00;00;00;00 - 00;00;21;27
Unknown
I feel confident in saying this, that if if you get decent at using ChatGPT or any of these AI tools and you have a business, it's the equivalent of having at least one six figure employee.
00;00;21;29 - 00;00;48;16
Unknown
Welcome back to the Seven Finger Flipping Podcast. I'm your host, Adam Witney, the CEO of Seven Finger Flipping and Blackjack Real estate partners with the one and only Bill Allen. And today I have, really good friends of mine, Jonathan and Lauren Weathers, who have been on this show before. But they have to come back because there's such they're like trailblazers.
00;00;48;16 - 00;01;19;18
Unknown
They're trailblazers. They, they're some of the best, most efficient and effective house flippers in the entire, United States. And they have a really they have a they have a very specific dialed in model that works repeatedly over long periods of time, which I think is extremely valuable for people to hear. Well, what's been most impressive about them over maybe the past six, 12 months.
00;01;19;18 - 00;01;46;21
Unknown
And I've spent a lot of time with Jonathan in our community, in, in weekly meetings where they've made a true, genuine focus on implementing AI into their business to create more efficiencies in their processes, to make their company more lean and just to be generally more effective as a house flipper. And I'm hopeful that they'll come on and talk about that today.
00;01;46;23 - 00;02;10;06
Unknown
And I know you guys have been on before, but welcome to the show and give everybody like a 32nd overview of, you know, where you who you guys are, what your business is and where you guys are. Yeah. So, I'm Jonathan, obviously this is Lauren. We've, we've been in real estate a little, all right, around 18 years now.
00;02;10;06 - 00;02;29;27
Unknown
Yeah. I think IRA. Yeah, we started out in rentals. And then we kind of transitioned into flips, and then we were to to be a W-2 job, and then we transition, and we've been doing real estate full time for, around eight years. I guess it's that we both were away from our W-2 and and so, I mean, it's really awesome.
00;02;29;27 - 00;02;56;27
Unknown
Every day I get to work with my best friend and we, just have been so tremendously blessed. God's been so good to us. We've just a, like, a lot of people, throughout the country that do real estate investing, the only constant that we've learned in this business is change. And, you know, I it's just, one of those other pieces that seems to be changing daily, and there's just a lot of opportunity in that.
00;02;56;29 - 00;03;27;18
Unknown
Yeah. I love that you guys are, you guys are real estate investors. You guys are, you know, a married couple of real estate investors. Your parents, you guys each have unique roles in your businesses, and you guys each have superpowers. I know, I mean, Jonathan's like, okay, Lauren has acquisition superpowers. She's got some design superpowers.
00;03;27;21 - 00;03;49;18
Unknown
She's, you know, she's a good people person. Janet. I'm just kidding. I'm just kidding. It's, that's all mostly true there. I will tell you. She's, you know, we she used to do very little. Yeah. And now a few, probably a few are probably to spend the next hour, like, you know exactly what we do.
00;03;49;18 - 00;04;05;03
Unknown
You probably would say, well, what is it that you actually do at this? Do we pay Jonathan for this? I know he does a lot of stuff. You know, we came to a point where he had a lot of stuff on his plate, and I was like, well, I can do that. Like, I can and I can order stuff.
00;04;05;03 - 00;04;23;06
Unknown
Having stuff delivered is my superpower as a mom. So, like, I can have material delivered, I can schedule that out. And so we kind of started there and we kind of worked our way, taking stuff off his plate so he can scale our business so he can work on things that are really not in my wheelhouse.
00;04;23;08 - 00;04;39;03
Unknown
So I tried to take on things that were in my wheelhouse. And I think that's the one thing that I try to tell other couples that are trying to work together is that, you know, what is that what your strengths are, and then kind of use that to kind of build what each of you do in your business.
00;04;39;05 - 00;05;03;01
Unknown
So we started there. But he does stuff that I can do and don't want to do. So yeah, I think, I think it's, I mean, even couples for sure, to reduce kind of friction is having, you know, clear lanes and expectations. But as a leader in any business, like all your people want clear lanes expectations and to understand who's doing doing what.
00;05;03;01 - 00;05;29;16
Unknown
So that's, that's, lesson I think that's probably been talked about for ages and, easy to talk about, hard, hard to do with clarity and, and, and collaboration, but I yeah, I, I look at you guys, you guys are really g you guys just impressed me. For all the right reasons, you know, and I don't I, I say that what I mean by that really is that, you got.
00;05;29;16 - 00;05;50;14
Unknown
You guys are do something different than I see a lot of people do. And this is something this is a term we use in the military that is a highly effective thing that combat leaders use, and we call it tactical patience. I, I, I always appreciate, and I don't know if it's just because of it's the southern charm.
00;05;50;14 - 00;06;33;00
Unknown
Jonathan has, but he's thoughtful and he's not quick to rush into something. You know, he's not quick to, to go. That's a, that's a oh, that new tactical thing. He just exercises tactical patience and thinks about the whole picture, at least in my, Yeah, the opportunities I've had to spend with you, Jonathan. And just to look at how you so thoughtfully have built your business over almost two decades now, I want to just bring people along a little bit because I really there's a there's a really important part of your business, and I know there are people out there thinking, you know, hey, I want to do real estate to make
00;06;33;00 - 00;06;58;27
Unknown
money somehow. And I don't think they, I think sometimes they don't understand the difference between passive or semi passive income and active income. And as our friend Andy McFarlane would call it, building the moats. Right? Creating the financial security that would allow you to do maybe more active income activities. So can you talk about the, you got into rentals?
00;06;58;27 - 00;07;20;19
Unknown
Can you talk about how you built the rental business? You know, how you bought the houses, what those houses do for you? Do you how you view having debt on them or no doubt, on, and like, starting on that side of it, building the moat has what has that allowed you to do an expansion of your business was a game changer, Bruce.
00;07;20;25 - 00;07;40;12
Unknown
Yeah, yeah, that's probably the secret sauce. And probably our, our real estate business is that most people that know what we do on a daily basis have no idea that we have these cash flow producing properties. And, most people that are probably listening to the podcast, you know, know about rentals, know about Airbnbs and those type of things.
00;07;40;12 - 00;08;03;04
Unknown
But, I was very fortunate to have some really awesome mentors early on, who taught me not about flips, but about cash flow and so, you know, we have been doing this a long time, and if you probably could read the story of how we got to where we are today, it doesn't look sexy because it's not fast there.
00;08;03;06 - 00;08;28;13
Unknown
Like you said, I'm very slow. I don't do things on on a whim. I'm very thorough on my door. And so what we learned early on is that about every 2 to 2 and a half flips, we could buy a property in cash. And so we started doing that. And, it wasn't fun. I mean, early on, there were some years that we did one, one flip, and maybe the next year we did two, two and a half.
00;08;28;13 - 00;08;46;09
Unknown
I mean, we didn't have a community like seven figure to spoon feed us with the recipe that we needed, on how to scale this business. And then we finally got to a point. I think Laura and I were, like, really focused on getting to ten properties, and it was it was ten. And we had just been working and working and working.
00;08;46;09 - 00;09;07;12
Unknown
And what's crazy is that we were sitting at the table one day and I'm counting properties. I'm like, we were both like, we're at 13 now. We had gotten past the goal. Properties paid off. And essentially what we do is we do not live off of flip money that we make through that revenue stream. We live 100% off the rental income.
00;09;07;14 - 00;09;37;21
Unknown
And the active income that we have in our flip business is focused on creating some type of cash flow, which, you know, you know, now we have like a boat, an RV place. We have these rental properties and eventually we want to get into multifamily and some other things like that. Okay. So just to be like super clear here, your your model and your goal wasn't just the buy rental properties, but you your, your play was to get houses and own them free and clear.
00;09;37;21 - 00;09;58;09
Unknown
Correct. Yeah, yeah. We we're all about like we, we have conversations with people that do the BR method and and there's like that's a that's a great strategy. That is awesome. But I do know that if it were me, I'd rather had ten paid off properties than having to have 25 BR properties to create the same cash flow.
00;09;58;11 - 00;10;22;05
Unknown
That's just me, but I understand at the same time, you now have 25 assets that are appreciating rather than ten. Our model is just a little bit different. Yeah. And and I don't to your point, there's not a right or wrong answer there. Exactly. There's some number modeling that could go. This growth is faster than this growth.
00;10;22;08 - 00;10;47;20
Unknown
But where you can't really put a number on is, your security, what you value in terms of financial security that allows you to do what's most important, which is take care of your family first. Yeah. And because when you can put your family in a good position where you are, you know, you can do things and nobody's.
00;10;47;20 - 00;11;24;10
Unknown
And everybody's going to eat, sell, and we're going to be okay. Right? I think that, I think people do sleep on that because they get enamored with, the power of leverage. And I think leverage is great. I'm a huge user of leverage. I have about $50 million of real estate debt. Yeah, good debt. And, so I'm a proponent of it, but I'm also a proponent of, you know, creating some what our friend Andy calls is the moat create the financial moat that allows you to be secure, because when you're secure, you make good, sound decisions.
00;11;24;12 - 00;11;50;03
Unknown
Yeah. When you operate from a place of concern and a place of fear, it really does affect your decision making. And typically not for the better. So what's what's interesting? Jonathan, you know, you're not the only one in our community, which I think is really cool, like a mirror. You guys, we got a friend a mirror up in Michigan.
00;11;50;06 - 00;12;17;16
Unknown
Yeah, I think it was 45 or 50 properties. Most of those are free and clear as well. That's right. And you guys know Andy McFarland owns a lot of his properties. Free and clear. Yeah. And and it doesn't mean you can't still leverage those properties to use capital for other things. A lot of, a lot of the folks I'm not sure if you guys do this, but they do use lines of credits to create liquidity to, do other things.
00;12;17;16 - 00;12;38;29
Unknown
Maybe it's lending capital. Like, in Andy's case, I think that he likes to do a lot of lending. If it's other people, it may just be to to have the capital for, act to create more active income with flipping properties. Things like that. So are you guys doing any of that kind of stuff when it comes to like, lines of credit or using any tapping into any equity to use it for anything?
00;12;39;01 - 00;13;01;29
Unknown
We, we don't we don't secure any lines of credit with that. We do have quite a bit of lines of credits that we have available to us using real estate, but nothing that would be. We try to keep those properties as much as we can for any player member to say that we wouldn't, because if the right multifamily deal came up, we would call it a day and leverage those properties for the right multifamily deal.
00;13;01;29 - 00;13;21;09
Unknown
Right? It's just like a monopoly. We're going to trade in the houses for the hotels type deal. And we're, you know, we would play the same game. The main thing for us on the rental side is that through through our life, there going to be several black swans events usually. And we believe we keep those properties paid off.
00;13;21;11 - 00;13;57;23
Unknown
And whether it's Covid, whether it's a nine over 11, whether it's a 2008 or whatever, the next black Swan would be. Like you said, we feel confident we'll have those properties. We'll be able to use them to continue to put food on the table, keep the light. Bill Payne, those types of things. Yeah, I think yeah. Again, it's it's your moat, it's your moat that it allows you to be in a position where it's really hard for you guys to, to lose in a meaningful way to I do want to just kind of chew on this, the idea of the Black Swan event.
00;13;57;23 - 00;14;23;14
Unknown
And I think what we talk about in real estate is, you know, the biggest problem, there's two things that could really affect us in a meaningful way. One is the lending dries up like people stop lending money. That would be problematic for our industry. Yes. Whether that's like normal 30 year loans or if it's, institutional hard money loans that would have a meaningful impact on our industry.
00;14;23;20 - 00;14;48;24
Unknown
Yes. The other thing that would have a really meaningful impact on our industry is if the values of properties took up, took a hit, right, like 2008. I think I did a deep dive study on this over the past 60 days of the worst real estate market corrections since 1929. Now, 1929 is not really a good comparable because the economic environment is not the same as today.
00;14;48;24 - 00;15;10;28
Unknown
There were no 30 year fixed rate loans, mortgages like that. All was actually born out of the Great Depression. So if you go beyond that, really 2008 is our kind of worst real estate event. There was some bad stuff in the 70s, but 2008 is our worst real estate event. From 2008 to 2012, nationwide, the housing market dropped 25%.
00;15;11;00 - 00;15;41;18
Unknown
Okay, that's over four years. If you look at the micro markets, there were some markets that were impacted in a very meaningful way. Miami, Las Vegas, namely, talking 40 to 60% in that market. But if you do this study, the worst kind of the worst case scenario we've seen in history is about 12 to 15% over a 12 month period, which I think is an important frame to think about when we go, well, what has happened that's been really bad.
00;15;41;20 - 00;16;01;29
Unknown
We go, well, the market could drop and we lose half the value. Well, you might, but it's not going to it's it's very unlikely that it happens next month. Right. So never a very short period of time. I mean it would it's not going to be a overnight deal. And we and we as house flippers operate on 6 to 12 month time horizons.
00;16;01;29 - 00;16;24;07
Unknown
Yeah. Right. Like, you know, ideally you get in and out of a house in six months, but probably more can do between 6 and 12 months from purchased to true exit with the days on market and stuff. So, I just tell people, like, if I plan for worst case scenario, I just take the current today after repair value and I -1% a month of projected whole time.
00;16;24;09 - 00;16;42;14
Unknown
Yes. And and I think I'll be okay. So, yeah, I, I, I get a lot of fear mongering in my feed. I don't know why I'm getting fear mongering or people, like, worried about the market in the current economic conditions, but I like it force me to go do some study and go, what is the worst thing that's ever happened?
00;16;42;14 - 00;17;00;03
Unknown
Because I like I like to go to worst case scenario. And what I realized was basically about 1% a month drop is, is what we've seen in history that that is kind of most worst case scenario. So, we you can adjust for that when you buy new estate in the way we always talk about it is it's, you know, analogy.
00;17;00;03 - 00;17;19;02
Unknown
I'm a huge analogy guy. Just because I need those to help myself understand things. But it would be like trying to turn around a cruise ship. It takes time, effort and energy for that to happen. And, when it comes to real estate, you're not going to see those things. It's not like a little jet boat that can just make a 180 turn.
00;17;19;05 - 00;17;39;11
Unknown
It's just like when the fed, you know, we just had a little bit of reduction in fed rates. We've seen ten year, Treasury note rates go down, but still rates just didn't overnight. And just all of a sudden make a huge adjustment. Things take time. It's a ripple effect. So, like, you said, we're looking we're always looking about 12 to 18 months out.
00;17;39;13 - 00;18;10;02
Unknown
Most of our deals are usually a seven nanometer turnaround. So we know, like a cruise ship, that our underwriting is adjusted so that if we get to the end of that nine months, that cruise ship has made a little bit of an adjustment. We've already got that built into the deal. Yeah. So and I think, I think that's where is that the, kind of the moniker or the adage of like, you, you, you win at the purchase of a of a, of a real estate.
00;18;10;04 - 00;18;36;27
Unknown
Yeah. Because you if you purchase a at a, at a good price, it's like it's hard to lose. Like, you have to like it's you had to put effort in to lose if you really, genuinely purchase in the right kind of way, it's a good business plan. One of the things that I think, you know, people you guys coach, you, we have, seven figure altitude, which is our kind of true mastermind community.
00;18;36;27 - 00;19;01;00
Unknown
A couple hundred people in their investors businesses, you know, family members, all flipping houses, typically buying rentals and, you know, some, some other verticals, but mostly a house. Flippers, in our community. And I love it because on average, we've got most investors are flipping between 40 and 50 houses a year in addition to what else they're doing.
00;19;01;02 - 00;19;48;05
Unknown
And of course, we've got some lifestyle folks doing 15, and we got some crazy people doing two, 300 houses, annually. But, the thing that I really, value about you guys is how dialed in you are. Jonathan, how you have a really good attention to detail and you see process really, really well. And I mentioned the community because you don't you don't do 40 houses or even 20 houses or, God forbid, 200 houses in a year unless you have a process and a system in place that can be followed by other people and is repeatable and is not overly complicated.
00;19;48;05 - 00;20;13;03
Unknown
And when, a lot of people in our community, especially our one way community, are newer investors that are like 1 to 10 deals, like they love talking to you because they, they, they find security and systems and process. And you are so good at that. Can you just before we go into like how you're bringing AI into that, can you just talk about like, what do you see as the of a flipping system.
00;20;13;03 - 00;20;36;08
Unknown
Like what what would you how would you describe your flipping system or what are some of the tools that are involved in that? Yeah. Well, essentially, I mean, again, I'm analogy guy. Right. So to me, systems and flipping, I would look at them very similar to the way that we would make any recipe in our kitchen.
00;20;36;10 - 00;20;55;21
Unknown
You're going to have core elements into those systems. You know, how do you control labor? How do you control your material? When do you one of the right ways to schedule those things to work with each other? You know, but at the same time, there are elements in every recipe. There's going to be a little bit different.
00;20;55;21 - 00;21;15;07
Unknown
So, you know, off the cuff, you take a cake, you take a cookie. I will make a cookie. Last year. Right. You take all these elements, they all have flour, they all have eggs, they all have some of the same elements. But the way that they're infused together, the order, the bake times are all a little bit different.
00;21;15;09 - 00;21;33;28
Unknown
But you still have the same elements in those systems. So when I'm coaching people into how do you create a system that works because everybody is going to run their business a little bit different. This flip over here may be more of a cake type recipe for their business, and this might be more of a cookie. You know, we're heavy rehab right.
00;21;34;05 - 00;22;01;13
Unknown
So our systems are a little bit they still have the same core elements. And so it's really about learning. How does the flour or maybe the labor apply to how you run your systems? You know, I taught a couple of weeks ago and a, in a, zoom call it did about, you know, whether you're a hands on, hands off or how to use focus to be a hybrid of the systems, meaning, are you stroking checks to a GC?
00;22;01;13 - 00;22;32;02
Unknown
Are you, are you the actual license GC, or how do you merge a hybrid system that works successfully? So it's really learning what those core elements are, figuring out how they are applied to your business's recipe. And then it's really just about duplication. From one house to the next house. So there will be differences. But ultimately those core pieces are the same each time.
00;22;32;05 - 00;22;59;03
Unknown
Yeah, I love that. And, I'm like, I like to I like to do deals. I like. I don't consider myself a house flipper. I don't consider myself a wholesaler. I don't consider myself a rental buyer. And I don't consider myself a multi-family investor. And I do all of those things, and I, I consider myself a, business owner.
00;22;59;10 - 00;23;35;15
Unknown
I consider myself an investor. And, what I know to be true, when I look at businesses, even outside of our industry, there's they're just kind of fundamental things that are similar. So if I just even zoomed out of a house flipping in a business organization, you have a leader. Oftentimes you got a kind of a number two, you know, a right hand man or woman, and then you have the components of a business.
00;23;35;17 - 00;24;14;20
Unknown
All businesses have some component of marketing and sales. All business have some middle I call it the meet some operations. Yeah. And all businesses have some component of H.R. And finance like that's those are the ingredients to a business. Yeah. And we might we might organize our operations area differently. I might have a GC. You might be the GC and have all your subs or I might go third, I might federate everything out to a third party and be a manager of vendors rather than bringing it in-house.
00;24;14;20 - 00;24;44;11
Unknown
But the interesting thing is the flow is almost always the same. The core process and every house you do demo. Yeah, right. Yeah. You get it ready. And every house what happens after demo? It's like the same thing. Right then. Then we do usually like, you know, if we're taking it to the studs, we're drywall and we're doing drywall, we're skim and drywall.
00;24;44;16 - 00;25;12;28
Unknown
Yep. You know, and then we're going to do some painting, and then we're going to do flooring, and then we're going to do baseboards, and then we're going to do cabinetry, and then we're going to do finishing like the job layers, the kind of the, the fundamental parts of the rehab, they actually don't really change. Now you might be making, chocolate chip cookies, bog standard rehab, but tomorrow we're doing sugar cookies.
00;25;12;28 - 00;25;37;01
Unknown
So now I got to remove a wall and open up a kitchen and bring in an Hvac guy, and, you know, so not like, I feel like that's what I watch you do this, and I watch the way you've set your system up and leverage technology like asana and Slack and tide I into it. It allows you to have the fundamental flow is like every clear followed by all.
00;25;37;01 - 00;26;11;08
Unknown
Everybody can clearly understand it. But you've created a level of flexibility in your business that allows you to, put the new ingredients and make make the sugar cookie instead of this cookie. Like, to me, that's that. That is a good business owner. That is a good business because you're, you're you're rigid in the things that don't change, but you're flexible in the things that can add value inside of your business, which is the different things you can do with a value add or rehab or the ability.
00;26;11;08 - 00;26;37;07
Unknown
Even if I've even if I think about your, your underwriting models, like you have a way that you look at your flips, but you also own rentals in a way you evaluate that, but you also built a system that allows you to see value in an RV park. Yeah, fundamentally, I want to get something at a price here, make the value here, be able to do something with the spread or cash flow it right.
00;26;37;07 - 00;27;01;01
Unknown
Like it's it's kind of fundamentally the same. So as you build that system and you leverage the technology, how has artificial intelligence, which is a really big term that is loosely defined? It doesn't mean the way we we've turned it into a verb. Oh, we're using AI. The United States government doesn't even have a good definition for AI.
00;27;01;03 - 00;27;32;12
Unknown
What? We're using our tools that have, large language models or generative, tools. So we're, we're thinking like ChatGPT, grok or any of these tools. These are, these are models that are able to take information and make sense of it and give you an output and then connect to other technologies. So how like what are some of the things you've done to implement those in your tech stack?
00;27;32;12 - 00;27;55;23
Unknown
And how they made your business more efficient, or how have they helped you guys in your decision making? You know, just kind of big picture with that stuff. Yeah. So I'll, I'll do an introduction and then I'll let Lauren speak because, honestly. Good. Good call. Good. Yeah. I mean, I'll tell you, like I said, if I had laid it all out, you be like, what do you do when he or she is?
00;27;55;25 - 00;28;24;24
Unknown
Essentially, as Lauren, I talk. So in our business, we only integrate major changes in our business every 90 days. It's just a pretty big fundamental piece of of how we operate. I'm a really big Elon Musk guy. I've read a lot about his stuff, and just how he runs his business and he's very big on cutting out noise and taking something that's complicated and not trying to figure out how do we add more to fix the problems.
00;28;24;24 - 00;28;46;20
Unknown
He's more about let's take away to fix the problems. And so we've tried to look in that in our business to be more efficient. You've got to make it simpler. You've got to make it where it is less on the human being to physically have to do something. And now I what we've learned is that it changes every day.
00;28;46;23 - 00;29;04;07
Unknown
There is no constant that what AI looks like today is going to be completely different from 12 months, but those who do not pay attention to it and sleep on it right now, I think I've told you and many others, I think this is like the whole like internet bubble, right? It's just a fad. It's not going to be that big of a deal.
00;29;04;09 - 00;29;33;15
Unknown
Those who harp on the AI train now will learn how it can, change their business, create more revenue, create more efficiencies and, and numerous other things. But there are really two things that we use AI for, and that is data collection and automation. So everything that we look at in our business, when Lauren are looking at, what tasks we go to, a virtual assistant or what tasks we can go on to our project manager or something we do.
00;29;33;17 - 00;29;58;24
Unknown
The first question we ask is, can I take care of this for us? And if it can, then Lauren is getting on her computer and figuring out how to make that happen. Because I'm telling you, I do know tech stuff. But I do not have the patience to run through. Like, we were working on something yesterday. We're going to start tracking how, our views and saves that.
00;29;58;24 - 00;30;13;24
Unknown
We've been doing that for a while, but we want to automate some of that. And basically I'm like, does this look good? If it looks good, I'm going to go find a freelancer that can make this happen. And then what? She can actually physically do technology. What she's making happened so she can tell you more about what we're actually doing.
00;30;13;27 - 00;30;43;11
Unknown
So I started using we use this online to do our rehabs. So I've started using asana. I have a dedicated, like, ChatGPT chat. That will actually it's connected to our asana, and I'm able to tell it what I want to do. I'm able to create templates. That way I'm able to adjust things that way. Able to create things on a daily basis for hours onto for our project manager so that I'm not physically having to do those things.
00;30;43;11 - 00;31;07;27
Unknown
And we use a few other tools to kind of integrate with that. But just for example, we have we've started doing some more meetings with on like Google Meet and Zoom's with our project manager so that we can have, a note taker take the notes. Well, I have it big so that the note taker takes the notes, it puts it in the chat, organize the notes, and then post it in slack without me having to do it.
00;31;08;00 - 00;31;23;22
Unknown
So this is like, like, I'm just saying a practical application here. And how many times do we meet with somebody on our team, we give them like what we believe to be super clear direction. We're like, okay, go run. Yeah. And then you either come back later, you're like, wait a minute. Yeah. The oh, you didn't say that.
00;31;23;22 - 00;31;41;28
Unknown
No. Oh no no no oh no. We get a summary. Here's what was said. Here's what we all agreed to do. Boom goes in the slack. Everybody goes oh yep okay. Tracking gets on the it keeps you on the same page. Exactly. And it gives us what we love about using slack is that it gives us all. It keeps us all on the same page.
00;31;41;28 - 00;32;14;29
Unknown
It gives us something to refer back to, whether it's a day or what was said was going to be done for this project or what was communicated that was done just different things. And we use it. We use like every day in our business. We use ChatGPT every day in our business, we use asana every day in our business, there's not a day that we're not using it for something new that we're trying to work on, or trying to prepare for, and we're like, I use it to help with SOPs for our VA, but we're about to hire, they're going to have someone to kind of doing some more admin
00;32;14;29 - 00;32;40;23
Unknown
stuff to take some stuff off my plate, so that I can work on some of the other things that a VA can't do. And I've got like, a whole, like, a whole thing I've created just by using ChatGPT and having it help us. And we, I mean, we use API for all sorts of things. Like on our listings, I have it, I had it look at our listing on Zillow and make sure there wasn't anything that we could change to try to get more sales and views.
00;32;40;25 - 00;33;05;04
Unknown
That wasn't a paid feature. What was what was it seeing? Compared to other properties? So we're doing we're trying to use that as leverage to, you know, sell houses quicker to make sure that we're doing everything we can to be the most efficient. Yeah, it's it's incredible. And I mean, like GPT or any of these, these large language models or generative models.
00;33;05;04 - 00;33;37;25
Unknown
Yeah. Their, their ability to ingest, take data, large amounts of data, do analysis and illuminate the most important things based on what you tell it of course, the better you prompt it, the better questions you ask, the better result you get. But it can do it way better than we can. And that's just, you know, especially when it's just fundamentally compare these things across Zillow, which is a ton of data in of itself in this area.
00;33;37;28 - 00;33;56;23
Unknown
These are the things that are important. And here's what mine looks like. How is mine better or worse than everything else? And what can I do to improve like that? Would take you hours to do that. Yeah. Right. And then you get it in there doing it and within you know, minutes it's got like a, like an 80% solution for you and you're like, Holy cow.
00;33;56;26 - 00;34;16;13
Unknown
Exactly. Let's reorder the photos. You know, it's yeah, I mean, it's it's really like she's I mean, she's mentioned in probably 3 or 4. There's probably 20 plus things. I mean, we've had to do anything from like interior design, like telling it, you know, here's pictures of it currently. We need you to post it and make it look like this.
00;34;16;16 - 00;34;36;24
Unknown
You know, here's our sketches. You know, turn these things into something we've built for cuz for, our business from a data standpoint, this is how we're handling this is problem or, you know, as I've done coaching with our project manager, I'm typing in situations and issues were documenting like, inspections that we get on the property.
00;34;36;24 - 00;35;07;27
Unknown
We're documenting all the things that we fail for. You know, we've created databases that have like, North Carolina's, code requirement so that we're easily searching codes and, and, trying to overcome any construction issues. Yeah. We also use it for the warehouse, a lot of items. That we use every day in our, in our flips, you know, anything from plumbing to electrical, Hvac, we have a whole pod worth of,
00;35;08;00 - 00;35;36;24
Unknown
So I'm looking for materials and, like, we. Yeah, we buy containers worth of stuff imported loads of stuff that we. Yeah. Like, I feel confident in saying this, that if if you get decent at using ChatGPT or any of these AI tools and you have a business, it's the equivalent of having at least one six figure employee.
00;35;36;26 - 00;36;03;16
Unknown
Welcome back to the same Thing You're Flipping podcast. I'm your host, Adam Whitney, the CEO of seven Figure Flipping and Blackjack real estate partners with the one and only Bill Allen. And today I have, really good friends of mine, Jonathan and Lauren Weathers, who have been on this show before. But they have to come back because they're such they're like trailblazers.
00;36;03;16 - 00;36;34;16
Unknown
They're trailblazers. They, they're some of the best, most efficient and effective house flippers in the entire, United States. And they have a really they have a they have a very specific dialed in model that works repeatedly over long periods of time, which I think is extremely valuable for people to hear. Well, what's been most impressive about them over maybe the past six, 12 months.
00;36;34;16 - 00;37;01;21
Unknown
And I've spent a lot of time with Jonathan in our community, in, in weekly meetings where they've made a true, genuine focus on implementing AI into their business to create more efficiencies in their processes. To make their company more lean and just to be generally more effective as a house flipper. And I'm hopeful that they'll come on and talk about that today.
00;37;01;23 - 00;37;25;04
Unknown
And I know you guys have been on before, but welcome to the show and give everybody like a 32nd overview of, you know, where you who you guys are, what your business is and where you guys are. Yeah. So, I'm Jonathan, obviously this is Lauren. We've, we've been in real estate a a little, all right, around 18 years now.
00;37;25;04 - 00;37;44;25
Unknown
Yeah. I think I grew up. Yeah, we started out in rentals. And then we kind of transitioned into flips, and then we were to to be a W-2 job, and then we transition. And we've been doing real estate full time for, around eight years, I guess that we both were away from our W-2 and, and so, I mean, it's really awesome.
00;37;44;25 - 00;38;11;27
Unknown
Every day I get to work with my best friend and we, just have been so tremendously blessed. God has been so good to us. We've just a, like a lot of people, throughout the country that do real estate investing, the only constant that we've learned in this business is change. And, you know, I was just, one of those other pieces that seems to be changing daily, and there's just a lot of opportunity in that.
00;38;11;29 - 00;38;42;15
Unknown
Yeah, I love that you guys are, you guys are real estate investors. You guys are, you know, a married couple of real estate investors. Your parents, you guys each have unique roles in your businesses, and you guys each have superpowers. I know, I mean, Jonathan's like, okay, Lauren has acquisition superpowers. She's got some design superpowers.
00;38;42;18 - 00;39;11;15
Unknown
She's, you know, she's a good people person. But, Janet, I'm just kidding. I'm just kidding. Hey, it's, that's all mostly true there. I will tell you. She's, you know, we she used to do very little. Yeah. And now, if you probably, if you were probably to spend the next hour, like, you know exactly what we do, you probably would say, well, what is it that you actually do at, do we pay Jonathan for that?
00;39;11;18 - 00;39;27;22
Unknown
No, he does a lot of stuff. You know, we came to a point where he had a lot of stuff on his plate, and I was like, well, I can do that. Like I can now. I can order stuff. Having stuff delivered is my superpower as a mom. So, like, I can have material delivered. I can schedule that out.
00;39;27;25 - 00;39;47;06
Unknown
And so we kind of started there and we kind of worked our way, taking stuff off his plate so he can scale our business so he can work on things that are really not in my wheelhouse. So I tried to take on things that were in my wheelhouse. And I think that's one thing that I try to tell other couples that are trying to work together is that, you know, what?
00;39;47;07 - 00;40;09;25
Unknown
Is that what your strengths are, and then kind of use that to kind of build what each of you do in your business. So we started there. But he does stuff that I can do and don't want to do. So yeah, I think, I think it's, I mean, even couples for sure, to reduce kind of friction is having you know, clear lanes and expectations.
00;40;09;25 - 00;40;33;25
Unknown
But as a leader in any business, like all your people want clear lanes expectations and understand who's doing doing what. So that's, that's, lesson I think that's probably been talked about for ages and, easy to talk about, hard, hard to do with clarity and, and, being collaboration. But I, I look at you guys, you guys are really.
00;40;33;25 - 00;40;58;23
Unknown
Do you guys just impressed me? For all the right reasons, you know, and I don't I say that what I mean by that really is that, you got you. You guys are do something different than I see a lot of people do. And this is something this is a term we use in the military that is a highly effective thing that combat leaders use, and we call it tactical patience.
00;40;58;25 - 00;41;24;01
Unknown
I, I, I always appreciate, and I don't know if it's just because of it's the southern charm. Jonathan has, but he's thoughtful and he's not quick to rush into something. You know, he's not quick to, to go. That's a, that's a oh, that new tactical thing. He just exercises tactical patience and thinks about the whole picture, at least in my,
00;41;24;04 - 00;41;49;14
Unknown
Yeah. The opportunities I've had to spend with you, Jonathan. And just to look at how you so thoughtfully have built your business over almost two decades. Yeah. I want to just bring people along a little bit because I really there's a there's a really important part of your business, and I know there are people out there thinking, you know, hey, I want to do real estate to make money somehow.
00;41;49;16 - 00;42;13;25
Unknown
And I don't think they, I think sometimes they don't understand the difference between passive or semi passive income and active income. And as our friend Andy McFarland would call it, building the moats, right? Creating the financial security that would allow you to do maybe more active income activities. So can you talk about the, you got into rentals?
00;42;13;25 - 00;42;35;15
Unknown
Can you talk about how you built the rental business? You know, how you bought the houses, what those houses do for you? Do you how you view having debt on them or no doubt on them? And like starting on that side of it, building the moat has what has that allowed you to do an expansion of your business with a game changer first?
00;42;35;21 - 00;42;55;08
Unknown
Yeah, yeah, that's probably the secret sauce. And probably our our real estate business is that most people that know what we do on a daily basis have no idea that we have these cash flow producing properties. And, most people that are probably listening to the podcast, you know, know about rentals, know about Airbnbs and those type of things.
00;42;55;08 - 00;43;18;00
Unknown
But, I was very fortunate to have some really awesome mentors early on, who taught me not about flips, but about cash flow and so, you know, we have been doing this a long time, and if you probably could read the story of how we got to where we are today, it doesn't look sexy because it's not fast there.
00;43;18;02 - 00;43;40;29
Unknown
Like you said, I'm very slow. I don't do things on on a whim. I'm very thorough model. And so what we learned early on is that about every 2 to 2 and a half flips, we can buy a property in cash. And so we started doing that. And, it wasn't fun. I mean, early on, there were some years that we did one, one flip.
00;43;41;05 - 00;43;59;06
Unknown
Maybe the next year we did two, two and a half. I mean, we did have a community like seven figure to spoon feed us with the recipe that we needed, on how to scale this business. And then we finally got to a point. I think Lauren and I were, like, really focused on getting to ten properties, and it was it was ten.
00;43;59;06 - 00;44;19;23
Unknown
And we had just been working and working and working. And what's crazy is that we were sitting at the table one day and I'm counting properties. I'm like, we were both like, we're at 13. And we had gotten past the goal. Properties paid off. And essentially what we do is we do not live off of flip money that we make through that revenue stream.
00;44;19;23 - 00;44;52;17
Unknown
We live 100% off the rental income. And the active income that we have in our flip business is focused on creating some type of cash flow, which, you know, you know, now we have like a boat and RV place. We have these rental properties and eventually we want to get into multifamily and some other things like that. So just to be like super clear here, your your model and your goal wasn't just the buy rental properties, but you your, your play was the get houses and on on free and clear.
00;44;52;17 - 00;45;13;09
Unknown
Correct. Yeah. Yeah. We we're all about like we, we have conversations with people that do the BR method and and there's like that's a that's a great strategy. That is awesome. But I do know that if it were me, I'd rather had to pay off properties than having to have 25 BR properties to create the same cash flow.
00;45;13;09 - 00;45;37;03
Unknown
That's just me. But I understand that the same time, you now have 25 assets that are appreciating rather than ten, our model is just a little bit different. Yeah. And and I don't to your point, there's not a right or wrong answer there. Exactly. There's some number modeling that could go. This growth is faster than this growth.
00;45;37;05 - 00;46;06;08
Unknown
But where you can't really put a number on is, your security, what you value in terms of financial security that allows you to do what's most important, which is take care of your family first. Yeah. And because when you can put your family in a good position where you are, you know, you can do things and nobody's and everybody's going to eat, sell, and we're going to be okay.
00;46;06;08 - 00;46;39;08
Unknown
Right? I think that, I think people do sleep on that because they get enamored with, the power of leverage. And I think leverage is great. I'm a huge user of leverage. I have about $50 million of real estate debt. Yeah, good debt. And, so I'm a proponent of it, but I'm also a proponent of, you know, creating some what our friend Andy calls is the moat create the financial moat that allows you to be secure, because when you're secure, you make good, sound decisions.
00;46;39;10 - 00;47;05;02
Unknown
Yeah. When you operate from a place of concern and a place of fear, it really does affect your decision making. And typically not for the better. So what's what's interesting? Jonathan, you know, you're not the only one in our community, which I think is really cool. Like a mirror. You guys, we got a friend a mirror up in Michigan.
00;47;05;05 - 00;47;32;14
Unknown
Yeah, I think it was 45 or 50 properties. Most of those are free and clear as well. That's right. And you guys know Andy McFarland owns a lot of his properties. Free and clear. Yeah. And and it doesn't mean you can't still leverage those properties to use capital for other things. A lot of, a lot of the folks I'm not sure if you guys do this, but they do use lines of credits to create liquidity to do other things.
00;47;32;14 - 00;47;53;26
Unknown
Maybe it's lending capital, like in Andy's case, I think that he likes to do a lot of lending. If it's other people, it may just be to, to have the capital for, act to create more active income with flipping properties. Things like that. So are you guys doing any of that kind of stuff when it comes to like, lines of credit or using any tapping into any equity to use it for anything?
00;47;53;28 - 00;48;13;00
Unknown
We, we don't we don't secure any lines of credit with that. We do have quite a bit of lines of credit that we have available to us using real estate, but nothing that would be. We try to keep those properties as much as we can. For you clear. Never to say that we wouldn't because it's the right multifamily deal came up.
00;48;13;00 - 00;48;33;08
Unknown
We would call it a day and leverage those properties for the right multifamily deal. Right. It's just like monopoly. We're going to trade in the houses for the hotels type deal. And we're, you know, we would play the same game. The main thing for us on the rental side is that through, through our life, there's going to be several Black Swans events usually.
00;48;33;08 - 00;48;54;10
Unknown
And we believe we keep those properties paid off. And whether it's Covid, whether it's a 911, whether it's a 2008 or whatever, the next black swan would be. Like you said, we feel confident we'll have those properties. We'll be able to use them to continue to put food on the table, keep the light. Bill Payne, those types of things.
00;48;54;12 - 00;49;22;02
Unknown
Yeah, I think yeah. Again, it's it's your moat. It's your moat. It allows you to be in a position where it's really hard for you guys to, to lose in a meaningful way to. I do want to just touch on this, the idea of the black swan event. And I think what we talk about in real estate is, you know, the biggest problem, there's two things that could really affect us in a meaningful way.
00;49;22;04 - 00;49;47;23
Unknown
One is the lending dries up like people stop lending money. That would be problematic for our industry. Yes. Whether that's like normal 30 year old loans or if it's, institutional hard money loans that would have a meaningful impact on our industry. Yes. The other thing that would have a really meaningful impact on our industry is if the values of properties took up, took a hit, right, like 2008.
00;49;47;25 - 00;50;10;24
Unknown
I think I did a deep dive study on this over the past 60 days of the worst real estate market corrections since 1929. Now, 1929 is not really a good comparable because the economic environment is not the same as today. There were no 30 year fixed rate loans, mortgages like that. All was actually born out of the Great Depression.
00;50;10;26 - 00;50;33;15
Unknown
So if you go beyond that, really 2008 is our kind of worst real estate event. There was some bad stuff in the 70s, but 2008 is our worst real estate event. From 2008 to 2012, nationwide, the housing market dropped 25%. Okay, that's over four years. If you look at the micro markets, there were some markets that were impacted in a very meaningful way.
00;50;33;15 - 00;50;56;14
Unknown
Miami, Las Vegas, namely, talking 40 to 60% in that market. But if you do the study, the worst kind of the worst case scenario we've seen in history is about 12 to 15% over a 12 month period, which I think is an important frame to think about when we go, well, what has happened that's been really bad.
00;50;56;16 - 00;51;16;24
Unknown
We all well, the market could drop and we lose half the value. Well you might, but it's not going to it. It's very unlikely that it happens next month. Right. So I didn't tell a neighbor a very short period of time that they knew it was. It's not like the overnight deal. Yeah. And we and we as house flippers operate on 6 to 12 month time horizons.
00;51;16;24 - 00;51;39;03
Unknown
Yeah. Right. Right. Like, you know, ideally you get in and out of a house in six months, but probably more kind of between 6 and 12 months from purchased to true exit with the days on market and stuff. So, I just tell people, like, if I plan for worst case scenario, I just take the current today after repair value and I -1% a month of projected whole time.
00;51;39;05 - 00;51;57;10
Unknown
Yes. And and I think I'll be okay. So, yeah, I, I, I, I get a lot of fear mongering in my feed. I don't know why I'm getting fear mongering or people, like, worried about the market in the current economic conditions, but I like it force me to go do some study and go, what is the worst thing that's ever happened?
00;51;57;10 - 00;52;14;28
Unknown
Because I like I like to go to worst case scenario. And what I realized was basically about 1% a month drop is, is what we've seen in history that that is kind of most worst case scenario. So, we you can adjust for that when you buy, you know, estate in the way we always talk about it is it's, you know, analogy.
00;52;14;28 - 00;52;33;28
Unknown
I'm a huge analogy, guy. Just because I need those to help myself understand things. But it would be like trying to turn around a cruise ship. It takes time, effort and energy for that to happen. And, when it comes to real estate, you're not going to see those things. It's not like a little jet boat that can just make a 180 turn.
00;52;34;00 - 00;52;42;29
Unknown
It's just like when the fed, you know, we just had a little bit of reduction in fed rates. We've seen ten year, Treasury note rates go down, but still rates just didn't over.
.jpg)
.jpg)
.jpg)
.jpg)
