Year 1 of Real Estate Investing: What It Takes to Grow Your Business

Dan Austin: [0:00] Welcome back to another episode of the Collecting Keys Real Estate Investing Podcast, the podcast for off market operators looking to level up their game. I'm recording this podcast. It's a solo episode, so you know it's a Friday focused episode. I'm recording it from Solitude, actually in a hotel room in my dingy hotel room here in in Solitude, Utah. We're doing a little ski trip with the we've got about 12 people in the scale community here all wanting to come here, meet up, just have kind of a fun little little ski trip, a lot of good friends and relationships that we've built in the Scale community. So it's always good to just get together with people within, just really talk about our businesses and go over some of the the different aspects of our goals, and we're this time, we're talking a lot about fulfillment, not just in business, but in our personal lives and our time, and really kinda resetting, you know, everybody joined our community to level up their business so that they could use and leverage their business for other things in life, and so it's really a good check-in for that sort of thing. And one of the things that we did yesterday was with one of our scale members. He's he's one of our OG members, been in the group since 2023, Shane. He's actually up here in Washington near Mike and I in an adjacent market. Anyways, we did what we call a zero to one conversation.

Dan Austin: [1:17] It's basically going from nothing into this business to to running a full time business and being a profitable business. And so Shane, you know, went through the different phases, so I'm gonna go through the five phases of his build up to now being a highly successful operator in this business, and it was really cool. Inspirational to see him talk about all the steps because they really do mimic the the steps Mike and I went through as we built our business. But he actually I think he joined the scale community in 2023, but he had a w two job, a really high paying job. He was making 200 k a year, really good career, but this is where he he really wanted to plant his flag and get out of his w two job, and this was the business he was going to do it. And so he decided to join the Scale community and learn how to do wholesaling and flipping and all the off market real estate that we teach in the scale community. But it's not easy to leave and walk away from a $200,000 a year job, but Shane did. And so we'll cover the different phases on how he did that and how he's now making more money than he actually did at his day job. And it really, starts phase one is what he described himself as like the starting line. He attended our first ever KeyesCon just q four of twenty twenty three.

Dan Austin: [2:29] We had a group of maybe 14 or 15 of our community members there. It was a really good time. We went down to Scottsdale, rented a mansion, did kind of a boots boot camp style meetup where we really went through the day to day of how you can scale your business in the off market game. And Shane hadn't really started his business. He kinda was dabbling, but really hadn't done anything yet. But that was really his jumping off point. He got to see other people doing what he wanted to do and just gave him, in his words, all the confidence in the world that if they can do it, he can really copy them. And one of the the favorite things that, we were at dinner the other night and Shane was telling me, he's like, I'm kind of inherently lazy in the sense that, like, I wanna figure out how to do things the easiest, most efficient way, so I don't have to work hard every single day trying to build things. And so in in the terms of being lazy, not that he doesn't work hard, but that he can really rinse and repeat, rip off and duplicate in an efficient way of what other people before him are doing, and that's exactly what he did. And that was kind of some of the some of the, truth of his story was just like following the path that he knew and he believed in from what Mike and I had talked about and what others in the scale community were all already doing.

Dan Austin: [3:36] The other thing I appreciate about him is, you know, he really did follow Mike and I always talked about, like, you can't really get this business going without lead generation. A lot of people try to bootstrap it, it takes a long time. But in reality, things like cost per deal exist in in an average across the country in a very similar format for most people. And so you it's really hard. You gotta either have you gotta have a ton of time and a ton of effort and energy, or you gotta start spending some money. And so Shane I think Shane spent it all all three of those areas, but he started marketing right away in, right after KeyesCon, October, November, December. He started spending, looks like, 2,200, then 3,500, then about another thirty month of about 3,500, he started getting leads, no deal. So q four was a goose egg. He was getting the leads. He was working on it and, talked to his first sellers. But his big lesson in this phase was that this is not a real estate investing business. This is a sales and marketing company. So you gotta learn how to market, and you gotta learn how to talk to sellers, and gotta learn how to how to how to sell yourself and and your solutions for the sellers. The output of this is real estate investment opportunity, but that's not usually why people get into it, and they usually are caught off guard that it really is a sales and marketing business. So as we lean into what you would call phase two, which is really understanding the business a to z, this was q one in 2024.

Dan Austin: [4:55] So he had this little goose egg of marketing and no no deals, which is not uncommon. So I wouldn't even call it a goose egg, but he just walked away and quit his job because he knew he needed more time allocated to do this business if he was gonna do it right. He kept spending on marketing. Looks like he was around 3,500 each month in q one, and he said he was working eight to fourteen hours a day just really immersing himself in the business, immersing himself in the in the, scale community, and really giving back whenever he learned anything, but then also being willing to ask questions and and be humbled on things he didn't know. He, did get his first deal under contract, but if you look at his revenue stream, he still didn't make any money. So that's six months with no money, but marketing spend. But he was really dedicated. He was still getting leads. He was talking to more sellers. He was working his butt off. Finally gets his first contract, which is really it was month four, so was in January of q one, is really about a good timeline. If you think about this business, you know, some people, you know, you you get lucky or you you do really well early on, but, you know, say it's three to four months before you get your first contract, and it's maybe another month or two before that revenue comes in. So you gotta be willing to either work really hard with no pay or spend more money to get more leads and generate more opportunities for a period of time. And that's where most people just quit and they tap out and they give up. But during this phase, you know, Shane mentioned that, the biggest lesson is that there's just a ton of opportunity that comes at you in this business.

Dan Austin: [6:13] A ton of different things are thrown at you all the time, but networking and staying relevant and working with others, because it is a team sport, is highly important. And that's how you start monetizing your deals. That's how you start growing. That's how you do what he said, like learning the business and understanding it from a to z. And then you get into the doing whatever it takes phase, which is q two of twenty twenty four, which is where, you know, he's a 100% committed. Right? He's been spending money for six months. Now he doesn't have a w two job. It's just the full immersion, doing everything he can to to get these deals across the finish line. His first closing happens in April 2024 where he makes $32,000, and then he signs three more deals. So now you can kinda start seeing this snowball picking up, and he's learned that the business is hard, but he's also overcome that by putting in the energy, putting in the effort. And I can attest to this time period. I mean, Shane was really grinding, always on all of our scale calls, always asking questions, always presenting deals and talking about them, and really, really truly committed to making this thing work. It was pretty amazing to watch during this phase. And then from there, I mean, he started getting more and more opportunities, started increasing marketing spend.

Dan Austin: [7:24] Think into q three of twenty twenty four, he started spending up to 7,500. Because now he's seeing the money coming in, and he's starting to feel like, okay, if I double my marketing spend, that's how I'm gonna get double the leads. And that's really what he started doing. He started getting a deal consistently every single month. And this is where he kinda felt like he went through a loss of focus phase, which is not uncommon, because he was starting to make deals, but then he was starting to do flips and getting distracted. Mike and I, our story is follows the same path. We started doing projects, big rehabs, started distracting us financially and mentally. Like, we just didn't have the mental capacity. Right? We weren't following up with sellers because we were focused on rehabs and rental properties and all that sort of stuff. So he even had a month where he stopped marketing, which he found out. You know, that's if you stop marketing in a month, you might have a deal that month, but the next two, three months, your deals start going away. So you're really learning that you've gotta consistently market and you gotta keep going out there even when you're busy and don't get distracted by pulling out resources from your business. Because remember, this is a marketing and sales business, and you need to get deals under contract. And when in doubt, I always say wholesale it before you decide to flip it or keep it until you feel like you have the capacity to take that on.

Dan Austin: [8:31] Because if you do it too early, like Shane found out, you lose focus and your business suffers. Which brings us to the to the past six months, really his last phase, which is where he's been figuring it out and he hired his first acquisition manager, he's fired his first acquisition manager, he's really making all these decisions based on KPIs and what he needs to do next in his business, and really learning to deal with the cash crunch of the business. Because that's and truly managing it from the KPI standpoint and the financial cash crunch, because this is a cash intensive business, real estate in general is. Anytime you're flipping or buy and hold, you're consuming resources. When you're marketing for deals, you gotta consume resources. You know, Mike and I typically get a seven x, seven times return on our marketing spend. So we know that is a KPI that if we want to make a certain amount of money, we need to spend x amount in marketing, and then we need to hit all of our other sales KPIs to make sure we get that return on our ad spend. But as as Shane learned, you gotta figure out how to get through that cash crunch, keep marketing, and make decisions that do not distract you from the main core of the business. And it was really exciting, because now he's he's at this point, coming into q one twenty twenty five, he's had a deal every single month for nine months straight, where he's also had some months with two deals a month, and his average, revenue per deal is $31,644. That's pretty amazing.

Dan Austin: [9:50] And he is now making more money. So he's making about 200 k a year in his w two. Right now, I think his profit for the last rolling twelve months is like $225,000, which is freaking amazing and super exciting to see. And to be honest, there's, he did the exact I mean, he followed the exact same path Mike and I did, a lot of the same humps and bumps. And so we see this across all of our all of our scale members that are truly committed in growing and scaling their business. They it's almost identical depending on the market you're in. And if you're committed to growing the business, these timelines are all about the same. The revenue's about the same. Like, it's really the KPIs are about the same. It's really a consistent thing. So if you're hurting in the market you're in, it could just be the way you're operating and managing your business, the way you're managing through KPIs, the way you're managing your capital, you're likely not doing enough. And if you don't have enough capital, like like I said earlier, gotta put a hell of a lot more energy into the business and get to that lead those leads generated so that you can convert them into deals. So just quickly to wrap this up, just going over some of the biggest mistakes that Shane listed out. So hopefully this helps you and if you've made these mistakes, you can resonate with these. Really, the biggest one he said was just his mindset around the business and really understanding what it is.

Dan Austin: [11:07] It's it is a sales and marketing business, and you need to be able to recognize the seller's motivation and start solving their problems. And the sooner you can do that, that's when you start picking up at a clip those deals. That's where you get nine months of consistently closing one or two deals every single month, is once you figure out the marketing sales piece and how to recognize opportunity through the seller's needs, you really, really can make this business something to scale it. On the money side, he said, learning and having a better understanding of deploying the capital. And this goes back to when to deploy, when to flip. When in doubt, wholesale it, even if it's a little five k bump. Don't try to push for deals and say, why can't wholesale someone to flip it? Those are always the ones that you lose on. They're just never it just never works out. Because if it's not a good enough deal for you to wholesale and make even a 5 or 10 k fee, should not you should not be flipping it yourself because you're gonna siphon off resources and slow your business down, and you might not make any money off of it. And the the biggest thing is, and Shane noted this, is, like, you can you can run out of that dry powder pretty quickly with that cash, and that just affects your marketing. And when you have money on the line for a flip, you have to shove resources over there to get that thing wrapped up until you so you can get your money You can't just say, I'm gonna stop this flip so I can go market. That's not a good idea. And then, you know, just along that line is always keep those reserves on hand so that you can be ready and pivot, that you can get through these tough times. Because like you can see here, for Shane, he was marketing for six months really before he started to get any revenue.

Dan Austin: [12:26] So but he consistently marketed, which was the key, and then that snowball, that flywheel started spinning and growing for him. So, anyways, I'll leave it there. Hopefully, you enjoyed this. This is kind of like our first zero to one. We tried to record this with Shane yesterday when we actually did the live interview in front of the group, and the podcast studio kept kicking us out, so we couldn't get it done. So you had to deal with me doing it, but, hopefully, we can do some more of these live at other events and post them up here, and you guys can learn from the scale community members themselves. So hopefully you enjoy this. If you had any questions about this, hit me up on Instagram at investor man dan or mike at mike underscore invest. We'd be happy to to share what we know. So have a fantastic weekend. We'll catch you all next week.