April 7, 2020

The Numbers Game of Real Estate – Erik Hammond Coaching | #ErikVlogs 38


The point is the Zetia always be
tracking the stuff, always figure it out. But look over it. You know, quarterly in six
months and every twelve months and just see how everything’s coming together and what
you can do to improve it. If you don’t track it, you’re never
going to fail to improve it. You’re never gonna know if you’re doing
well or if it can be better. Hey, guys, you guys are all doing well. Just thought I’d give you kind of a quick
update of what’s going on in our backyard. It’s nothing to do with social media,
but it still kind of fun. And I know a lot of guys love
construction, real estate and all that stuff. So I thought I’d give you a quick kind
of tour of the backyard and what’s going on. So three and a half weeks ago or so, we
got our permanent Trufant City and took a little bit to get everybody ramped up and going. But we started demo about a week ago
right after Thanksgiving, like the Saturday after. And then the rains came. And so this is where we are right now. So there’s a back yard. We are now a lakefront
resort, which is awesome. As you can tell, there is a massive pothole
for her and her backyard from where they took out a patio. And it’s
just been raining like crazy. I think we had more rain in
the month of November than Seattle got. So crazy rain here. We had like three inches in a couple of days. So it’s a muddy mess right
now, as you can see. Like all the stucco has been
ripped off the side over here. They’re gonna be adding on to this room there
and they’re going to be adding on where they’re so was hoping today that the
foundation guys that I’ll be here. This must be doing all the roofing for the
electrical and plumbing are going to be trench and and dig in and just run stuff everywhere. So anyway, it’s kind of a mess, but
it’s kind of fun to see, too. I’ve got three old girls and are usually
pressed up against that glass room right over there. And I just love watching all the tractors
I buy and the guys work in this stuff. And you hits those funds up. The rain finally cleared. As you can see,
it’s kind of sunny and clearing out. And so I’m hoping by tomorrow the guys gonna be
able to come by and start grading it and being able to mark out of the lines so
they can start trenching it and get things moving. So anyway, I’m hoping that we can start getting
the walls up probably the first part of the year, maybe like January or tenth or
somewhere around there and make some big progress from there. So and that
with the power company Day, S.D., Jeanie’s San Diego Gas and Electric, and we have
to move our gas meter and our electric meter and upgrade our electric meter
and upgrade our gas meter. And like I’ve done that once before,
another job, it wasn’t that bad. And this is like the most challenging
project this guys ever dealt with. It sounds like it’s just a mess over here. So a lot of fun. I’m excited. And me hasn’t fallen
along and seen what we’re doing. But he’s been going through
all of our contractors. Right. So each of them kind of submitted, not
kind of, but they submitted their bids to us. And we got the plumbing
bid for all the rough. And we’ve got the foundation
guy and his numbers. And these guys know their number so well. The concrete guys like. Yep,
on fourteen bucks a foot. And that includes everything like when
you want us to start. Right. And they just kind of did the
multiplication of how many square feet were added and all that plumber guy had to
kind of go through some different things. Electrician kind of unique. We’re adding like one hundred and twenty
five different lights of the house. I think we’re like three in there right now. Anyway, it’s kind of fun going through all the
numbers and just seeing where we are and making sure it adds up to our budget and
definitely adds a massive value to this house. We’re more than doubling the
square footage of it. And, you know, it’s an
awesome house when it’s done. But what caused me to think about this is
obviously I’m a big numbers guy, a huge analytics like I love running the numbers and
all that kind of stuff, which hopefully you guys do, too. And as I was going through
all their numbers and matching up with our bids and making sure that we’re good and within
budget and can stay under budget, hopefully, obviously there’s a lot of stuff that still
kind of unknown at this point that we’re getting into. But I
was thinking about profitability. Right. And it’s kind of different because
we’re spending money on something that’s not going to be like an income property
or a flip or anything like that. But in the days when I was flipping houses
like this, you obviously try to keep your numbers as low as you can see.
Good profit as much as you can. Our goal is always to increase revenue. Right. And decrease costs. And so when you’re running a real estate
business, you have overhead like employees and marketing. And if you have a broker, it’s
split and your license and insurance and gas and all that kind of stuff that it
takes to run your real estate business. I think a lot of us get to the end of
the year and we have to pay taxes and we’re like, oh, I don’t know how much we actually made. And you have that like, oh, crap moment where
you’re like, all right, well, now I’ve got to pay taxes. A lot of you do. Some of you do a really good job of
taking, you know, for every dollar you make, you divert some of that money into a tax
account and save it, which is great. So when your quarterly taxes are
due, you’re good to go. But I think for most of you guys, it’s a
big sticker shock if you haven’t sold a lot of houses before. And as you make more money, you
obviously got to pay more money if you’re one of the income tax states. I was talking to somebody yesterday about property
taxes in Texas, and it’s insane how much he has paid down there. But it’s just interesting to
think about like your profitability. Right. And when we were running our real
estate team, we’re always focused on how to decrease costs. So the end of the day, after we got all
our commission, our take home as owners of the business was usually around 12
to 15 percent on average. Meaning that, you know, we had
hourly people on our team. You know, t.c.’s and stagers and. Contractors, drone operators, all that kind of stuff
I just got paid by the hour. Other people on our team were, you know,
agents were paid commissions if they sold a house or helps them buy a house. They got paid a
percentage of that commission. And then obviously we had, you know, office
expenses and like I said, everything else, gas and insurance and just everything
that comes along with those costs. So there was like a kind of like a bell
curve, like you got to this one point where we were the most profitable that we could be. But then as we started doing
more houses, we needed more overhead. We needed more more office space
for more agents to be around. So that costs increased. Right. So to get let’s just say our agents
usually shared like two or three agents to an office. But to add on, you know, a home
of their office base maybe cost us a thousand dollars more a month. And they you scale like
by being on three more agents, you don’t automatically triple your business or whatever
that number turns out to be. And so there was kind of an overhead like lag
for a moment until you could kind of recoup those costs. And so it’s interesting. We got to the point where we’re selling
about 200, 30, 40 homes per year. But there’s this sweet spot for a while,
right around one hundred and fifty, a hundred and seventy homes. And obviously it depends on
the property that you sell because some houses, you know, might be a $30000 commission check
and so might be a $6 DA commission check. But overall, we got to this point
right around a hundred and fifty seventy homes per year. We were the most profitable. And as we got to 200 homes and 210
homes, we actually started making less money per transaction. We averaged out. And so you you know, you may have
a goal of selling 100 homes this year. 50 homes this year. Whatever your goal is,
or maybe a thousand homes this year. But you actually might make
more money selling less homes. And it’s just that’s an interesting thing. And I don’t think you realize it until you
actually go back to and look at the numbers. So I definitely encourage you as the end of the
year wraps up here to go check all your stuff. Right. You definitely should
be knowing your numbers. You should be known. How
much commission you take. You know, do you always get 3 percent? Are you giving it away for
one and a half or two? You know, do you go through all your numbers
and make sure that it’s all adding up? Right. Like, what did you spend on stage? And if you had to do that,
would you spend on marketing this year? Did you get an hour away on your marketing? That’s a big question right there. Are you actually getting a positive, Arwa, and
the money that you’re spending out there, if you go through your business, you know, how
many leads do you buy this year and how many of them did you close? And if your buying leads from multiple
businesses like, let’s say, your subscription to Zillow, right. Again, Zillow is
not real true dot.com leads and maybe running Facebook ads. Are you audited in each of those things or
are you just saying, look, we spent $10000 on marketing and, you know, we made $200000. So it’s a win win? Or can you look at
maybe Zillow and say, look, we sold one house from Zillow and it cost us eight thousand dollars
and we sold two houses from Facebook and only cost us two thousand dollars. Right. So you can know where your money goes. And I know a lot of
you guys aren’t analytical like that. And that’s OK. There are people out there
called accountants and CPA is and financial planners not really in this aspect, but there’s
people that can help you review your numbers and and help you know where you are. Just keep track of it. And then finally, these
people to help you go through the numbers, go through your budgets and get
as detailed as you possibly can. If you just have a line items
as marketing, you’re doing it wrong. You need to come here. You need to break it out. You need
to break out all your subscription stuff. You need to spend break out your your
print, marketing your business card, marketing your door to door, marketing your look. I had to drive for an hour
to go knock doors, whatever it is. Right. Like all that stuff needs to be trackable
so that you can know where you put your money and how our allies working for you. My goal for you guys would always be
to increase your profits, reduce your overhead, reduce your expenses, try to be as profitable again
for us, you know, being at twelve to fifteen percent. Our goal is to get to 20. So we’re always going through the numbers, trying
to fix things, trying to figure out how to get back to 20 and 25 and
so forth for our business right now. It’s the same thing. Sometimes we’re in the
negative because we have such high overhead and we don’t bring in as much
profit some months as others, you know. So it’s for me, it’s lumber up and down
right now because we have someone really, really well. And some months were, you know, maybe people
don’t buy as much stuff from us nuts. OK. But the point is, is you should always
be tracking the stuff, always figure it out. And maybe month over month is kind of a
hard case scenario from you because you don’t have enough volume going on Politico over it. You know, quarterly in six months and every
twelve months and just see how everything’s coming together and what you can do to
improve it if you don’t track it. You’re never going to improve it. You’re never gonna know if you’re doing
well or if it can be better. So figure those things out, go through your numbers,
see what costs you can cut, see how you can negotiate better prices. Maybe you need to decide. Look, I’m charging three
and a half percent this year and this is what I need to do to make it work for me. You know, maybe you can work out a better
split with your broker or go somewhere that’s more affordable. Maybe you drop Zillow because it’s
not bringing in the results that you need, whatever it is. Right.
Just audit your numbers. Know that you can track these
things and get better at it. And that’s my message for you today. All right. That we are packing up the car. We’re leaving our swampy mess here, and
we’re headed Disneyland today, which I’m super excited about. I love Disneyland. It’s my daughter’s fifth birthday yesterday. We’re gonna go up there for a couple
days and how a lot of fun. So you guys are doing well. All reports from Disneyland. It’s not random. A lot of fun. Anyway, she has a.

Leave a Reply

Your email address will not be published. Required fields are marked *