Over the years I've hired hundreds of different people between my real estate company, military career, and 7 Figure Flipping. I’ve also worked with hundreds of real estate businesses to scale their REI companies. One of the biggest things we see over and over again is people being unsure who to hire, when to hire, how to hire, and how much to pay them. Thy key to smoothly scaling your business is nailing down all of these.
Below I am going to break down what its like to hire in the early days when you're doing just a few deals a month - these hires can be crucial to the success and growth of your business.
I am then going to jump into what to do once you start to scale and are over 40+ deals a month. (or at least in that ballpark)
Look at your business and be really honest about what you like to do and are good at and what you don’t like and aren’t good at. What you don’t like to do is usually where the bottleneck is happening in your business. For example if attention to detail isn’t your strong suit you may be overlooking important things that are slowing down contracts and keeping you from closing deals quickly. The area you are procrastinating in is the area to hire someone for.
The Early Days (A Few Deals a Month)
Generally, as you are expanding your real estate business the first person you hire is a lead manager, a transaction coordinator or someone to assist with admin. You are spending money on marketing and you need someone to follow through on those leads and help convert them into deals. ‘No lead left behind’ is our motto. You have to nurture each lead to begin closing deals.
There are benefits to hiring someone local as they will be familiar with local landmarks etc. however you will be paying more (starting at $15/hr) whereas if you hire an overseas VA you will most likely pay ($5/hr). Terry Burger (a 7 Figure Flipping board member and REI professional) hired someone to answer calls live and paid them $12 an hour with a bonus if a deal closed. You can find talented people for not much money if the job allows them to work from home, or if you can’t yet pay your people a larger salary you can tie them to the net profit which is a great incentive for them to close deals.
30-40 Deals a Year
If you have scaled your business to the point where you are doing 30-40 deals a year, hiring a bookkeeper will save you a huge headache come tax time. You want to find someone that works with business owners and preferably someone who understands real estate and has real estate clients. If they don’t you run the risk of them doing your books wrong.
You will probably pay around $20-30/hr at 10-15 hours a week.
40+ Deals a Year
Once your business is scaled to 40+ deals a year you would hire a dispositions person who we argue is as important as an acquisitions person. If you are flipping and start doing multiple projects you can hire a project manager. Many manager have a general contractors license and can actually build a house. This role can potentially make a huge difference on your team. If you find someone who really owns the projects and is well respected, good with people, etc. they will build a strong team of local subcontractors and change the way your business is run.
Project managers start at $40,000 unskilled to around $65,000 with additional skills. This is another position you can tie to the net if that is what they choose.
When you are turning a high volume of houses, make sure you have a good realtor to work with.
There are different pay structures but one example I really liked was how Terry pays his realtor a flat fee of $2,750 rather than a percentage of the sale because he is bringing him a large amount of listings that it requires absolutely no work to acquire. Generally it is a 3 percent commission but with multiple listings that can eat into your net quickly.
When you hire it is a good idea to find out what your hires want, and then leave some room to grow and offer raises or part of the net as bonus incentives.
Your pay structure needs to be able to scale. Look at what your starting pay is and multiply it by ten. Does it still make sense? This can especially come into play with commission based sales positions. If you make the commission really high when you are doing less deals and then you start doing many it is difficult to then lower the percentage for that employee. The average commission percentage for your sales person is 10 percent.
If you are at the point in your business where you think you need to hire someone it is probably overdue! So get out there and hire the person that is going to cover the area you are weakest in. We hope this hire/cost perspective on scaling will help you take the next step in growing your business.