The New Rules of Real Estate Investing

Dan Schwartz

/ 13 min read

InvestorFuse CEO Dan Schwartz was featured in a new book by Chris Prefontaine, the Smart Real Estate CoachThe New Rules of Real Estate Investing: 24 Leading Experts Reveal Their Real Estate Secrets

Below is an excerpt from the book, featuring a candid look from Dan into how InvestorFuse came to be, and some of the important lessons learned along the way that you can apply in your business and life. 

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Rewind to around 2010: I had just graduated from school with a marketing degree from the University of Maryland. I was living at my parents’ house after graduating, as millennials do these days. Lying on my bedroom floor, I saw two paths for my life and my career: I saw the limiting path, where you get a job with a fixed salary, and the infinite path, where you have the potential to make as much you want, with no ceiling–as well as the challenge of figuring out entrepreneurship and growing from that. I said to myself, “You know what? Let’s do this! Let’s find something that gives me the freedom to pursue the lifestyle I want. If you’ve listened to Chris’s podcast or read his book or online material, you know the idea of “designing your lifestyle” is something that comes up frequently.

Well, that’s what I wanted. I had read “Rich Dad Poor Dad” earlier that year, which had planted the seed. I remember going to one of those free Rich Dad summits with my father and not opting into their coaching program, a $40,000 upsell. But I did some research online and met another young investor in Baltimore, Maryland. We did our first wholesale deal within a month or two of meeting, and we were off to the races! I had a couple of good coaches and mentors at the time. We flipped houses willy-nilly for a couple of years, living deal-to-deal as most people do, and brute-forcing our way into closing seven or eight deals a month at our peak. It was just the two of us and a lead manager.

I was also touring full-time, on the road playing music as a drummer in the electro-funk band Pigeons Playing Ping Pong—music is my passion. But I was determined not to be a starving artist; I wanted to figure out how to be a touring musician and also have a business that would work without my direct involvement all the time.

Becoming a Systems Guru

That set the stage for my interest in–and now obsession with–setting up business systems. There were a lot of opportunities, a lot of moments when I realized I was the bottleneck to the growth of the company. I knew there was a way to resolve that bottleneck with effective delegation systems. I had a lot of time on the road to think about and work through that issue, and I wanted to use the technology available to us at the time to create a system that would automate your deal flow, assigns tasks to the right people on your team, and make sure you can sell the property in a timely fashion–at scale.

My circumstances forced me to get really good at that. I created some pretty cool solutions that other people then wanted me to help them out with. Eventually, I found that I was spending more time helping other people set up their business systems then I was spending on my own business: I was still doing deals, but most of my time was spent building infrastructure or helping to set people up on this platform called Podio, which helps you manage, view, and track all of your incoming leads.That parlayed into what I’m doing now with InvestorFuse, where we launched our own standalone platform. At this point, InvestorFuse is helping over 650 investment teams systematically convert their leads and follow up automatically in an easy way.

Three Pillars of Real Estate Acquisitions

If you think about any real estate acquisitions operation, it comes down to three essential pillars:

1. Lead generation: creating opportunities to make money
2. Lead management: capturing those leads, working through
and nurturing them to get the contract.
3. Monetization: What strategy are you using to take that contract and turn it into profit? You could wholesale it to another rehabber, flip it yourself, buy and hold it, do a lease option or owner financing–whatever strategy you decide.

The Middle Pillar: Administration

I find that the middle pillar is the one most investors struggle with it’s the most administrative and manual. It’s the most thankless act of this business: having to call people over and over and over again, constantly dealing with voice-mails and no’s and people leading you on. It’s hard to follow up with hundreds and hundreds of homeowner leads at scale, and most of the current systems out there aren’t really built for that middle pillar.

We realized that we needed to optimize that middle pillar of lead management/acquisitions management, and all the little stages of the pipeline of a deal in between—If you can optimize how many leads you’re capturing, you can optimize how many leads you’re making offers on, increase the number of leads that turn into appointments, and finally, increase the number of appointments that turn into deals. The best companies track all of these numbers numbers through the process. If you do that, you can scale up your acquisitions funnel predictably.

When you don’t have to close deals one at a time, then go hunting for that next deal, you can be confidently building a predictable pipeline line of deals. It all starts with thinking about your business like a funnel: leads come in, leads turn into appointments, appointments turn into deals, you have all the followup that happens in between, and then you have your monetization strategy in place.

So we only go all in on that middle pillar, which is the least sexy part of the business. All the fun stuff happens after you get it under contract; before that, it’s all administrative tasks. We believe that by using technology and effective delegation to make sure you get as many contracts as possible, you can shave off a lot of time and make a bunch more money. That’s what InvestorFuse does for our clients.

Who Are InvestorFuse’s Customers?

Our clients come in all sizes, from single-person teams all the way up to teams of 20. Chris’s son Nick and son-in-law Zach are fully immersed in our platforms, for example. Probably 20% of our user are rehabbers, 70% are wholesalers, and 10% are landlords, because no matter what exit strategy you’re using, you’ve got to get a contract.

Don’t invest in lead management systems unless you have leads coming in. If you haven’t done a deal yet or don’t have a lot opportunities coming your way, focus on that first. Close a deal or two, then you can reinvest in automating your process. This is not for folks who are just starting out and have no leads to manage. Experience also helps with the learning curve for using a new technology: If you’re already familiar with the way the sales process works, your learning curve is drastically cut.

Our biggest asset is our team. We have an amazing onboarding and support team to help with all the integrations. We’ll get on the horn and make sure that you and your team are trained on how to use it.

The Importance of Lead Management

I know one guy who’s a one-man show. He was doing sixes figure months all last year before I finally convinced him to hire an assistant to help him with leads.

The system was built for the entrepreneur’s peace of mind, to know that their team has something efficient that thy can use and not have to worry about leads. It’s what I wanted when I was on the road and worrying about all the leads that we were generating, spending a lot of money on, that might be falling through the cracks.

Once, a seller called my business partner late in the day. We had missed his first call, and he tried calling us back again later in the day. We just didn’t have a system set up to notify us when a lead came in. We had to go in manually and look at our spreadsheet. “Man…I wish you guys had called me back earlier,” the guy told Mike, my business partner. “I just locked up this deal in Canton with another guy.” Canton is a high-end area in Baltimore, and this would have been a $50,000 wholesale fee. We completely missed out on that opportunity, and the seller was nice enough to call us and let us know about it. That lit a fire under us to figure it out, and that’s when we hired our first lead manager whose full time job was to work the system, nurturing leads, answering the phones, and collecting all the data. That’s an important first step for any investor who’s looking to create a real business around real estate investing. You need someone focusing full-time just on lead management.

Strategy vs. Details: Dan’s Strength vs. His Kryptonite

Strategy comes naturally to me. I’m your classic entrepreneur personality type. I like to make moves and take action, and I’m very aware of actions I shouldn’t be taking myself. I build systems around that insight so other people can execute within a framework.

My core strength is finding opportunities that have scale, and are higher-leverage. InvestorFuse is one of those: it’s a company that has scale potential and that I know can help a lot of people. It’s high-leverage and can make people a lot of money. We can create systems and own our own intellectual property that can be a massive lever for other people. I like to identify these opportunities, which is a trait I think a lot of real estate investors also have–What’s the minimum amount I can spend to acquire a deal? What’s the maximum amount I can make?—We build systems around that.

I’m a very systems-minded person, but working inside the system and getting into all of the details is not my forte. The more in the weeds I am, the more likely I am to break the system–and my whole team knows that. I think it’s important for people to align themselves with others who understand what their core strengths are, accept them for who they are, and don’t try to force them to do the things they’re not good at or don’t enjoy doing.

Limiting Beliefs

Sometimes when people think about setting up businesses, they think they won’t have to do anything; that they can create systems, hire people, and then just lounge on the beach all day.

On the opposite end of the spectrum, you encounter the limiting beliefs: “Oh, that sounds like so much work,” or, “No one else can do this as well as I can,” or “There are so many things I’d have to set up…this is going to take forever!” There are so many limiting beliefs that cluster around the idea that you can’t escape the rat race you’ve created for yourself.

Here’s a simple exercise: list all the tasks you currently do, and highlight the tasks that you enjoy doing, and put cut/paste them onto a separate list or note. What you’re left with is a job description for someone you need to hire. Take whatever little actions are necessary to get whatever’s in your brain represented externally in a note, video, or a step-by-step process. One process at a time, you’ll start to see the power of delegation and of hiring people to do the things you don’t like to do. I tell all our staff to do that: whenever they feel overwhelmed, I say, “Take a step back. Get a laptop, get a notepad, and just make a list of everything you do.” It’s super-helpful, and after making that list, you can create a job description for someone else.

Real Estate Rock Star

You can’t have two careers at once. You can’t try to do two things at the same time with equal ferocity: you end up half-assing both endeavors, and neither will work out. I’m speaking from my own experience touring full-time in a band while trying to run a real estate business. I thought for the longest time that I could be a real estate rock star. It took a moment of clarity to realize that my heart wasn’t in either of these fully; as it was split between the two. Finally, I asked myself, “What is my ideal lifestyle, and what career best aligns with that?” I chose entrepreneurship and left the band at the end of 2014. I left the rock star lifestyle, which just wasn’t going to support the life I wanted for myself and my family.

Because of that decision, I made more money within six months than I ever had in my whole life; when you finally do make that decision, your mind’s focus narrows down to that one thing. If you’re reading this and find yourself in a similar situation, it’s important to make that choice: What’s going to give you the life you want for yourself and your family? The power of focusing on one thing is probably my biggest takeaway from that experience. Everyone on your team should be killer at one thing. They shouldn’t be dealing with both buyers and sellers on a day-to-day basis. If you haven’t read Gary Keller’s book The ONE Thing, you should.

Software that Builds Community

InvestorFuse is a win for all stakeholders. There are 650 or so companies on the platform (as of July 2019), which is more than 3,000 team members across all those companies using the software. But the biggest win for me is the team and the community we built around it. Up until that point, there wasn’t really an open community talking about how systems and technology can help you free up your time and your business, and help get you out of the rat race you’ve created for yourself. There wasn’t any actionable advice around—just YouTube videos telling you, “You need to have systems!” but not giving you any sense of how to actually do it.

It started when I was setting up people’s Podio workspaces in 2013. I had a 3,000-person Facebook group just about automation/team-building, which some readers might even be familiar with. It struck a chord with people. It created an amazing network and community of investors who were actively doing deals, savvy about eliminating overwhelming tasks, and were effectively creating teams around their business models.

The Year Ahead

There will be some massive improvements to InvestorFuse over the coming months that a lot of folks will be able to enjoy. We’re perfecting and standardizing the sales process of real estate investing…and taking it mobile. The goal is to continue to push time off people’s plates using technology like bots and eventually machine learning/AI. We’re going all in on the tech side things because we know that when we create a killer app for real estate investors, it will be relevant to other niches in real estate too. We’re scaling up our development, growing the team and the user base, and trying to help free up as many people as possible.

Advice to New Investors

Don’t do it alone. Having a business partner, a mentor, a coach, or someone to bounce ideas off of really helps take the edge off this business. All of your anxiety can be eliminated with a simple conversation, or by listening to a podcast. It’s important to surround yourself with folks who will support you through it. Don’t try to do it all by yourself. Don’t try to figure it out by yourself and reinvent the wheel. Whether that means having a business partner or your first assistant, don’t do it alone. As Chris always says, someone has already done exactly what you want to do. Go find them. Grab onto the shirttails of someone who’s still in the trenches.

My real passion is helping the struggling entrepreneur. If you’re reading this and you don’t think you can grow a big business or do a deal, take note: this is the only life you get. This is a business where you can arrange it so you’re only doing stuff that you enjoy doing. You can do things that excite you. You can work from wherever you want—it’s truly possible to do that. I had the same limiting beliefs that you might have right now. Chip away at them, build your confidence through action, and work smarter.

Here’s the key takeaway: The more time you spend building your engine versus working inside the engine, the more successful you’ll be, the longer you’ll be able to stay in business, the more fun you’ll have, and the more freedom you’ll have to do what you really want to do in life and spend time with the people you want to be with.

Know that it’s 100% possible to achieve that. Focus on building your engine. I want to leave you with those words of encouragement: it is possible. Take a deep breath. Realize that right in front of you are all the resources you need to make this a successful business.

Now all you need to do is execute.

TAKEAWAYS FROM THIS CHAPTER

1. Focus on learning how to do deals before you invest in software.
2. You’ll eventually need a full-time lead manager nurturing the leads, answering the phones, and collecting information.
3. Identify your limiting beliefs and work to get rid of them!
4. When you feel overwhelmed, list the tasks you hate to do and hire someone else to do them.
5. Don’t try to have two carers at the same time; you’ll half-ass them both.
6. Find the one thing you excel at and do that. (Read The ONE Thing, by Gary Keller.)
7. Surround yourself with people who understand your strengths and support you.
8. Don’t go into real estate by yourself—get a partner, mentor, coach, or at least an assistant!

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We hope you enjoyed this excerpt. Chris’s book is filled with gems, so be sure to grab your copy here.