for, and it doesn’t really touch on anything where it’s like, “I can solve a problem, I care more about you.” Trying to get that across is not the easiest way, but if I’m getting a letter from somebody who’s like me, if it’s all talking about that person, then I’m like, “Why am I going to call you, knowing that you’re only looking out for yourself?”  Does that make sense?

Joe Fairless:  Yeah, it makes a lot of sense. I appreciate your sharing that. What’s a mistake you’ve made on a transaction?

Elliot Smith:  Oh man, I’ve made a lot of mistakes.  Sometimes I think the mistake is really when you get to the appointment and you’re talking price, and sometimes the person will say a price like, “Hey, I think it’s worth 150k” and you’re like, “Holy crap, I was going to pay 175k”, so you get too eager.  I’ve done that a couple of times, where I’m like, “Yeah, we can do that” instead of playing it like, “Hey, maybe we should actually try to negotiate.”  And so then they’ll be like, “Oh, maybe I sold it too cheap.”  So really it’s all psychological with people, right? If anybody goes there and they make an offer and they say a price, and the person immediately accepts it, then you’re going to be like, “Oh, crap, I sold it for too cheap.”  But if there’s a little bit of negotiation, you’re going to feel like everybody won.

Joe Fairless:  Has that come back to burn you in the past?

Elliot Smith:  Yeah, I’ve lost deals that way. What you do is you actually turn the sellers off. Then all of a sudden they’re like, “Now I’ve gotta go back and spend six months to a year rethinking this whole thing”  because they’re like, “Maybe I was selling it too cheap, maybe I don’t know–” and then they kind of put their head in the sand and say “Well, I don’t really know what I’m doing and I don’t know how to talk to you, and I don’t know…”  So trying to get them back to the table is not always the easiest.

Joe Fairless:  It makes a lot of sense.  Best ever way you like to give back?

Elliot Smith:  I love volunteering, so I volunteer coach on a third-grade basketball team. I like basketball and I like volunteering for junior golf. I’m a big golfer. And my wife and I like just giving back to the community. We gave ten $250 gift cards for Thanksgiving this year to just random people that were nominated on our company page. We adopted a family for Christmas… And just really trying to be a good friend and always being a person that somebody can count on and trying to do things for others.

Joe Fairless:  How can the Best Ever listeners get in touch with you?

Elliot Smith:  I would say Bigger Pockets or Facebook, you can find me on Facebook. You just write Elliot Smith. And our company page is Summit Development.

Joe Fairless:  And your company page – is that your company website, summitdevelopment.com?

Elliot Smith:  Summithousebuyers.com is our page, and then just Summit Development is our Facebook page. But I’m on Bigger Pockets and I’m on my normal Facebook page.  Most people have been able to find me. I did an interview with another group, and most people have been able to find me that way.

Joe Fairless:  Well, thank you for being on the show and talking to us about evolution of your company and some successful tips that we can implement in our business that have helped you. One is the follow-up, and the follow-up approach, having a process… You answer your calls through CallRail, take notes, and then your assistant listens to them afterwards, takes notes and enters them into Podio, puts them on your  calendar for follow-up, so it’s an automated process… As well as working with a significant other, setting expectations for who does what, because there will be a division of responsibilities, so it’s necessary to be clear for who does what. And then the direct mail piece for how to be effective. First, have a high-quality list, and holy cow, your list comprises of driving for dollar addresses that you’ve written down.  That is the highest quality list that I can think of.  And then make the letter more about the recipient and less about the sender.

So thank you for being on the show.  I hope you have a Best Ever day and we’ll talk to you soon.

Elliot Smith:  Thanks.

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