Jason and Pili Yarusi
Jason and Pili have two beautiful children, two awesome bulldogs, one flipping and wholesaling business, a Multifamily Acquisition company, a Beer Company, and are the hosts of the REI Foundation Podcast.
Having met in New York, Jason and Pili got into real estate investing shortly after hurricane Sandy struck the east coast. Jason’s family construction business had to help homeowners lift their houses to meet the new FEMA requirements because of the massive amount of flooding. Before the hurricane, Jason’s family business would do maybe 12 lifts a year. After the hurricane, the numbers skyrocketed to nearly 400 in a single year to avoid future flooding.
Because of his background with houses and construction, Jason and Pili made the choice to move into real estate investing! When they were expecting their first child, Jason’s dad asked if he and Pili would be interested in becoming real estate agents to work in their investing business. When a lot of businesses were getting overwhelmed in the east coast, Jason and Pili found a great opportunity and took it.
After the move from construction to real estate investing, Jason and Pili focused on finding as many deals as they could to help people dealing with stressful situation regarding their houses. Once they started buying these houses so that they were putting time and work into a product they would turn around and sell, their business took off.
Aside from already knowing the business, the best thing that kept Jason and Pili motivated was believing they would be successful. One of Pili’s favorite quotes is:
All of a sudden we believed we could do it.
“There’s so much power in those words. Just believing you can do it is 80% of getting something done.”
Where do you find your deals?
Jason and Pili get a good amount of deals hunting the MLS. A property they just recently got from the MLS had an original ARV of the house was in the 700’s, but with an end buyer in the West Field area, Jason and Pili are marketing the house in the 800’s. There’s a lot of commitment involved, but the payoff will be worth the risk.
As far as their business goes, it sound like Jason and Pili are doing a great job! We appreciate them coming on the Flipping Junkie Podcast, it’s always great to get advice from successful real estate investors.
Don’t forget to check the links at the bottom of the show notes for a link to their podcast, REI Foundation Podcast!
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Danny Johnson: Welcome to the Flipping Junkie podcast episode 82. [music] 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 a small group of house flippers that considers themselves flip pilots that strive to build the 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 gets started.
Hey, everybody. Welcome back to the Flipping Junkie podcast. I’ve got a couple on here today that I’m excited to interview. So this is going to be a great show because Jason and Pili are awesome. They run several businesses and do it well. So I’m going to get to interview them today. I was just on their podcast, a very good podcast as well. The REI Foundation Podcast. Jason and Pili have two beautiful children, two awesome Bulldogs, one flipping and wholesale business, multi-family acquisition company, and a beer company. And then, they’re hosts of The REI Foundation Podcast. They’re just great people, too. I really enjoyed being interviewed by them for their podcast. I’m looking forward to doing the same on this podcast. So glad you guys tuned into the show and let’s get started.
Okay, everybody. I’m super excited. We’ve got Jason and Pili Yarusi here on the Flipping Junkie podcast, and I just had the pleasure of spending about an hour being interviewed on their podcast which I highly recommend. You should check it out. These guys are awesome. Now, they do a lot of things and I’m amazed at how they’re able to keep the go without going crazy. And it seems—
Pili Yarusi: Without going crazy?
Jason Yarusi: We are running right now.
Danny Johnson: Still functional at least. Crazy but functioning, right?
Pili Yarusi: Yes.
Danny Johnson: So if you’re watching on YouTube, we’ve been putting these episodes on YouTube now. So youtube.com/flippingjunkie. You’ll see behind me there’s a picture of New York City. It’s just a big kind of poster thing. And Jason, what were you saying? You were saying that that’s where you guys had met or—
Jason Yarusi: Actually, yes.
Pili Yarusi: Few blocks away.
Jason Yarusi: A few blocks away right in 23rd Street, Pili and I both lived in New York City for a long time, almost close to 13 or 14 years before—
Pili Yarusi: I met him in 2003. I actually hired him.
Jason Yarusi: Hired me way back in the day. One of our points right back there. So I was always still asking permission.
Danny Johnson: That’s funny.
Jason Yarusi: So a long time, I love New York City, we’re in New Jersey now. Miss it very huge. Actually, I’ll be going in there for a meeting tonight but it’s a quick in and out. And every time we go, the energy is amazing.
Danny Johnson: Nice. I have never even been. I need to probably go. I’ve been to Chicago, I’ve never been to New York City. So I’ve heard that it’s interesting.
Pili Yarusi: [crosstalk 00:03:10] stay with us.
Danny Johnson: What’s that?
Jason Yarusi: We’re right there. We’re 20 minutes outside the city. So anytime. You’re always welcome.
Danny Johnson: Okay. Yeah. Maybe sometime soon and get Melissa to go up there. She’s been there before, but I never have. So is that the first business then? Was that your bar where you hired Jason?
Pili Yarusi: No. I was like 23 at the time. Our boss at the time was like, “Yeah, you can manage. You can manage my huge bar that has like 3000 people when there are club parties. Sure. You can do that.” And so a little 23-year-old just managing a bar and walks Jason, and I was like, “Okay. Yeah, you’re hired.”
Danny Johnson: Nice.
Pili Yarusi: I think you might’ve given me—no. I don’t think you gave me your resume.
Jason Yarusi: No. But I think at that point, there was a light ship that had sunk twice that was beached at this barge where this bar was. It’s something that New York City—it’s very unique because there’s not many. It’s transitioning now but there wasn’t many things that were allowed to happen on the water. So this sunken ship was now a nightclub bar, I was actually painting it as part – me and another guy, Joel, crazy enough. It’s one of our first gigs in New York City while we’re in there. It was quite some time ago.
Danny Johnson: That’s interesting. So how did you guys come to start flipping houses? And how did you get into the whole real estate business?
Pili Yarusi: So that started right after hurricane Sandy.
Jason Yarusi: Yup, that’s correct. We were at sort of a family construction business. It’s what we’ve done for five generations. We move buildings, lift houses. We’ve done that for forever back from my grandfather and then my dad really took it and ran with it. Mostly in New Jersey, some in Connecticut, some in Pennsylvania, and New York. But hurricane Sandy happened and things really got crazy because homeowners had to lift their homes, basically take their home that had been flooded. And to meet the new FEMA requirements, hopefully prevent any future flooding at all, so cut their insurance rates down that had skyrocketed and are continuing, they need to lift their houses to a new elevation. So we had gone from doing a dozen or so a year to doing—at one point, we’ve done like 400 in one year. So it had gone just out of control.
Danny Johnson: Wow. Yeah, it’s crazy.
Jason Yarusi: Yeah, it was bonkers. And it’s still is a piece now but we had always wanted to push more back into real estate. My father had built for many years. We have done stuff on that avenue, but it was mostly for others and it wasn’t always for anything for us. And so as we started to transition into this point really pushing hard with the construction, we realized that you’re always just working to work for another job. No one is lifting your house twice. So we’re out there continuing to find a job and it’s hard work and there’s no passive element to it or no generational wealth come into it or no real big cash flowing into it. So the big focus is that we always want to do our own projects, and that’s when we started transitioning into real estate.
Pili Yarusi: So we were into Sandy, back into the construction business for about a year lke Jason slowly had started to take over the office or is systematizing this business, and I came in as—we were still working at the bar we were talking about before and then we would drive out to New Jersey and take a look at houses and help out with the office. And at one point, I got pregnant and realized I couldn’t bartend anymore. And around the same time, Jason’s father, Wayne—and Jason sat me down there. They’re like, “We’re thinking about getting into flipping homes. Would you be interested in becoming a real estate agent?” So therein lies the start. I started taking the classes to become a real estate agent and we started looking for deals on the MLS back then. That’s how we started.
Jason Yarusi: And it’s been a great learning curve for us because—
Pili Yarusi: And that was 2013.
Jason Yarusi: Yeah, 2013. Because the hurricane Sandy, it was a lot of people. And there’s a lot of businesses out here that I’m really just got overwhelmed, a lot of townships, a lot of government entities in the state. Everybody just got flooded because you go from having a dozen construction projects happening in town to hundreds all at once. So we were trying to navigate that path, had to grow responsibly where there’s no time to because you’re going from having a couple of phone calls a day to thousands. And there is no built-up here. So we were trying to figure out how to grow ourselves into this, not taking on too much but at the same part to have the steps along the way to go in there and it’s been a hard learning process but also very good to help us push into his next avenue.
Pili Yarusi: So needless to say, we were so busy with the construction company that those first couple years we really only did one deal.
Jason Yarusi: Yeah, we do one deal to year. One deal on another. Bought some rentals. I actually brought some rentals out of state. As I looked back, we took some interesting steps that I think I’m just a little more risk averse which is okay. I’ll set up my steps but I’ll also leap and then figure out what’s below me sometimes which is good and bad. But that’s been some of the elements for us.
Pili Yarusi: So it was sort of a slow start. In 2013 and 2014, we had one deal that we raised and add square footage to by using our construction company. We actually took actually the first couple of homes. We took the home which was like, let’s say at Cape Cod and we raised it up twice to add square footage.
Danny Johnson: Nice.
Pili Yarusi: So we added a whole new floor and a garage, and we’ve done that three times now. One is in Union Beach and another one is in Manasquan. And these are all Jersey shore towns and flood zones.
Jason Yarusi: So it would allow us to build a little bit where we could get more money back into square footage compared to what we’re building it for. And then also now, we’re raising it. We’re cutting the flood insurance for the new homeowner from subsequently 8000 or plus on a property to 500 a year.
Danny Johnson: So what are the typical numbers for you guys’ deals? Are you still flipping and doing this with most of the flips where you’re targeting these types of the properties and raising all them? Are you doing other types of properties?
Pili Yarusi: So that’s two questions. We’ll get into numbers for the first question, but the second question like we realized that the business model that we had for flipping was very hard to scale just because we were so in it, having a construction company do most of the work. We sort of got bogged down in the fact that only we could like find these deals and only we can like do the construction work, only we can—
Danny Johnson: Sounds familiar.
Pili Yarusi: Yeah. It does sound familiar, does it? So in the past like or so, we’ve been trying to transition into doing more wholesales and more like easier flips. I guess you could call them “lipstick flips,” like just make it pretty. Don’t add square footage. Just make it pretty and get out of it. So our flips right now take anywhere from like seven to nine months; whereas we want to get into flips that take three to four months.
Jason Yarusi: The difficulty for our work is that with the influx of all the work happening with hurricane Sandy, the permit process has gone pretty extravagant. You have to do utility shut offs that are all basically at your control. Utility shut offs here on the front may take six to weeks. In the back, it may take four to six.
Danny Johnson: Painful.
Jason Yarusi: Yeah, it’s painful. So I’m losing three or four months right there in the project. Once we get into the work—typically, we were looking at houses where we can buy high threes and low fours. We’re putting in 150 to 200 and trying to exit on the back in mid-sevens and that works for the errors were in, but we would be much better to—because that takes so much. It takes so much effort. You got so much capital involved in every other point.
Danny Johnson: There’s a lot more risk.
Jason Yarusi: And a lot more risk. Exactly. So we’re open for—especially now where everybody… no one has a magic ball but everybody is talking about whatever direction that things are going to take. If I’m exposed on five or six of these for 8 to 11 months, that’s a hard exit strategy if things did push into a different direction with interest rates or anything.
Pili Yarusi: So as we scale our business within the last year, we’re definitely gearing towards more—I don’t want to say easier flips but shorter term holds. We’re not letting go of our original business plan. We just have to learn how to scale it. And we’re talking to people who do this type of work on a regular basis. We’ve talked to a couple of them in the last few weeks, and they actually have scalable models. So we’re going to start implementing that, like finding an end buyer. So we’re kind of going to do—I hate to mention—the HTTV type of deal where we’re going to be working with the end buyer to kind of like build the house they want but that cuts at least a month to three months of marketing because you can imagine the houses that we’re into. They’re marketed just for a certain type of buyer at that price point. So if we find that buyer first, we knock that time out.
Jason Yarusi: We’ve actually just had one work for us on that method. And it was really eye-opening because of just all the lags that we have that are out of our control between the utilities and the permits to be able to get the buyer in when the house is too gutted and almost allow them to feel great because we’re hitting our price mark but then they can pay for all the upgrades past whatever we had in there based on their point and they can feel as if they’re involved in the process. It’s been like a win-win.
Pili Yarusi: I’m laughing because of the last buyers. We had just built the new additions. So you can imagine like we didn’t have a roof and this house is in a flood zone, so it was raining. So we’re taking these buyers through and I had actually found them on Facebook.
Jason Yarusi: In a Facebook live video.
Pili Yarusi: Yeah, a Facebook live video. An agent saw it. It was like, “Does this have four bedrooms?” I was like, “Do you want it to have four bedrooms? Sure. We can put four bedrooms in.” The funny thing is we had actually just taken out the fourth bedroom to make a grand foyer. So we’re taking these two poor souls through this house that they want buy. And they’re getting dripped on. There was like lumber and nails all over the place. It was sort of messy, but they loved it.
Danny Johnson: They loved it?
Pili Yarusi: They can see the vision.
Danny Johnson: That’s good because I’ve always heard like, “Don’t ever take them until it’s done.” When they see a gross stuff, if you have any gross stuff going on there.
Jason Yarusi: So we have buyers coming through. I was like, “Where? It’s like a pool over there. I think there’s ducks in the front yard.” She’s say, “What? Are you sure?” “Yeah.”
Danny Johnson: Nice. It all worked out. So are you guys making a lot? Is there a big margin from the point of lifting and doing the construction part? Is there a big margin in there for that?
Jason Yarusi: The thing that allows us here is that that when we do that, we can buy to a point here where we can even hit it sometimes even a retail because we’re able to save a lot of the roofline and the walls right there. And from that, it gives us a point where we can jump at projects and still make a good amount at the back end as well.
Danny Johnson: Yeah, because I wondered like if you did the scary stuff and did like the whole tail sort of thing where you raised it and you got everything. But I guess that’s probably the hardest work, so after that. It’s like doing the construction part of remodeling the house isn’t a lot. I was just thinking maybe get to that point and then sell it to somebody who would then finish it out and then you have even less time in it, but I don’t know. I don’t know what the numbers are if you would be able to find buyers at a good amount to make a lot of money enough to make it worth skipping the finish out on it.
Jason Yarusi: It’s been it’s been difficult for that price point because people have been—it’s such a difficult process to raise the house and get back in the house that so many people and their friends have had to deal with around here that they get scared of that. I’ve seen a few other people try that method and they just scared of having the house still with so many variables left unknown to get back into it because it would make complete sense. You’d put out there, put as a handyman special. And from that, then it goes and says, “Okay. Great. Now, we still have to do all these other items of this process that the town is still not really sure how to take in.” And then they try to beat you down and price a little. I think as we get a little bit further out, that mile is going to get much better. But with all the uncertainty from Sandy, it seems like there’s still a lot of variables out there.
Danny Johnson: Well, there’s probably a lot of that going on, right? Where people are the ones that the need all that work still. So there’s the supply of that product where it still needs. The work is maybe a little bit higher than the finished and done, already fixed, no more hassles. It’s been raised. So yeah, that makes sense. Now, you had talked about doing the— oh, did you want to say?
Jason Yarusi: The one thing that is why we’ve been even trying this model and pushing this model a little bit outside the flood zone is what happens in the flood zones is that you have a block where houses have been raised and remediated and the rest haven’t. So it’s been playing havoc on basically the sale value of the neighborhood. You don’t have the best comps going through because of now people transitioning. So the model, it works to an extent but you’re still open to so many variables because you pull comps two streets away that are substantially damaged and they’re pulling really adverse numbers. When they do come back and the whole town does come back and the whole block comes back, then those numbers are going to skyrocket but were still in this transition period.
Danny Johnson: Yeah, more risk there. So making the transition then to do the easier flips, right? I think this gets into a little bit when we talked about on your podcast most people’s mindset and struggling to get the first deal, right? And it’s believing that they can get a deal and do a flip, right? That they can find a house at a low price, that somebody will take low offer on a property, that it can even happen for them. Did you guys deal with any like mindset shift that you needed to believe that you could transition to find those deals that didn’t need a ton of work? Did you guys go through that?
Pili Yarusi: It’s a constant mind shift. So sort of the timeline of that was October. I think you had mentioned in October for you as well. So I was pregnant with our second child. So I couldn’t make it, but there was a huge mastermind in San Diego that I sent Jason to. It was with House Flipping Formula. It’s called Flip Hacking LIVE. And this just goes to like the thought that you should surround yourself with people who are better than you, who know what they’re doing. Why change something that’s already working? So find somebody that can do it, and that’s exactly with the Flip Hacking LIVE was for Jason. He went there, and it was amazing. And that was sort of our first mind shift into because—like I said before, we had only been looking for deals on MLS. I have become a realtor, and I was on MLS every day looking for deals.
Danny Johnson: It’s so painful.
Pili Yarusi: And that sort of become a little painful after a while because you’re like—there are deals on the MLS. I don’t care what anybody else says. You can find them. You just have to be there on the MLS every day to look for them. So yeah, it can get painful but they’re there. So anybody out like listening to this and MLS is your only option, it’s not. But if you’re looking on the MLS, just keep on looking. It works.
Jason Yarusi: We also had a niche where we’re thinking outside the box. So maybe the house has this or just fixing it up wasn’t going to work for someone. But when we’re going to purposely add square footage to homes, lifting them, and repurposing them, it gives an advantage that we’re going to look at homes from a different context.
Danny Johnson: Nice. And I say painful in the MLS and I say that in a joking way because I gave up too early on it, because I didn’t believe. And I was like, “This is more work than I want to do.” And I’m saying that now because I want to people realize that’s how most investors see it. It’s like they’ll get on and they’ll tell themselves those false beliefs and sell themselves on it and not work hard at it. So it worth it for you to believe that you can and get in there do it because you guys are having success with it. So don’t ever hear people say, “Oh. That doesn’t work, and I was so miserable and painful,” and then write off.
Pili Yarusi: Exactly. Well, I’m looking for this awesome quote I just heard, “All of a sudden, we believed we could do it.” I heard that somewhere. You just said that. You said that like an hour ago to us. “All of a sudden, we believed we could do it.” There’s so much power in just those words. Just believing that you can do is like I would say 70% of everything, like even 80%, 80-20 rule. You believe you can do it, 20% will come. Like I said, it’s a mind shift. So back to the MLS, I could go on a tangent with like one of our current deals, but we’ll get back to that. Just remind me about Westfield.
Danny Johnson: Well, go ahead and share it.
Pili Yarusi: So we just purchased a property that’s basically at market value. We purchased it for 415 in Westfield. That’s like almost as low as you can get on the street that we got it. Westfield is sort of like an, I guess, A community if you want to use A-class neighborhoods, great schools.
Jason Yarusi: A-class neighborhood, great schools, great all the time. And it’s got a great area, properties, new roads.
Pili Yarusi: Yeah. Right next to the city.
Jason Yarusi: New homes being built, a million more and up.
Pili Yarusi: And we’re like five minutes away from this house. And we really wanted to try out our business plan in Westfield to see if it works. So we’ll see what happens. So we bought it for 415. The original ARV was going to be in like the 700s. But now that we’re working, we’re thinking about working with an end buyer. We’re actually upping the ARV into like the 800s because now we’re going to be putting in high-end finishings and actually taking it to the level where Westfield is whereas we’re going to like go for like the median entry home buyer. We still can and the ARV can like fluctuate, but we’re going to market it at 800 for like that end buyer that’s trying to like enter into Westfield but can’t afford the 1.2—
Danny Johnson: I love that because you guys are testing it out. You’re not committing in putting that investment out there then hoping that somebody—I love that. That’s smart.
Pili Yarusi: It’s commitment. It was a large monetary commitment, but no. We’re definitely just like—
Danny Johnson: It could be even larger without knowing that you’ve got someone that’s really already on the hook to buy it.
Jason Yarusi: Correct. We like this model.
Pili Yarusi: We’re going to start marketing that by next week. We just got the plans in.
Jason Yarusi: Because we’ve been constantly trying to figure out that if we’re going to spend this time doing these high-value ads, how can we just cut that length of time that’s not actually construction work. Because construction work, you bang it out but then you have all this prep and pre-work and then all your post-marketing that really makes the process extended.
Pili Yarusi: Put on MLS. Wait for other agents to show it. All of that. But then maybe there’s no buyers for that particular house. Maybe the finishings I put into the house nobody likes. It could happen. So it will all just sit there until the perfect buyer comes and we can’t wait for that. But back to October. So Jason goes to Flip Hacking LIVE, comes back, and he’s like, “We are doing something called direct-to-seller marketing.” I’m like, “What is that?”
Jason Yarusi: And we’re going to have a team. And we’re going to go places. And we’re going to hire people [crosstalk 00:25:03].
Pili Yarusi: And we’re hiring people. And we’re opening up our marketplace. That business plan we’re doing this whole time, we’re not going to do that anymore. So needless to say—I’m going to be honest—my brain kind of shut down. I was like, “Okay. You do that. I’m going to keep on with what we’re doing.” I didn’t allow myself to do the mind shift until Jason and his partner, Kevin, closed on their first multifamily. Jason will go more into that later. When that happened, I finally had that mind shift. I was like, “Bing! Our flipping business is going to fail unless I take it over.” Because we were just kind of going like this, like not really having. We were still taking on deals from the MLS, the direct marketing, and everything that Jason had put into place. He gotten us on a CRM. None of it was really taking because nobody was really paying attention to it as much as it needed to be paid attention to. We had skipped to let the system handle itself before we actually built out the system. So that’s kind of where we are now. I’ve taken over the flip business. Jason is still like helping me in it, and I help him with the multi-families but that’s sort of like the split that we did to make sure that each business gets our full attention.
Danny Johnson: Great idea. And Melissa and I, like I said, in October on your podcast was we did the same thing and it is was—it felt good, right? It’s kind of hard sometimes to not be a part of all of it, but you can’t be a part of all of it and have as much successes when you kind of focus. And I know what you’re saying, when you’re saying that your mind shut down a little bit when he first brought that to you.
Pili Yarusi: Because it was like so much. Like, “What?”
Danny Johnson: Well, you’re building momentum in a certain direction then you get told, “Hey, we need to push and go this way instead,” and you’ve got all that momentum still carrying you this way. It’s kind of hard to do. But your point also, I think, about setting up the system and then just kind of like letting it run. You’re just like, “Well, we set it up. Let’s just let it go.” We found as we hired people like we made that mistake with people when we bring them on and kind of say, “Hey, do this,” and then hope that it all works out and it’s never. That was a big learning lesson.
Pili Yarusi: We’ve just learned that as well.
Jason Yarusi: I’ve seen myself throughout businesses that I have is that just wouldn’t bring on partners. You assume that everybody is going to do their thing and sometimes you don’t clarify the roles and that’s been one of the biggest learning experiences for me, is that you need to be very, very intentional on who’s doing what and who’s taken on what one model. Sometimes you have, especially as you’re breaking in, maybe you’re going to have to overlap a ton just to get something to the finish line or the next step. But if you’re getting to a point where things are dropped because no one is certain whose role that is or where it is, that’s when you can have a lot of distention and a lot of problems in your business. I’ve learned that in the hard way and in some ways. And I’ve been much better in other ways, but it’s been a good learning lesson to help me continue for sure.
Pili Yarusi: Go ahead.
Danny Johnson: No, go ahead.
Pili Yarusi: To give you an example—it’s never a failure. It’s a life lesson. After October and after I had joined this huge mastermind back in April, we hired two acquisitions managers. And I think we did a really good job at hiring the right people for the right jobs and initially training them. And then, we kind of let them do their thing. One of them had to go on vacation, a family vacation that he had planned before. So he’s been gone for a month. So our other acquisitions guy, Jake—bless his soul—we basically cloned ourselves in him. We gave him everything: phone calls, acquisitions, dispositions. You name it. He was doing it. So when we got back from the mastermind meeting we just went to a few weeks ago, one of our bigger, I was like, “We need to make Jake just dispositions. Pull him back. Take the phone calls away. Take the acquisitions away. Take everything.” Well, not take it away but let him focus because he was feeling it too. He was all this pressure that he shouldn’t have.
Jason Yarusi: It wasn’t a lack of effort, I admit. But you know, we had five contracts and all of a sudden now I feel like he’s like backed into the wall like, “Okay. Which way am I going?” I’m trying to like fend off everywhere. What would I do?” “Okay, Jake.”
Pili Yarusi: Taking phone calls.
Jason Yarusi: Let’s take one step back, and let’s be one step further behind.
Danny Johnson: We did the same thing. You get excited though because it’s like, “This guy is awesome. I’m going to have him do this, this, this, this, and this.” And yeah, a mistake.
Jason Yarusi: Exactly.
Danny Johnson: But there’s always the temptation. Even after you learn it, you still, I still. I know I shouldn’t, but I can’t help it. I get so excited. I’m going to push all this over.
Pili Yarusi: “Do all this. Why aren’t you doing it good?” “Sorry. Here. Let me take the phone calls again.”
Jason Yarusi: We’ll set up the guidelines too because as you grow, you may feel that you’re explaining but you’re not systemizing on that. You can just constantly repeat it with others, and so the steps we have with them. We’ve done good in certain elements of being able to help them, but we’ve done really poor in other parts about not explaining enough. And so, they’re doing what they think. And not nothing that it’s bad or wrong, it wasn’t how we positioned but we weren’t clear with them. So we weren’t leading them down the right path to be able to accomplish what we we’re hoping to have them accomplish and that’s completely on us. And so now, we just have to go back and say, “Okay. What are those steps to get him to the finish line? And how can we make that as a point?” So as now Jake transitions to the only dispositions, how can we put this back in place so when Alex comes back, so we don’t have to just keep repeating.” But you’ll say, Here’s our manual. Here. This is how we like it to be done,” and make it cleaner for them. And also, less steps that we have to constantly just say the same thing over.
Danny Johnson: Well, then you forget. If you have to make a decision about something that’s not made all the time and you have to think through what all the variables and things that could happen, the risk, and stuff if I make the decision one way or the other, and you go through all that. You make the decision and then it doesn’t come up again for a year or two years. And then, you find yourself having to go through all of it again to figure out where you were, why you decided and document it. Even if you don’t think it’s going to come up that often, document everything that you go through even before you hire people. And one thing you did say there too which has been huge for us too is like you said it was on us, like the really the responsibility, it all comes up. It’s always the top. So I always see it that way. I’m glad that you guys do. It’s awesome that you had that in you.
Pili Yarusi: It’s all about taking responsibility for your business. That’s the only way you’re going to grow, is to be responsible, grow responsibly, and know that the things that you do. Sometimes I can’t let myself think about this too much, but I’ll let myself think about it right now. The things that we do like we build houses for people. Imagine if we do something wrong. Something could go wrong in that house with the people living in it. You have employees. You have people working with you. You have partners. What you do every day affects people’s lives. So that’s a responsibility. It’s a huge responsibility.
Danny Johnson: It reminds me of something I had read about getting to the bottom of the problem. By being at the bottom, it’s the top really, right? But when somebody that you’ve trained does something and they make a mistake, and you say, “Well, why was that mistake made?” “Well, because I made the wrong decision.” “Why did you make the wrong decision?” “Because we’ve only talked about this, and I forgot that you told me this and it’s not written down anywhere.” And then, “Why isn’t that written down anywhere?” “Because we don’t have—
Pili Yarusi: Systems manual.
Danny Johnson: The processes in place to even like know that we need to be documenting everything. So you get to like the root instead of dealing with just the symptom, right? And fixing that. But I was going to ask you guys also: How are you—you talked about expectations or what people should do and knowing what they need to do and having them focus. And then, how are you checking up with all of that? Do you guys have like KPIs, key performance indicators kind of things or reports or meetings that you have?
Jason Yarusi: We’ve been growing into that and that’s also been—I guess the point then you put this out to the surface is that at many times you have to fail to know what you’re missing, especially for a lot of these. So something happens where maybe someone offered so much. You got to go back and just say, “Listen. We’re sorry. I was like disappointed.” But you have to take those steps to understand what your process is going to be for the next time because I think for one that the multifamily properties—we just didn’t have a great experience with one of the security’s lawyers. And I was thinking about this and I was like, “This really comes down to that if I knew the right questions to ask which I do now for the next one, this will be a much better experience. But is it that guy’s job to teach me the right questions? Not really. It’s his job to do the securities paperwork so next time.” Now, I know the questions. I just didn’t know the questions this time. And so now, “Okay. I got it for the next one. Lesson learned. Cool. I’ll figure it out for the next one.”
Pili Yarusi: Going to what we do, on a weekly basis, we have Monday morning meetings. And I’m in the process of systematizing those a little bit more. I think it’s the books Traction and Rocket Fuel. They talk about having your meeting, making a safe place for your employees by like structuring it. And every meeting runs the same way every time. I’m not doing that yet, but I will be. Again, it’s a growing process. Our KPIs, we’re building those out right now, another thing that we’re trying to systematize. And like you said, just write it down.
Jason Yarusi: But in that group we lost, so it was also at that point of, “Okay. So we need to track. Okay. Great. How are we tracking? What are we tracking? Why are we tracking it? And how are we looking to improve these marks?” And that’s been now. We’re now backtracking out from. So the phone is ringing a ton. What does that mean? Are we having good calls? Or are we just having people just calling why are they getting this letter? So from that now, how many appointments are we getting? And are we making sure we’re sourcing motivation before going in this appointments. We’re not just out there just fishing around for someone that maybe thinks for moving furniture or something.
Danny Johnson: So it’s like having the right metrics and the metrics saying the right thing. And we struggled with that too and then we probably still do to some extent as far as—especially when you’re measuring something and then the person responsible for that number feels it’s a goal. And since that number is tracked, it’s a goal that’s going to be seen. The progress of is going to be seen more than something else, but maybe that’s not their most important thing. So it makes it confusing as to what the expectations are. “Okay. So they’re monitoring this. So I better be making much more calls or try do something to get the phone ring more,” when maybe that’s not their most important task. That’s some problem that we had in trying to determine those two.
Pili Yarusi: We have the structures in place to monitor everything a little bit more closely. We just have to build it out a little bit more. Also, this goes more for your listeners. Don’t be afraid to track yourself. I can of deal with that because I’m like, “I don’t want to see the numbers. Maybe we’re failing.” I’ve started to say that’s stupid because if you’re failing you should know. You should want to now, right?
Jason Yarusi: Course correct.
Pili Yarusi: Exactly. You want to course correct. On the flip side, if the numbers are showing that you’re doing good, don’t you want to know that, too? So track your sales. Track your numbers. Track your phone calls. You can get lucky and do well. But over time if you’re not tracking why that’s happening, you’re ultimately going to fail and I’ve seen that with restaurants business and other points. If you’re not lining up where the metrics are falling, well sure you can have some really solid months just because you hit the right momentum point right there but then you’re going to have down months and you’re not going to realize why or know why, and you’re going to throw off your old business model trying to correct something that you don’t fully understand.
Danny Johnson: Absolutely. And that can be tricky in this business too because you can get—especially on a rehab, right? You guys know. You do all this work. Maybe you get the check at the end. And it’s tempting to think that that’s all profit. There’s a lot of cost like probably that aren’t taken out in the loan or whatever that you have on top of that. That’s most likely not the actual end number. And to not know exactly what that is can be a shocker when you finally do sit down to figure it out because what you thought was a $40,000 profit could be a $17,000 profit. And you’re going around making decisions thinking you’re making $40,000. That’s how we know.
Jason Yarusi: I push out to my father all the time. I thought because I track all these big rehabs because we just have so much going on, my father loves to have the one-month or one-and-a-half-month mark where he possibly—it was like 713 receipts that I lost. I was like, “Dad, listen. I’ll come meet you weekly. I will set up whatever appointment you want, but stop doing this to me.” “Okay. No problem.” Next month, “There’s 713 receipts. I think they’re finished jobs.”
Pili Yarusi: Or better yet, “When are we going to change this? We’re going to take out the stairs and move them a foot? Are we going to—?
Jason Yarusi: My dad is amazing. He really has the most incredible IPS. It’s always for the best. But sometimes I’m like, “Dad, the owners already approved this. It’s fine as it is.” “Well, no. They’re going to like it better.” I’m like, “Okay.” Well, if we do this now, now I have to take this. Go back to our lawyer. Have this sent to the other lawyer. Go back to the homeowner. Get the approval. Go back to this lawyer. Go back to us. And now, come back to you. You want to do it, but they’re going to like it better.” “Go ahead, dad.”
Danny Johnson: I don’t know. It reminds me just like when working with my dad. He was mentoring us and helping us get into the business. But really, we ended up going to his mentor and he did more. I just called my dad with specific questions. And it kind worked out nice that way because sometimes I think people will get a mentor or find someone they’re learning from and expect—they want a model exactly and then kind of lean on them a little bit too much without figuring how enough themselves. I like the way it worked for us because my dad was one of the smaller outer towns of San Antonio, not in San Antonio. So we weren’t really competing. But it was also different markets and different situations. So we kind of had to develop what we were interested and what we found worked well for us instead of just modeling what he did exactly. And so, I think for people listening at least—you guys are doing different things. You’re not just doing something that other people are doing. You’re finding where you guys fit what were your niches and what you enjoy and figuring that out, and I think that’s cool. I think that’s what more people need to do.
Pili Yarusi: It’s been an amazing process just kind of like figuring out where we want to be.
Jason Yarusi: And not to say that we haven’t now pushed it to complement this with more quicker turns, more wholesales, etc. because we’re doing all those marketing looking for stuff that fit our model. Well, it’s a very select portion that’s going to fit our model. So we were having good leads come across in front of us that we were like, “It just doesn’t work for our model,” and we just said, “Man, it works for others.” So we started building our team to be able to—and start growing our wholesale business with this. And we don’t see this as being—it’s nice. That’s casual. It helps your marketing. It helps everything else out. But it’s nice to add that in because you also have the quicker turns that can kind of bounce out our 7- to 10-month projects.
Danny Johnson: Fore sure you’re adjusting.
Jason Yarusi: Exactly.
Danny Johnson: Adjusting and finding your way. That’s awesome. I’m constantly adjusting. We’ve done different things too over the years, and it’s always changing. It’s like getting stoned like one thing that you’re going to do—I think what happens sometimes is like the market does change. It catches people off guard because the momentum again is always focused on doing that one model. And not willing to change can really be a detriment.
Pili Yarusi: And that’s when the major reasons or it’s major reasons why I was like—when Jason had the idea of going into large multifamilies, I was like, “Take it. Run with it,” because you never know when the market is going to shift when flipping or wholesaling is not going to be the thing to do; whereas large multifamily investing, that’s a longer play. I’ll let Jason talk more about that, but that’s why we need to keep our mind open because this is a really awesome market. It can change at any point.
Jason Yarusi: And we were talking a lot about focusing. That’s one of the problems I constantly have, is that I have a couple other businesses. The other day, I was like, “Pili, I’m going to start a donut franchise. And then the next week after that, I’m going to start this…”
Danny Johnson: The look on her face.
Pili Yarusi: The donuts were good.
Jason Yarusi: This is how my week goes most of the time. I’m just like, “Do a shared workspace.” “Okay. And then this point.”
Pili Yarusi: And again, these are all really good ideas. The donut franchise, it’s making money. The shared workspace, great idea. We talked to a huge amount of people that are doing it. It takes only so much time in the day.
Jason Yarusi: And you just end up not doing anything great. And so we were like, “Okay. So we’re going to push the multifamily.” Well, I can’t continue to do these other things that I’m not able to focus. So I now systemize from other parts and put a lot of emphasis now pushing in this direction. We’re always really pushing with the flipping business just so we can—like you said, you can have a tunnel vision because you have to course correct as the points change, but you have to lock down in your focus of where you’re trying to get that particular space.
Pili Yarusi: And you did ask us beforehand like how we do it, like how we have our family and run a bunch of different businesses. And I don’t know if we have even mentioned this.
Jason Yarusi: It’ great, but it’s crazy sometimes.
Pili Yarusi: Jason has a beer company, a restaurant. But the beer company he sold off 75% of the shares, and he’s now the brand ambassador. So he works maybe two days a month in the company I would say like 16 hours.
Jason Yarusi: Well, I just had to make choices. It’s just moving in different directions that you ultimately can’t continue to do everything very well. And I was just saying, “Stop suffer,” because it wasn’t that the brand or the process was wrong. I just think that my attention was the delayed or pushed in different directions based on what would need most attention at the moment. So that was a point where we had another interested party, and my partner and I decided to sell 75% with the right move.
Pili Yarusi: Now, the beer company is becoming something fun to do.
Jason Yarusi: And the growth has done great, so we’ve been really happy with that. So now, it’s able to have that focus which has been awesome.
Pili Yarusi: The restaurants, you’re a silent partner in.
Jason Yarusi: I have a partner on point and another point. So it’s all about partners and—
Pili Yarusi: Finding the right partner.
Jason Yarusi: I’ve done better in some times and not better on other points. But what really comes down to it is that you have to think about how you can add to it and how they’re going to add to it and just make sure your visions are aligned because everybody starts with ideas that you’re very excited about without thinking it through. And I’ve seen this around me a lot like, “We have this great idea. Super idea.” Everybody is psyched. You get into it. You don’t know who’s doing what, and people become mad with other people because they have different expectations of maybe how long you’re going to work or how much are you going to work or which are you going to do or which are you going to put into it. So going back to the partners, you just have to be very detailed. You just want to know what they’re in for and what it was because restaurant has been a good experience but we weren’t clear on the outside and that’s made the business more difficult for us just as we learned to those.
Danny Johnson: It’s a huge point. For me, I think sometimes these ideas, they sound like such great ideas because sometimes it’s the whole strategic thing where the—what’s it called? I forgot what the title is in traction, whatever they call. It’s like sometimes the idea of something new and different and the getting excited about the planning and the idea is a little bit easier than doing the implementation of what you’ve already planned. And so for me, it seems so much more fun. And so that’s always the drawn temptation instead of like working hard through what’s already been planned out. So like you were saying, when it’s not planned out, it’s because you don’t want to think about the fact that you’re not doing something right and you’re just excited about not having to do the other thing that requires more work that you had already planned out to do.
Pili Yarusi: That’s exactly it.
Jason Yarusi: And you could probably push that directly to real estate where if you were so worried about having the LLC, having the logo, having the website, but they don’t even know how to comp a house. “But I need to have this first, so I can be legit.”
Danny Johnson: Because it’s easier.
Jason Yarusi: It’s easier, yeah. “Look at the right colors. What do you think of this color?” “Whatever.”
Pili Yarusi: Already thinking of the faint colors. And then to move forward in the construction business, Jason has tried his best to systematize it but it’s a 40-year business. It’s been in the family for 40 years. So I think that’s our biggest time constraint right now. But it’s also been the biggest boon to both of our real estate businesses because it was because of the construction company and just its background and its 40-year knowledge and the knowledge of Jason’s father that’s helped us to grow. So even though Jason had spent a good portion of his time and a good portion of our time in that business, it allows our flipping business to grow. So now, we have our flipping business which I’m taking over most of that. I am still in the process of taking over more. And then we have our multifamily business which just a few months ago we had a huge, huge, I guess, acquisition.
Jason Yarusi: So we did put a lot of push into studying that space and really understanding which direction we wanted to go to. For us, it made sense that B&C assets in markets outside of New Jersey based just a lot of different metrics, the job growth, population growth, job diversity, housing starts, and income, it made sense for us to look in different markets. And so, we focused on a few of those drivers and really started looking at properties that were at 75 units on the minimum and maximum about 200 units just so we could afford staff if we had a property that big. And if we were up a the 200 mark or over, we may start competing with REITs. And it just was like, “Okay. Now, that’s a whole different level that we wouldn’t be able to compete with.” Looking for mom-and-pop which gets put around a lot but just properties that we’re missing something because maybe they’ve been mismanaged or they didn’t have the money put aside to be able to take care of the property correctly. And we just started really talking to people to market, trying to put together a team just like we have been doing with our house flipping business. But in the same part, we’re trying to put together a team outside of our market and that was a learning curve within itself. But it also helped a lot because here we’re so relegated with these heavy projects to really push to a lot of this heavy work to ourselves. Where now if it’s a thousand miles away, we have to find the right team because we’re going to be depending on others. So that was a good learning step for us.
Pili Yarusi: It was actually easier to—well, not easier but it was something we had to do. We had to build up a team to get the multifamily off and going whereas our flip business is here in New Jersey. And we’re still in the process of building out a team and this is a few years in whereas the multifamily business has been about a year in.
Jason Yarusi: So we have 94 units now. We’re close on another 47 unit that’s right in the area.
Danny Johnson: That’s crazy.
Jason Yarusi: So it’s been really nice. But it was another mind shit. We did push our model a little bit now since we’ve gone through the first one. We offered 372 unit or 373 unit the other day. Just now we have this team in place out there so now I can grow responsibly because I started with the property manager who dealt primarily with C-class assets. He was very used to the tenant base. He was very used to that model. He had in-house construction minus of course the licensed mechanicals. They’re right about 5500 units under management. So if I throw on another 94 units, it wasn’t going to break them. It would just going to be maybe a little speedbump that they were just, “Okay. Let’s adjust.” That was a nice cover level for us to get into. And now, we’re just trying to push that forward.
Danny Johnson: Nice. It seems like you guys have done a lot and figured out a lot and learned very quickly and that’s something you use in this business. It’s pretty impressive. It really is impressive. It’s like how do you do so much, right? And you guys are doing it right now where you’re starting or more and more saying no about all those ideas and just planning thing. Which ones the best? We’re going to focus on these. We’ll have other temptations, but we just say no and get all this dialed in. And then maybe once that’s going, we have the teams in place. We’ll consider doing some other things when the energy and the brain power is freed up for it, right?
Jason Yarusi: I know. Go ahead. I’m sorry.
Danny Johnson: No. I was just going to ask—we’re already running almost on an hour here. It’s been great really so far, but I wanted to make sure that you guys had a little bit of time to talk to the audience and everybody listening and tell them about what they can expect from your podcast because I like for them to check it out.
Pili Yarusi: So our podcast is The REI Foundation Podcast with Jason and Pili. It’s just that. It’s looking at the foundations of your business in real estate. It could be any facet of real estate. But having those strong foundations, having mentors in place, opening a book and reading it, and taking all the information you get like BiggerPockets. This podcast, any podcast that you listen to, don’t—what’s the term? I can’t think of the term now. Justin uses it a lot. I know e likes to use the hammer metaphor, “don’t swing a hammer,” and he also does—analysis paralysis. Don’t have analysis paralysis. Yes, learn and get that foundation centered. But then, take that information and build your house. You need that foundation first.
Jason Yarusi: We want to help listeners break the barrier, and that barrier lots of times is mental and lots of times is giving them reasons that they want to do this or they want to start a business or they want to buy income-producing properties or they want to flip homes, but they’re so worried because they don’t know everything or know anything. And we want to just put on there people that they’re doing, but they’ve also had many setbacks. It has never been a perfect model. We haven’t had one person. We’re not anywhere close to perfect. We’re all going to fail and that’s okay. You fail a lot in your days and it’s just in many different ways. Maybe you wanted to eat right and you don’t eat right. Well, okay. Well, you failed at that but it didn’t ruin you. It didn’t destroy your world. For real estate, you just take the first step. It’s not going to destroy your world. You’re going to take that first step and say, “Okay. I’m here now,” and now you’ve done that first step. So now, maybe you don’t know the second step but at least you’ve taken that first step. Reward yourself. And what do we do at this next step? Well, you take another step and you’ll course correct from there and that’s we’re hoping to help the listeners take that first step into their path wherever that may go.
Danny Johnson: Nice. That’s awesome. And how many episodes have you? I guess you’ve done quite a few episodes so far already.
Pili Yarusi: We’re up to 25.
Danny Johnson: Nice.
Pili Yarusi: Everyone we’ve talked to so far, their business has never been perfect. And these are people who are doing—like for instance, Andy McFarland. He’s going to do like—I don’t know—14 billion homes this year. He said he’d do. I don’t know. He’s probably going to do like almost 300.
Jason Yarusi: Like 253 other homes.
Danny Johnson: He’s a machine.
Pili Yarusi: For a lot of people, that’s like saying a billion homes because they’re like, “What? How do you do that?” But he started looking at homes. He started driving for dollars. That’s how he started. He started, and that’s the main thing. He started.
Danny Johnson: He didn’t say, “I’m going to do a bazillion homes this year.”
Pili Yarusi: Exactly. Justin Williams, the same thing.
Jason Yarusi: He did.
Pili Yarusi: Yeah, he probably did. Justin Williams, the same thing, 100 homes. He didn’t just like wake up one day and say, “I’m going to do 100 homes and then create this like amazing educational platform. He didn’t just do that. It was a process. That’s another podcast I would send your listeners to, Justin’s podcast. He just talked about his mind shift. And to hear Justin talk about mind shifting, I’m just like that. That made me feel like much better about myself. It was hard for him to mind shift. It takes a little bit. But just do it. Let your mind shift. And for instance, you. You’re going to do 108. That’s not nothing. But did you start with 108? No. We started with one.
Danny Johnson: I know it took 14 years. I did so fast. Well, thanks for Melissa and focus. Melissa is the one doing it. Well, thanks so much for being on the show you guys. And I had mentioned to Jason and Pili about the Flip Pilot Facebook group, and they were saying that they are going to get on there and be on that group. So I’d love to have you guys in there, in the group. And everybody else who’s listening that hasn’t joined that group, go ahead and join. You can find Flip Pilot on Facebook. Or if you go to flippilot.com, you can request an invite there and let you in the group. Thanks a lot for being on the podcast. It’s The REI Foundation Podcast. It’s Jason and Pili’s podcast. So you guys check that out as well. And is there any other way if people want to contact you somehow? Is there any other way for them to find you guys?
Jason Yarusi: Sure.
Pili Yarusi: You can also just email me. It’s [email protected].
Jason Yarusi: Or [email protected], but she’s better at the email responses because she them around a lot.
Pili Yarusi: We’re also on Facebook, so look us up. We’re always open to talk.
Danny Johnson: Awesome. All right, guys. Well, thanks a lot. And we’ll be in touch.
Pili Yarusi: Thank you so much.
Danny Johnson: [music] Yup. Have a good day. Fantastic episode. I like the talking about focus because that’s something I have been struggling with for a long time or less several years and all the different things that we’re doing. If you’re getting into flipping and narrowing down sort of the type of investments you’re going to do can be a struggle. And really just focusing and even down to like what marketing you’re doing and focusing on what works and not trying to find the magic bullet of the new cool thing that’s going to get you some special deals nobody else is getting. It’s like there’s tried-and-true things like online lead generation and direct mail that investors are having success. And like mastering those and focusing in getting your start that way, I think, is the way to go. If you are looking at getting into online lead generation, definitely check out our leadpropeller.com to get real estate investor websites built on the years and years of us generating thousands of motivated seller leads online, built-in to those websites so you can start with a better product. Then you can have from hiring a SEO expert to conversion expert, website optimization, and all that kind of stuff. Everything is just in there from an investor for investors. It’s pretty awesome, leadpropeller.com. And then, join the Flip Pilot Facebook group. Go to flippilot.com for that.
Know that in the show that we mentioned the mastermind we’re part of. So Jason, Pili, and I are all in this mastermind. And it’s this very powerful group of people that are just helping each other out and just getting massive benefit from and helping us to focus. And getting input from different other successful investors has been amazing. I’m mentioning it right now because I will have another podcast episode here shortly, probably in a couple days where I’m going to talk more about that group and tell you how you can take part in it if you have any interest. If you’re at a certain level and wanting to get to the next level, it’s going to be awesome. So be in the lookout for that. We’ll have another episode probably in a couple of days where I talk a lot more about that and give you that opportunity. So very cool. [music] Thank you so much for listening to the Flipping Junkie podcast. And talk to you next time.