Best Ever Tweet:
Brian Elwood Real Estate Background:
– Business Coach, Real Estate Investor, Entrepreneur
– Does 75+ rehabs per year and owns 25 rental properties in Middle Tennessee but resides in Denver
– Passionate about business development and helping entrepreneurs
– Based in Denver, Colorado
– Say hi to him at BrianEllwood.net
– Best Ever Book: 4 Hour Work Week by Tim Ferriss
Click here for a summary of Brian’s Best Ever advice: http://bit.ly/2nZJzXU
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Joe Fairless: Best Ever listeners, 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 podcast. We only talk about the best advice ever, we don’t get into any fluff.
With us today, Brian Ellwood. How are you doing, Brian?
Brian Ellwood: I’m great, Joe. How are you?
Joe Fairless: I’m great. Nice to have you on the show, and looking forward to digging in. Brian does 75+ rehabs a year and owns 25 rental properties in Middle Tennesse, but lives in Denver, Colorado. He is a business coach, real estate investor and an entrepreneur. You can say hi to him at his website, which is in the show notes link.
Brian, do you wanna give the Best Ever listeners a little bit more about your background and your focus?
Brian Ellwood: I lived in a bunch of different states growing up, but Tennessee from sixth grade on, went to the University of Tennessee, graduated and moved back to Nashville, and that’s where I started my real estate business. That was 4+ years ago or so from now, and two years into it we started to build the business to where we can run it from our houses, without having to leave our house, but investing in the same city.
Then we decided to test that theory and moving across the country. Now I live in Denver, and we have a team of about 10 people that live in Nashville. Not everybody does… The marketing guy would not need to be local, but your sales guy would; certain people are boots on the ground, other people are not.
I really have a passion for creating passive income and for teaching other people, helping other people get into this business and create the lifestyle that they want to live.
Joe Fairless: I wanted to talk about your responsibilities now, as someone who does 75 rehabs a year and owns 25 properties and employs 10 people. How do you spend your day?
Brian Ellwood: I have a 50/50 business partner, so the work is divided up between the two of us. I am over marketing and finances and operations, and he is over sales and renovations, so we kind of divided it down in the middle. It’s kind of like we have two CEOs on our org chart.
My day is basically spent working with our marketing director, working with our CFO and our COO. I know these sound like big, fancy titles; the marketing guy and the COO are the same person, okay? [laughter]
Our COO, he spends one day of the week working on operations and four days on marketing, because marketing is more important to a business of our size. So I’m on the phone with them for several hours a week, and I’m focusing on our vision for the year and holding them accountable to getting certain results done by certain times.
I should also throw in there that 75 rehabs sounds really intense, but we don’t do expensive rehabs. We have, and we have a couple more going on right now, but over time we’ve decided that $10,000 or less is the sweet spot for us. We focus on being a marketing and sales organization at our core, so the backend monetization has to be kind of simple, because you can’t really be great at every part of it, at least not in the beginning… So that decreases the simplicity a lot.
A lot of times we’ll just do five, seven thousand dollars… Just trying to get properties in rent-ready condition, put it back on the market; either a landlord would buy it, or someone who wants to move in and finish the renovation will buy it.
Joe Fairless: So you’re staying away from the big time distressed properties and you’re looking for something that just needs some lipstick?
Brian Ellwood: It’s not that we wouldn’t buy a big kind of distressed property, as long as there’s equity in it when we buy it, as long as we can get it for a discount. It’s just that we’re only gonna put the first ten grand or so that it needs into it, and then put it back on the market.
If it was really distressed and needed to be torn down, we wouldn’t do anything to it. We would just buy it and list it as is. Sometimes it doesn’t make sense to put any money into a property, but in our experience, running a business virtually is tough when you’re putting $110,000 into a rehab and they’re opening walls and finding all kinds of different stuff.
We have a great team there, the project manager and another guy who oversees all the projects, but we’re just trying to create a more focused business model. I always hear the mantra that “Focus makes you rich”, so we’re not trying to be great at everything.
Joe Fairless: What usually comprises of the five to ten-thousand-dollar rehab budget?
Brian Ellwood: It’s probably like paint, carpet, [unintelligible [00:07:13].28] just cleaning it, taking out all the trash, doing some landscaping… It could be like windows, if the windows are broken out. If the property is gonna be listed and it’s gonna be sold to a homeowner, someone who’s gonna live there, then you’re gonna just do the first $10,000 worth of work that’s gonna make it livable, for someone to buy. But if an investor’s gonna buy it and do like a rehab on it, then we may just clean it up and not do much to it.
Joe Fairless: That’s an interesting model. I haven’t come across this model where you’re doing the initial part of it, or you’re just doing the five to ten thousand dollars worth, and then flipping it to either the end buyer or another investor. Did you start out that way?
Brian Ellwood: We started out wholesaling, and we kind of over time have just come to think that closing on everything is the best strategy – just closing on it, listing it on the MLS, selling it with a realtor. We still focus our efforts on marketing and sales, but instead of signing a contract to an investor, we decided to put the resources in place to allow ourselves to close on every property and sell it the traditional way, because then not only can you sell houses to investors, but you can also sell them retail, which means you can expand your business to a lot of other zip codes, or maybe investors aren’t looking, because you’re selling everything to retail buyers.
Joe Fairless: You mentioned that a lot of your conversations — or maybe not a lot, but you mentioned a priority of yours is holding the team members accountable to get the results done. What results do you outline for them to accomplish?
Brian Ellwood: Just as an example, our marketing director’s key indicator, of whether or not he’s doing a good job, is how many leads he generates each week. Of course, there’s a lot of other variables that go into that, like cost per lead, but that’s the main thing that we look at. And he has goals for each quarter, to get to a certain point.
Our CFO is actually responsible for maintaining a certain profit margin – net profit margin – in our business and forecasting the revenue that we’re going to make against the expenses and saying “Hey, the next quarter does/does not look good, so we need to make this or that budget cut of this amount to maintain our healthy margin where we wanna be.” Sales guys – there would be appointments attended and contracts signed. Another position we call our CRO, which would be chief revenue officer. He is responsible for pipeline revenue added, and we have one other that we call our brand commitment score, and that is something that our COO — he calls every customer after the property has closed and surveys them on how good of a job we did creating a certain experience for the customers, and it’s on a scale of 1 to 10. That gets reported. There’s a lot of other KPIs, but those are the main ones that we focus on.
Joe Fairless: Do you have a software program where you log in every week and just check the software program, or do you have a spreadsheet that you created and each of them fill out what they accomplished? How does it work?
Brian Ellwood: Each team member has their own dashboard where they have all their KPIs clearly displayed, that we look at on our call each week. We also have kind of like an assistant position, and one of the things she does is takes the KPIs that I mentioned, the core ones that we feel drive our business, and puts those in a little report that she posts to our KPI Slack channel each week, just so it’s front and center for everyone on the team to see how everyone else is doing in terms of hitting their numbers. Every person is responsible for tracking their own KPIs on a simple Google spreadsheet.
Joe Fairless: What is your best real estate investing advice ever?
Brian Ellwood: Well, I struggle a little bit to come up with a great answer for this, but what I wanna say is to start with lifestyle as your number one goal when you’re going into business. What that would look like would be write out your perfect day in detail, like where you are, who you’re with, what you’re doing, how much time you’re working, how many hours do you work etc. and figure out what that lifestyle that you’re imagining costs, and figure out what type of business model would allow you to live that lifestyle, and then work backwards from there to building your business.
I’m sure you’ve read the Four-Hour Workweek, right?
Joe Fairless: Yup.
Brian Ellwood: It’s probably the most mentioned book on your show, if I had to guess.
Joe Fairless: Rich Dad, Poor Dad.
Brian Ellwood: Okay… Yeah, I thought about that one, too. [laughter] Well, in the Four-Hour Workweek he talks about the difference between being a CEO that makes 500k/year working 80 hours a week and he’s gone all the time, or a dude who makes 50k/year working ten hours a week from a coffee shop, doing something that he loves. Two extreme ends of the spectrum, and there’s no wrong answer as to where you should be on that spectrum, but it’s just a really important question to ask, because there’s way too many stressed out, unhappy billionaires out there in the world.
What intrigued a lot of people about our business is “How do you do this virtually and you seem like you sit at home and you must be laying on the couch, watching soap operas?” Well, I’m not, but I don’t do a lot of stuff that I don’t enjoy, and I had to be intentional about creating this day-to-day experience, instead of just saying “I wanna make a million dollars and not thinking about what it’s gonna take to make the million dollars.”
A lot of people will sacrifice lifestyle for money, but they want the money because they think that will give them a certain lifestyle… It doesn’t work that way, unless you’re intentional about it.
Joe Fairless: That’s so true. What a great point. Are you ready for the Best Ever Lightning Round?
Brian Ellwood: Let’s do it.
Joe Fairless: First, a quick word from our Best Ever partners.
Break: [00:13:36].25] to [00:14:19].17]
Joe Fairless: The best ever book you’ve read?
Brian Ellwood: Four-Hour Workweek.
Joe Fairless: What’s the best ever personal growth experience, and what did you learn from it?
Brian Ellwood: One of my biggest personality flaws is that I have shiny objects [unintelligible [00:14:27].16] really bad, the visionary type, and if I see new ideas coming across my plate, all over the place… Every time you scroll Facebook there’s a new piece of software that’s supposed to connect to your business, or something. For the first four years we were in business we changed our direction a lot. “Well, let’s focus on this. Oh, you know what? Let’s change. Let’s invest in this other market. That didn’t work out… Let’s try to do new construction. Oh, that didn’t work out.”
I learned over time that you never get anywhere if you keep changing direction, so now what we do is we develop a vision for the next year and we stick to it. One year is about all I can commit to, because I still have issues… But once that yearly vision is in place, we don’t sway from it. We can make tweaks to it, but that’s what we do the whole year, even if great ideas come up and try to make us change course, and we get a lot more results from being focused.
That was the hardest and best growth experience I think I’ve had to go through.
Joe Fairless: Yeah, that’s probably some advice I should take myself… Thanks for sharing that. What is the best ever deal you’ve done?
Brian Ellwood: The best deal… We bought a house for $35,000 and it was in an area where new construction and things were maybe 10 to 15 streets away at that point; the area was still pretty rough, but the growth was spreading towards it, and we held it as a rental for about three years, and then sold it not too long ago for $225,000. So we bought it for $35,000, sold it for $225,000. The house was on two lots, and each lot was good for two houses, so four houses total, and it sold for land value.
Buying on the fringes of areas that are gentrifying I think is the easiest money you can make.
Joe Fairless: What’s the best ever way you like to give back?
Brian Ellwood: I’d say two things… One is that inside of our company culture we have — I mentioned the idea of living your perfect day in the beginning of this interview, and we have what we call our Perfect Day Crew where we meet quarterly and everyone goes over what their perfect day is and what’s holding them back, and we all give them feedback and advice. In between those quarterly meetings we are assigned an accountability partner. They hold their partner accountable to doing these things that they set out to do, to move them more towards living their ideal life. So I help not only our team members to do that, but friends and family as well.
Another thing I’ll say is that I really like to donate to Kiva – have you ever heard of Kiva before?
Joe Fairless: No.
Brian Ellwood: It’s a nonprofit… Some guy in San Francisco started it, and it’s micro-loans for people in third world countries that need money for things like water filters and building toilets, and stuff… And they actually pay you back. They have like a 90-something percent repayment rate. An $800 loan can buy a clean water filter for an entire village of people, and they collectively can pay you back in a year or so, and they even pay I think a little bit of an interest.
I like to throw a few hundred bucks a week to my Kiva account, and there’s always money coming back when I’m getting repaid, and I just keep pushing it back and it kind of creates a snowball.
I really like the idea of the money getting paid back. There’s something about that, because then I can just keep redeploying it. I think Kiva is a great organization, and I tell people about that a lot.
Joe Fairless: What is the biggest mistake you’ve made on a deal?
Brian Ellwood: Probably not doing enough due diligence, not getting a professional home inspection on the deal, and then thus overlooking major foundation issues that cost us $20,000… Basically, taking the deal from being profitable to just barely breaking even. So not doing thorough due diligence I’d say would be the biggest mistake.
Joe Fairless: Since you live in Colorado, your properties are in Tennessee, what safeguards have you put in place to prevent that from happening again?
Brian Ellwood: Well, we do a home inspection every time now. We have a contractor go out there and give us an estimate. We have a member from our team that we call the renovation manager go meet the contractor. Then we get a professional home inspection and a termite inspection on every single deal. We also have photos and videos uploaded to Google Drive that we can check out. That’s about all the due diligence I need to be comfortable. That’s our current system now.
Joe Fairless: What’s the best place the Best Ever listeners can get in touch with you?
Brian Ellwood: The Best Ever listeners can visit my website, it’s BrianEllwood.net. They can also feel free to send me an e-mail, Brian@BrianEllwood.net. I’d love to hear any of their questions and I’d be happy to help them out if they feel like there’s anything holding them back.
Joe Fairless: A couple major takeaways for me… One is your philosophy, and that is be intentional about your day-to-day experience, and you certainly have lived that and are walking the walk because of how you built your business. The other is how you are holding team members accountable because you have a different type of lifestyle where you are working remotely. I love how you went through the majority of the people on your team and what they are being held accountable for, and then lastly, the best ever deal, where you’re buying on the fringes of areas that are gentrifying is the easiest money you can make, according to you.
Thanks so much for being on the show. I really appreciate you sharing your advice with the Best Ever listeners, and we’ll talk to you soon.
Brian Ellwood: Thanks for having me, Joe. I enjoyed it!
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