Episode 89: [Wholesaling] Not Assigning Contracts and Making More with Kyle Lackey

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Show Notes

Kyle is a founder and managing partner at H L Homes, a Houston based real estate investment company, founded in 2011.

He and his partner, Eric, formed their LLC to start flipping houses as a side gig. In 2014, though, the business expanded into a larger business to grow it and make it official. When Kyle first quit his job, the situation became “how do I monetize this and start making money quickly?” He started heavy marketing and going to appointments, but their buyers list was growing from the start. His first move became to network with other investors throughout the Houston area to meet other wholesalers. He would ask for their biggest problem and be there to fill their issues. Buying houses from wholesalers that no other investors wanted became their niche area, and generated lots of revenue in their first year.

The tactics depend on the wholesaler or the other investor. Sometimes, they’re just looking for exposure. At that point, Kyle and his partner just look for a percentage of the fee. As long as the other investors are happy and continue sending deals to them, they want to make it as equitable as possible. There are also a few investors who are just looking to entirely wholesale the property, in which case Kyle and Eric take it on and become the assignees for the property.

What contracts in place do you have? Is it just trust built?

It depends on the individuals. When Kyle first started marketing deals to people, it was exclusively a trust thing. The majority of people are honest, that’s just how business works. If you’re helpful, you will get help in return. The few people who were either dishonest, or didn’t close the deals, ended up parting ways with Kyle.

A few years in, the title company gets invoiced for either a set amount or percentage depending on what got negotiated. If H L Homes took it, it would be a standard assignment. Because of the invoice to the title company, you know you’ll be paid at the closing. Definitely something to keep in mind. No title company will close a property without fulfilling the invoice. “Shout out to Allegiance Title Sugar Land!”  We know the title company wouldn’t turn their backs on an invoice.

Why are you transitioning away from wholesaling?

There are several things that lead up to that transition.

H L Homes started taking feedback from their sellers. “Of course, we thought we were great,” Kyle said, “but how can we make it better?” What they found is that what a seller wants more than anything is to be respected and be told the truth, and to have as few inconveniences as possible.

Start off being honest with intentions when it comes to price, and if it doesn’t work then we can market to other investors with different buy criteria. There are other wholesalers saying they would close on a property, and then not come through. Kyle found that they were losing deals by being honest when others were closing by not being honest. Going on a private money raise and tweaking the buy model helped them to be able to buy fast to help the sellers.

Being able to take properties down to wholesale gives Kyle more time with the properties. Because of this, Kyle is able to access different buyers because of the time allowed to advertise the market to.

Have there been times when you’ve lost money for taking down the prices?

Short answer: yes. It’s going to happen, but not frequently. Usually, money isn’t lost on “short take downs”. Typically, it’s on rehabs where estimates are done wrong, or a contracting issue comes up. Most of the time, the worst case scenario is already known. There are the buyers who have bought from us in the past, so we know what to sell to them. Because Kyle knows his buyers, the confidence in closing is significant.

What’s the process after closing?

As long as they have access to the property before hand, they try to do pre-market, however, most things are done at the same time. Listing, blasting to the buyers list, etc. Whatever the property will be sold for at open market value is what Kyle and his business sell for, which makes great deals for the end buyers and his business.

As far as listing, H L Homes does it themselves. There are 7 people in-office who all have different jobs to do. Eric, Kyle’s business partner, is on the sales side. Most of what happens in the business is done in-house. “Except our online marketing,” Kyle says, “LeadPropeller does that for us.”

All of the property management, construction management, etc. is all done in-house. The long answer is: they manage sales, closing, and acquisitions in house.

Links

YouTube.com/FlippingJunkie

FlipPilot.com

LeadPropeller.com/adwords

H L Homes

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Episode Transcription

Welcome to the Flipping Junkie podcast, the podcast for flip pilots everywhere. Flip pilots are the house flippers that work more on our business instead of in our business by keeping a 30,000-foot view. You’re now part of the small group of house flippers that considers themselves flip pilots. Let’s strive to build a life of financial freedom and time freedom so that we can spend more time doing what we love with who we love. In this podcast I give you a glimpse of the daily life of a flip pilot. So let’s get started.

Hey everybody welcome back to the Flipping Junkie Podcast, got another incredible episode for you today I’m looking forward to. I’ve got a friend Kyle Lackey from Houston on the show and I’ve been looking to have him on for a little while, so super glad that he decided to join us today and share his story of becoming a successful real estate investor in Houston. He’s been doing some great and awesome things. He’s been using LeadPropeller for a while and using our services, so we’ll talk a little bit about that but looking forward to talking to Kyle. Let’s get him on the show.


Danny Johnson: Alright, hey Kyle thanks for joining us on the Flipping Junkie podcast.

Kyle Lackey: Hey Danny, thanks for having me.

Danny Johnson: Yeah. I really appreciate you taking the time to do this.


Kyle Lackey: No problem, no problem. It’s very exciting. I’ve never been on a podcast before, so I get to check another thing off my bucket list.


Danny Johnson: Oh nice. It’s going to be great because that way I can pry all the secrets out. I’m sure you get tons of secrets.


Kyle Lackey: I won’t take long.


Danny Johnson: We were talking before the show and you said you have a total of two secrets.
So we’re going to work real hard—


Kyle Lackey: Well, that’s one of my secrets. It’s how many secrets I have, so now—


Danny Johnson: Oh man, so it’s only one secret.


Kyle Lackey: Down to one secret.


Danny Johnson: Alright. Well, we’ll save it for anticipation, so people listen all the way to the end.


Kyle Lackey: Stay tuned at the end of this podcast for the revealing of my secret.


Danny Johnson: You have one secret and that’s what the show is about, Kyle’s secret. That’s the topic. So Kyle you guys do rehabbing, wholesaling, multifamily properties in Houston right?


Kyle Lackey: We do. My company, HL Homes we try to do as much as we can and the REI real estate investing space. We wholesale. We have a multifamily portfolio in the greater Houston area that we’ve been working on growing. We do rehabs, kind of the whole spectrum. We market deals for other investors, so other wholesalers that may not have a strong buyers list. Help people kind of find exit strategies for great deals that they find.


Danny Johnson: Okay, so I’m going to write these down because to me that was a secret. To me that was something that just made me think, “You know what, why the heck don’t we do more of that too?”


Kyle Lackey: I didn’t realize that too many secrets. Danny maybe you you’re much more secretive than I am.


Danny Johnson: I wrote down that one. I’m going to look at that later and be like, “What was that secret again?” Now I got to go back and listen to it, but yeah, I basically if you’ve taken the time to build up a good buyer’s list you’ve got great buyers, why not network with other wholesalers and try to sell their deals and make something in the middle.


Kyle Lackey: I’ll tell you this, kind of like a brief history on HL Homes and then it relates to it just bear with me for a second. So we, my partner Eric and I, formed an LLC because we both worked together at another company and wanted to start flipping houses. We thought there was money in there, it was 2011. We formed an LLC, started flipping some houses and kind of did that very slowly. It is a super side gig, so we just wanted to make a couple bucks on the side and then in 2014. I wanted to make HL Homes a legitimate company to grow it and see what we could make of it. I was the first official HL Homes employee. Eric left his job about six months or so after I did. But when I quit my job, I was making pretty decent money, so I was trying to figure out how do monetize, how to make money pretty quickly now. I started doing a regular stuff. I started marketing. I started going on appointments, but through just network contacts, we had we started to build a buyer’s list already. We had a relatively strong buyers list, so that was my first move was. I would go to networking events in Houston and in Houston there’s a networking event that you could go every lunch and every dinner for a month and not repeat a networking event. Just I just go to a ton of networking events and be wholesalers and say, “Hey, what’s your biggest problem?” And they would tell me, “I’ve got this deal. I think it’s pretty good but I can’t find a buyer for it.” That was kind of a vacuum that we were able to fill three years ago. And you know for the first year that we’re – we started 2011 but relaunch like really started in 2014 that was huge revenue stream for us that first year.

Danny Johnson: Nice. Do you have them – they basically say the price that they’re trying to sell for and then you just mark it up for what you’re trying to make when you promoted your list? How do you work that out?


Kyle Lackey: We do it a couple of different ways kind of depending on the wholesaler or the other investor, so there’s sometimes that all that they’ll need from us is just exposure. They would just want us to send a blast out to our list and just get phone calls going to them. At that point, we just asked for a percentage of an assignment fee. People that we’ve had great relationships we take a smaller cut. If we’ve done a bigger deal, we take a bigger cut. We just try to make things equitable. We want them to make a lot of money so they continue sending deals through us, but just enough to make it worth our while. We have some investors or some wholesalers rather that who just want to give us the deal and kind of take their hands off and go find another deal which is great as well and typically there will be a larger equity split or we just take the contract ourselves. We just become the assignee and then either close on the property and work on an exit strategy there or wholesale it ourselves and then it’s become just a little bit more complicated transaction, but certainly within our will has to do.


Danny Johnson: Yeah, nice. A lot of this, I think people listening struggle when they hear things like this because they’re thinking, “Well, what contracts do you have in place for that for your percentage? What do you do for the agreement? Is it just trust? Are you just going off relationships that you got where were you guys just trust each other and that if they want to keep doing deals with you they’re going to tell you that that when you sent out to your list and they’re calling them directly, if they get a buyer for that they’re going to let you know and pay your percentage.


Kyle Lackey: It kind of depends. It kind of depends on – I’ll tell you that when I first started marketing deals for other people it was exclusively a trust thing and maybe that was evidence of my lack of sophistication or my being naive. But you’d be surprised how many people would call and say, “Hey, I got that deal closed. You know you should be getting a check” which we get in a wire coming and then what kind of transition from there is most people are, and you’ll find this I think throughout business, most people are pretty honest and then the people that weren’t, if I say, “Hey, I’ve sent three deals out for you and you haven’t closed any of them, maybe your deals aren’t good or maybe my list isn’t good. Maybe we should just part ways now” a couple of years three four years in. We typically invoice the title company. We figure out where the property is open for title. We send title and invoice for either a set amount or a percentage depending on what’s been negotiated. Like I said, we’re pretty fluid with that based off on volume, but that’s typically the way that we do it. If we’re going to take it, we just do it as a standard assignment. They would have signed the purchase contract to us and then we would assign that then toward that end buyer. It’s a property that we’re going to work.


Danny Johnson: I like the invoice to the title company. It’s a good way to do it because then you know that you’re going to be paid at a closing. You’re not going to wait for it.


Kyle Lackey: That’s the thing, contract are great but a title company within invoice, there’s no way they’re going to close a property without satisfying an invoice. We have a great relationship with our title company shutout to Allegiance Title at Sugarland, but there’s no way that even with this great of a relationship as we have that they would turn their back on an invoice or some sort of obligation order to close because the risks are too great for them, right?


Danny Johnson: Oh yeah for sure. So is your office close to Sugarland or in Sugarland?


Kyle Lackey: No. We actually office – if you know Houston, Houston is huge so we are actually on the north side of Houston and Sugarland is on the far south side, so it takes us probably about 45 minutes or an hour to get to Sugarland if we’re going to the title company for something. Typically we do all of our closings remotely, so we have notary’s in the office.


Danny Johnson: Yeah. They just come to you or let you print them.


Kyle Lackey: Yeah. They send us a closing package with a FedEx labels so we’ll sign typically a day before we’re scheduled to close and then send the docs back and that’s it. It’s not a common thing that we actually go to the title company, but we do from time to time.


Danny Johnson: Cool. Yeah you had mentioned to that you guys were transitioning away from wholesaling a little bit over the last several months. And can you speak to why you made that decision to do that?


Kyle Lackey: Yeah. There were several things that led up to that transition for us. So we started really taking feedback from our sellers like, how can we improve our process? We think that we’re great, but how could we make it so that everybody would think that they are as great as we think that we were and what we found was that what a seller wants more than anything is to first off to be respected and told the truth and then two to have as few incontinences as possible. What we found on the one hand is that we would go in and be really honest with our intentions. We’d say, “Hey, this is my price. This is where I can buy it at.” If this doesn’t work like that’s the number for me closing on it, if that doesn’t work then we could market this to other investors. We have other investors with different criteria than we do. What we’ve found is that there are other wholesalers that were out there that were saying that they were going to close on a property and then not coming through on that. We found that we’re losing deals because we’re being honest and then other people were trying to give the perception that they were going to make things easier for them, so we really kind of went to the drawing board and try to figure out how can we make it a win for both. We went on a private money raise and raised some additional lenders and kind of tweaked our bind model a bit and we’ve been able to really offer that. If somebody really needs to sell fast, we’re able to take it down with them. And we’ve always done that, we’ve always been able to take properties down but typically in the past we’ve only taken properties down that were slam dunks that we’re going to rehab and put on the MLS, but taking properties down to wholesale is the end of shoot term that people are throwing around in order to take properties down to wholesale, will tell that that gives us way more time to sell it, gives us way more accessibility so we’re not having to worry about inconveniencing a seller without having to coordinate with somebody else bringing investors through. A pet peeve of mine is like when I go to look at a house and I’m walking up to the door and somebody says, “Hey, tell them you’re with State Farm.” And then we’re able to access a different buyer because we’re able to advertise on MLS. We’re able to advertise to just different people than the investors that are desired buyers. We have a great buyer’s list with great buyers, but the more people that we can expose our product to the better.


Danny Johnson: Okay, so I’ve got a lot of questions from that then and by the way also to me that was a big secret number two. Now you dropped at the beginning of that was like actually asking the sellers how can you improve your service in your process. Who else does that? There’s not a lot of investors that do that. I would probably say less than 1% of investors actually do that. That’s a big secret to me. I think that was very helpful advice. Everybody should be doing that. But the questions that I have then are, if you take them down, have there been times when you’ve – have you lost money when you’ve taken these down? We’ll start with that one first I guess on some properties.


Kyle Lackey: So you’re asking as a real estate investor, have I lost money on a deal? Yes, so few and far between and usually not on what I would call our short take downs. Most of the money that we’ve lost on deals has been rehabs where you misestimate or rehabs where your contractor misses something and you have to reframe two-thirds of the house or something crazy like that. But most of the time, we know kind of a worst case scenario. We have a buyer there we know is going to buy it at this price or we have like a an archetypal buyer, there’s a buyer out there that’s bought from us in the past that’s going to buy a property just like it at this price so that gives us the confidence to take it down. I’m not going out there buying houses at 95 % and trying to sell them at 105% market value. That’s certainly not – we still want buy cheap and provide a value for our buyers as well.


Danny Johnson: That’s a key point. So what’s the process? You take these down, you close on these whereas before you might assign a contract, you actually close on the property. What is the process at that point? Are you marketing to your buyer’s list before you list it and if you don’t get a buyer through that or any interest then you go ahead and list the property or do you just straight up list it as soon as you get it?


Kyle Lackey: If we have access to the property before we might try to use some sort of – if we know we’re going to close on it because that’s what we’ve committed to, but we have access to the property before we might do a little bit of free market to it. But typically we’re going do everything at the same time. We’re going to blast the property to our buyers. We’re going to list it. And when we list it, we’re listing it for whatever that property in that condition would sell on the open market. We recently sold a property in a flipped section of Houston that had to tear down a house on it, so we sold the property for a lot value. It was a great deal for us and a great deal for the end buyer as well, but if we were to blast that property out, we probably would have blasted it as a discount to our buyers. So there’s some perceived value if they were to go Google it and find it on MLS.


Danny Johnson: Yeah. So I completely lost my question. The let me see, so are you listing these yourself? That was the question or do you guys have an agent that you use and have some sort of special rate or do you list them yourself and take the calls or have somebody in office do it?


Kyle Lackey: Yeah, so we list them ourselves. There are seven people in our office that all have different jobs to do. Eric, my business partner, sits in the salesy, he like myself and a couple of other people on our office are licensed agents, so we do all of our listings ourselves. Most of what we do, like most of what we do, we do ourselves with the exclusion of a lot of our content online marketing, which you guys do for us. But all of our property management, all of our sales, we manage rehabs in-house. We have a construction manager, so we manage rehabs in-house. We obviously use contractors to do the dirty work, but that management is a ___. Long answer to your short question is we manage sales soup to nuts in-house.


Danny Johnson: Okay cool. So you’ve got people there to take the calls and handle it because I was going to ask, when you list them like that what’s the level because my concern being how much like timewasting calls from agents do you have to deal with and what kind of – have there been difficulties with explaining to people. I mean, I guess you own the property so there’s not a whole lot to explain, you’re just selling it and then if the place needs a lot of work, you’re selling it as is.


Kyle Lackey: There’s so much less to explain. There’s so much less of a dance that goes on as opposed to a typical wholesaling. I think that all kind of relates back to being systemic in how you and how you manage all of those things, so the more things that you can disclose on the front end, it’s like realtor 101 stuff the more people that you can keep from looking at your property, they would never buy it in the first place the better you are. A lot of times we’ll go in and clean up a property, so we’ll go do a trash out or something like, but we’re not going in and necessarily doing deep rehabs on most of our most of our things. Unless there’s going to be a great return by doing – if you’re going to put a couple thousand bucks and get a bigger turn out of it, then that make sense to do, but typically we’ll at most going in and clean it out, mow the yard.


Danny Johnson: It’s amazing what a difference those things make. I was cleaning the places out broom cleaning it real quick.


Kyle Lackey: Turn the air conditioner and put on a couple of air fresheners in there.


Danny Johnson: I was thinking like how people bake cookies or whatever it’s like bake some cookies put some of those houses man just the smell of cookies mixed with urine and feces and everything else. It probably wouldn’t go over so well.


Kyle Lackey: Listeners, use your best judgment there. If your house smells like feces, don’t bake cookies. That’s secret number five.


Danny Johnson: Yeah, I think you’re probably at number five already but we just did one that I think we looked at like a year ago and I still remember having trouble like there’s only been a couple of these I’ve been in a lot of houses that smell like urine. But these, I couldn’t breathe, it literally burned my throat like, what is it, the ammonia? Is that what the air from like cat urine and stuff. Crazy.


Kyle Lackey: Yeah, this was probably two years ago but my acquisition who is AJ, we’re getting pretty close to buying it, it was a rehab that we’re going to do, so he asked me if I would go out there and walk with them just wanted a second set of eyes and I’ll never let him forget it. But afterwards, we went out to lunch and I was sitting in a booth and I was like this restaurant smells of but it was that the stench had permeated by beard, I had to go and clean up in the bathroom before I was able to eat. I said next time show me a pictures. I never want to go with you.


Danny Johnson: Reminds me a long time – man, this was a long time ago, Melissa and I were driving around, probably driving for dollars this was early on and a guy called us about a property that was real close to where we were driving, so I was like well it’s gone over there now and I go over and I knock on the door and like the front door just kind of like creaks open just like an inch, it’s a wall of smell just from that inch of opening came out nearly knocked me over. It was so bad and Melissa was like I’m not going in there. She just stayed out and I went in and the ceiling had been leaking for years. All of the drywall falling down and the insulation got soggy and was all over everything and there were tons of cats in there with feces everywhere. And the guys cooking a burger in the kitchen and the cats and their feces are all over the countertop jumping over his food while he was cooking it and he asked me if I want one, “No, I don’t want one. Thank you.” But he’s walking around trying not to puke and he’s eating his burger walking around. But I mean that was that was a funky – I think that house even had like a room that he wouldn’t let me go into and it had padlocks and stuff on it. It’s a little weird.

But anyway, back to the back to the conversation. So the wholesaling, I like that idea a lot. I think raising that money, being able to do that and having a lot more control over the deals and maximizing your profit from each one of them like you said. Are you finding some buyers for those maybe that aren’t necessarily the typical investor that would be on a buyer’s list or more if somebody that’s—


Kyle Lackey: Yeah. Just the ability to take longer, to be able to slow down in the process I think has been advantageous for us. Wholesaling is game of speed, so trying to enter in the contract quickly and then take all the steps necessary to get it closed as quickly because as soon as you sign a contract, you start this start this timeline and what we found is that a lot of times you might not compete with somebody on price, so you might not be competing with another buyer on price. You’re competing with other buyer on all these different terms and a lot of times that term is speed. If somebody says that they can close a house in seven days and they’re a wholesaler and you’re like “Well maybe they trade maybe they couldn’t” your only option is to kind of reduce down to that denominator if that’s really where the seller especially if somebody is up against a hard place. If you’re in week two of the month and they’ve got a foreclosure letter that says they’re going to the courthouse the next Tuesday, that’s only the Texas thing, right? Super Tuesday. If you go there get foreclosed on the first Tuesday of the month, you do kind of go and the faster you go the more limited you are in your buyers. Think about that Carmax commercial where the guy’s looking for a car, he’s like, “I’m looking for a car” and they show him all the cars. I’m looking for a red, narrows it down and narrows it down, put those restrictions on, you’re inherently narrowing your buyer pool and then so many of those the more buyers that you can have in your available buyer pool than typically the more selective you can be in selecting an offer and typically that turns into better products. I mean, there are costs associated with it too. So we’re paying closing costs on both sides. If the buyer is paying the closing costs on the second side we’re paying closing costs at least one time or paying holding costs for the money, origination, all of those things. We have to insure the property. I mean there are costs associated with it. There’s certainly way more risk there which I think you alluded to earlier to buying and taking down a property than there is to wholesaling it because if you’re wholesaling a property, you worst risk is if you put earnest money down or an auction fee or something like that, and your money would be at risk if you buy a property wrong and you were wrong then and now you’re stuck with this stinker.


Danny Johnson: So you must be making enough to overcome some of those additional issues with doing it the way you’re doing it. Whenever you guys started doing that was it like, ”Holy crap, we should’ve done this way earlier. We’re making way more than we would have had if we just sold it” and tried to assign the contract or was like yeah some of them you get home runs off them, some of them are like, “Well, we made some money and we’re moving on.” So was it like a thing where you were wishing you had done it sooner?


Kyle Lackey: I would say that I wish they would had made a transition earlier primarily just were there for the convenience, for the ease of it. It just makes the sales process much easier. It’s been it’s been great for us. But I would say it has been like a 2x game changer. It hasn’t been something that’s doubled our business. I do think that it gives our acquisitions guys the confidence to go eyeball to eyeball somebody and say “We’re going to close on it. Pick a date.” As long as we can get title cleared by that time and the money is ready, our price is right, we’re ready to go, so that kind of X factor having our acquisitions team have that confidence—


Danny Johnson: And no juggling trying to get people in there and scaring the seller because you’re trying to run people through the property. You see it right.


Kyle Lackey: And like I said, still if the seller says even our inflated – we’re going to buy it and do a quick flip on our price. If somebody says that that’s not their price, but there’s still room in the deal, we will just be honest with people and tell them. We’ll do our best. Let’s sign this contract, give me a couple of weeks. I’m going to ____.


Danny Johnson: And so you give them the talk where you’re connected with a lot of investors or how do you approach that?


Kyle Lackey: And so we kind of stage it as we always make the first offer of this is what we would buy it like, we’re going to buy it and I’m going to keep this house. I’m going to buy it, I’m going to rehab it and then sell or turn it into a rental. It’s always our first offer. If that doesn’t work then we go kind of as high as we can go and take it down ourselves, so like a different formula that kind of gives us that range. If they still say no to that number and we can’t overcome that and they have a number that they have in mind and their number makes some sort of sense, like I said earlier, if somebody says their house is $100,000. It needs $20,000 work and they want $95,000 for it what’s up? That’s not worth it for anybody. It’s not worth our time and it’s not worth their time. It’s not worth the seller’s time to tell them that maybe we can make that work. I don’t think that’s the right way to do things, but if there’s something, it doesn’t work for us but we might be able to make a couple thousand dollars off of it or we might be to pull a small assignment to get out of it, then we would be very honest with them and we’ll say, “Hey look, this is not a deal for me, but everybody has different by criteria, so this might be a deal for somebody. This might be somebody’s favorite neighborhood. It’s not my favorite neighborhood but it might be somebody’s favorite neighborhood and they might jump on it at this price.” And then we tell them that we are a business, so we have to make a little bit of money in order for us to work and I feel like if you frame things to people that way, if you straighten things that way, people are receptive generally.


Danny Johnson: Yeah, I like that because you’re giving them an option whereas other people that are only considering what they can do might walk away saying I can’t help you unless you can take this lower offer. I think some people have the concern when they offer like we do the same because we do the same thing. But it’s always like wondering about how that approach works, sometimes it does and then there’s the concern of like man if we offered that and if we didn’t offer that and we just waited a couple of days would they maybe take our other one. You kind of have to get I guess a gut feeling of which way they’re going to go.


Kyle Lackey: Right. I think that’s where the – I call it sales because I believe that it is like when we’re buying we’re selling, the fact that I’m selling you on the idea that you should sell to me. I think that’s part of the craft it’s knowing when to play which part. That a dialogue that we have often with our acquisitions team and we’re constantly trying to make sure that we’re mindful of. I think that’s kind of a natural tendency in sales as it is to take the easy way out, is to go for the easiest close, but certainly not the most lucrative option for us and a lot of times it’s not the right option for the seller.


Danny Johnson: That’s a good point, that’s a big point.


Kyle Lackey: If somebody needs to close in seven days then we need to move the conversation away from how much money they can make as quickly as possible because if they need to close in seven days, we are going to like, I’m going to buy your house. So we need to agree on a price and then get that out of the way and get to work because the longer that I stay here, the less time that you’re not to get an affidavit of ownership filled out. That’s going to take days and so on and so forth. Does that make sense?


Danny Johnson: No, it makes complete sense. I wanted you to keep talking to get more nuggets out of that. It was awesome. I was thinking also that it has a little bit to do with whenever you said, “it’s not always about the money,” so obviously it’s not always about the money and I think I did a podcast episode just recently about listening and really listening to people and finding out because people make decisions based on two things, a logical reason and then an emotional reason, usually emotional one is the reason that they actually did what they did, but they have a logical one to explain why they did it. And so it gets into that whole conversation of getting down to really what the emotional thing is for them and then helping them solve that, giving them what they want through that emotional perspective. And like you were talking about, maybe it’s a part logical, but if it’s about the speed of getting it done because of whatever reason, there’s probably a lot of emotional stress involved in that and it’s not at all about how much they’re going to get . I think that’s a huge point. I think that just reinforces that whole – looking at it that way is like uncovering what the emotional part of it is and whenever it’s about speed like why is it that you need to close so fast, sometimes it’s obvious it’s in foreclosure or some other reason they need money for something else. But yes, I’m glad you said that. Secret number eight.


Kyle Lackey: I think a lot of times people out of touch people – Zig Ziglar said that like, I don’t remember the exact quote but in the book that I read 15 years ago, that people don’t buy products, that people like don’t they buy you like, they buy the salesperson. It’s very relational. If you were to go out and buy a car tomorrow and you’re going to buy the same car in which the two dealerships, the pricing is about the same, you’re going to go with the guy that you like more. Being likeable and then how better to be likable and to be genuinely interested and empathetic for the situations that people were going through.


Danny Johnson: Absolutely. I think maybe that’s why I haven’t bought the MacBook. I had set a goal for something and I was going to buy a MacBook. I’ve got a MacBook Air that I’ve used for like three or four years or something and it still works. There’s nothing wrong with it, but I went and my daughter was going off to college, I was just telling you that they’re down there in Galveston or wherever but so we went to get her a MacBook. I got her a MacBook. I didn’t like the salesperson there and I don’t know what it was but – and then now it’s like I met my goal, I was going to go get one because I liked the one she got and I was like, “Well, I’m going to get one of those.” And I was thinking, man I met my goal but I didn’t want to go buy it. Logically I’m like, “I don’t need it. My laptop still works.” But I’m wondering if part of it is just because I didn’t like that sales person that just made me not want to go buy it.


Kyle Lackey: I think that’s just a part of the job, like I said earlier, just the craft of sales and salesmanship. I think that the best salesmen are the best sales people that I’ve ever worked with are the people that have that “it” part of their personality that you almost can’t describe. They’re just strangely personable. I don’t think everybody has it. Sure everyone can develop it, but I think there are some people that are naturally better at salesmanship and I think there are some people – I don’t know. I think sales isn’t everything, but maybe should be like an accountant or something where you’re not to deal with people. Like an office-based – you should be the guy who has the secretary who deals with the customers and the engineers.

Danny Johnson: Do you physically take it? No my secretary does.


Kyle Lackey: I’m a people person


Danny Johnson: We we’re just talking about that the other day because some of the guys in the office are a little bit younger and I think one of them said he hadn’t seen it and I was thinking like, “What is wrong with you? How come you’ve never seen this movie?”


Kyle Lackey: Stop everything. Watch the movie.


Danny Johnson: Yeah. So we’re going to do a pizza party or something, watch it during lunch one of these days in the conference room.


Kyle Lackey: We’ve been on that Nacho Libre kick in our office, so that’s every tech stream that goes around. It’s always a competition of who can sneak in a Nacho Libre picture or gift that’s appropriate to respond to a question that somebody gave. Go watch Nacho Libre. Stop what you’re doing. Watch Nacho Libre.


Danny Johnson: Alright. Do you mind my asking, how much office space do you guys have. Is everybody in office?


Kyle Lackey: Yes, yes so everybody in our company who works in an office we probably have 2200 sq ft somewhere in there. We have a large conference room. But we do work so my business partner and I share a large office together and that’s kind of an intentional leak. Before we move to this office, we had another office kind of further uptown and we played with the idea like I’m going to have this office and Eric will have that office, but what we found is that we’re too separated so just for the sake of our of our partnership, it’s good for us to be able to look across the desk and be like “What do you think about this?” It’s kind of relationally good and we have a large office that are both acquisition agents share kind of same thing so that, “Hey, I’m looking at this property, but I’m not so sure about the value. Can you run a quick ___ on it?” We have a lot of office space, but we still try to keep people close together that work close together just so that we’re not having to constantly intercom from room to room, we’re 15 feet away.


Danny Johnson: Yeah. I’m always interested in the two sides of it because people that I know that have built up the business of flipping into an actual business where they can kind of remove themselves somewhat. It was like two camps, the one where it’s like we have everybody remote and we just meet together sometimes and the people have everybody together. I couldn’t imagine having everybody remote. I think something’s kind of lost in that there’s not the camaraderie, there’s not the team teamwork, that whole dynamic I think. I don’t know if it’s missing or I’ve never tried it. It’s probably still there, but I wonder at what extent.


Kyle Lackey: I think part of that goes back to leadership style and I completely agree with you that I could not imagine running into office our size and we’re not big, we’re seven people, but I couldn’t imagine running a team without seeing them often. I think part of that – and we’ve had several VAs kind of different tasks for us the years. The first six months or so I wouldn’t have survived without the assistance of a VA. But we were never able to like fully, even though they typically like are great price per hour, offer what you would pay somebody that’s like in your office. You’re going to pay them half what you pay somebody in the office, but I could never get the appropriate amount of value out of them. I think largely that’s because I just don’t understand how to manage somebody that remotely. I think it’s great to be able to just walk in someone’s office and say, “I’m thinking about this. What do you think about it?” Rather than trying to get them on the phone and you miss them on the phone and you’re trying to get on somebody’s calendar to have a 30-second conversation.


Danny Johnson: Yeah, I agree. Yeah. We’re keeping things in-house for now and I think we probably will continue to. It’s interesting to hear that perspective of it too. So we were talking before the show and you were saying, “I think everything that you have we are a member of.” And I didn’t ask about Flip Pilot, have you joined the Flip Pilot group on Facebook?


Kyle Lackey: Yeah, the Facebook page? Yeah.


Danny Johnson: Okay because it’s good to have you in there because you’ve obviously done what a lot of people are wanting to do and should be doing and building the company out the way you’ve done it so. How long how long did you guys go just you and Eric just working together before you brought anybody on to help?


Kyle Lackey: We’re talking about this the other day. This is the approximate timeline that I can remember. So we formed the company to do flips in 2011 and at the beginning of February 2014 I left my full time job to work HL Homes and then Eric was working for a hard money lender in Houston at the time. So I mean we’re making great network connections and stuff like that. But ultimately you wanted to build the empire so to speak so he started transitioning I think June of 2014. We brought our first acquisition agents on probably August of 2014 and he’s still with us. We’ve had a lot of turnover in the acquisition space, but Brett is still with us today, three years later almost. We should probably get him a cake or something. And we brought our – she started off as our office manager and then she transitioned to our construction manager. Olga started working for us I believe in October or November of that year.


Danny Johnson: We’re moving pretty quick and was it a matter of saying, “Hey, I don’t enjoy doing this or this is too time consuming. Let’s hire somebody to do it for us.” What was your thought process in starting to hire people?


Kyle Lackey: Well, transparently we should have had a better plan initially. Brett started with us in 2014. He has been with us the whole time. We hired probably two or three other acquisitions agents shortly after we hired Brett because we thought that we were ready for it and we just weren’t. So probably towards the middle of 2015 we kind of stopped a lot of what we’re doing and like really reassess what we’re doing and make sure that all the hires that we were making at that point were in line with systemic sustainable growth that was in the direction that we wanted it to be. We read a book called “Traction.” It’s a book by Gino Wickman and basically they call it the EOS, entrepreneurial operating system, and it’s really a great process of how to break down all the little steps, to how to clarify rules and things like that. Through that process we ended up hiring a business coach to consult with us, somebody with outside experience. Really he knows very little about real estate, but does a ton about business, so he has just been a great asset for us there. The reason that we grew as quickly as we did is really because we had this idea that everybody can be pretty good at a lot of things, but if you are already really good then you really should only do a couple of things. So I really wanted our acquisition agents – I want them to be able to go meet with another investor and say my acquisitions agents are the best in this thing hands down and I knew that they wouldn’t be that way if I was asking them to management, to do just a ton of different things.


Danny Johnson: That’s the temptation.


Kyle Lackey: As the acquisitions guy, if that was my full time job was to be the acquisitions agent, I knew I couldn’t do that and then I love the kind of the tagline of being a flip pilot is also look at the business from 30,000 feet and really make sure that the ship is heading in the right direction. I knew I couldn’t do both of those things so that’s really why we started adding staff. Like I said, at first we added stuff willy-nilly and it took us a while to really narrow that down. Now we’re very systemic and so we’re in the process of we’ll add another acquisitions agent in the next 90 days or so, so we’re kind of at the very beginning of you—


Danny Johnson: Would that be number three or four?


Kyle Lackey: Number three.


Danny Johnson: Well that’s probably secret 14 or 15 I think if my tally is correct. But yeah, it’s funny whenever you’re hiring people like the temptation is to do kind of what you, at least for us, for me, what I was doing was always trying to do more than I should be doing and I will hire somebody and say, “Well, I could have them do this, this, this and this. I don’t see how that’s a fulltime job, so I’m going to have them do these other things.” And it’s a horrible thing to do. It’s definitely not the right way to go about things and I don’t know how many times I’ve got to learn that lesson. I don’t know if you suffered from that more than you should have, but—


Kyle Lackey: For sure I did – for sure, for sure. I also believe that people operate at their best when they’re probably like 85% to capacity. People that are probably losing your podcasts that are that are entrepreneurs that have that spark in them that our 80-hour a week people will think like 85%. If I’m not working 110% then I’m not working. Well, you’re the minority. Most people need to be in that kind of cruise control spot where they can still turn it on so if things get busy, they can still turn it on and squeeze out that extra 10 or 15%, take care of business. But they need to operate most of their lives kind of not redlining.


Danny Johnson: Well that way they’re enjoying what they’re doing and not stressed out.


Kyle Lackey: Yeah. Because if not you’re going to stress people out, you’re going to burn people out and then you’re going to end up hiring people over and over and over again and there’s nothing less enjoyable than training somebody a second time, training a new person to do a job. ___ that you promoted somebody, somebody that’s our office manager moved into a construction manager role. We had to train our transaction coordinator to kind of take over some of those roles and things like that. That’s a good thing. You feel good about that, but when you’re like teaching somebody how to log in to Gmail again because you burned an employee out, that’s—


Danny Johnson: So you guys document your systems so that whenever you do have to do training again you just kind of like go through the steps that you have documented?


Kyle Lackey: Yes. So we’re actually kind of in process of doing that. That’s something we should be a lot better at. Right now we have a very detailed outline of all of the processes that are in place for what all the pieces that we’re use, like all the systems that we use. So ideally what we’d want is to move to something toward – like the videos that you have for REIMobile and people play your videos for ___ too.


Danny Johnson: Yeah. The screen capture stuff with Camtasia or whatever it is.


Kyle Lackey: The REIMobile I think we spent – me and one of the acquisitions guys probably spent a week locked in an office watching videos and trying to how to use its full potential which we probably don’t do. We probably don’t use it to its full potential. We do pretty good.


Danny Johnson: Well probably because sometimes we add a bunch of features then don’t create videos for them and then people don’t know about them and they – I shouldn’t say that, but I mean it’s just the fact of like developing so much we kind of get behind on even telling people they’re saying, “It would be cool if it did this?” And I was like, “It has been able to do that for a year.” But it’s my fault you didn’t know that, not your fault.


Kyle Lackey: I can’t remember what it was that I emailed support and then I got an email about probably an hour or a half later – was it Tyler or Matt? I don’t remember exactly who sent the email, but somebody sent an email back to me like a screen capture and I was like they could have typed this out but they thought it would be easier for me to voice over and send it back and I thought that is it. But that I think in 2017 I think things like that are probably more applicable than an employee handbook or something like that, but I definitely think it’s important to important to be able to systemically repeatedly train people.


Danny Johnson: Yeah. Now you made a good point because actually Melissa and Grace have been working in our office on documenting the systems in a lot of different ways and a lot of it gets done in Google Docs or something and we put them out, put them in a binder. But I don’t know that a lot of people like to go through that kind of stuff that way, if they like to learn or consume that kind of process that way. So I think that’s something I’m going to talk about is maybe doing some live action just talking in front of a camera or something or having build out a real quick slideshow and just record it and explain the processes that way. That way if there’s something you need to show them, you can show them instead of typing out “click on the green button.”


Kyle Lackey: Right.


Danny Johnson: Yeah, good idea. So was that secret number 18 or 19?


Kyle Lackey: I feel like that’s a joint secret. I feel like we discovered that one together. It’s a good idea. We’re going to do that.


Danny Johnson: Well this has been awesome I really do appreciate it and I appreciate you being a customer for LeadPropeller and using the services for PPC and SEO and REIMobile and all that kind of stuff, so it’s really good to talk to you. I’ve heard a lot you from Josh. I’m glad to have you on the show and want to definitely keep in touch.


Kyle Lackey: Thanks for having me on. It’s good to talk to somebody and I know you guys have been killing it in San Antonio for a long time. I remember very early on one of the examples sites that Eric, my partner, sent me when we were not REIMobile customer at that time. He sent me Danny Buys Houses and I was like this guy’s website has got it nailed.


Danny Johnson: Nice, nice. We definitely want to keep in touch and everything and how can people contact you? So if anybody out listening wants to contact you what’s the best way for them to get in touch with you if you’re open to that?


Kyle Lackey: Sure. My email address is kyle@hlhomestx.com is the best way to get in touch with me. You can go to our website hlhomestx.com which is a LeadPropeller site.


Danny Johnson: I’m going to put that in the show notes page took, so if you are driving and couldn’t write that down you can find that on the show notes page at flippingjunkie.com/89. This is episode 89, just type in slash flippingjunkie.com—


Kyle Lackey: ___ another episode in the pipe, so that I would be number 90 or something like that would be a monumental thing, I guess 89 alright.


Danny Johnson: Wait, why did you want to be 90?


Kyle Lackey: I don’t know, it’s like a round number.


Danny Johnson: 89 is a nice number too though. If you really are interested in round numbers, I’ll have you back on for 100.


Kyle Lackey: Sounds like a plan.


Danny Johnson: Alright cool. Alright Kyle, thanks a lot again. I appreciate it. I had a lot of good time with this one.


Kyle Lackey: Awesome Danny. Good to talk to you.


Danny Johnson: Alright. Talk to you later.

Alright I enjoyed that episode a lot, a lot of great info and he thought he only had two secrets. He had a lot more secrets and he shared them in this episode, so very cool Kyle. I thank you so much. He does manage SEO and PPC from LeadPropeller doing it for a long time and you can find out more if would like, call up Josh, he handles that stuff at 210-999-5187 or just go to LeadPropeller.com find out the services that we offer up that allow him to run his business instead of trying to become an expert at pay-per-click and all that kind of stuff and wht he does that. We’re going to have show notes page for this episode at flippingjunkie.com/89.

Alright I want to give a shout out real quick for Jason who left a review for the Flipping Junkie Podcast on iTunes. Thank you so much Jason for that. I’m going to be doing the shout outs every week as long as there are new reviews. If there’s not, I can’t do it, so help me out guys. If you guys really enjoy listening to the Flipping Junkie Podcast please go to iTunes and leave a rating and review for the Flipping Junkie podcast. So Jason left, “Great information, amazing advice, a must listen.” Thank you so much Jason I appreciate it. Everybody have a great week and see you next time.

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