Is it possible to turn your hobby into a booming business? The answer is YES!
Danny Johnson is a well-rounded guy—he’s a podcast host, a professional house flipper, and the author of “Flipping Houses Exposed”. He used to be a software developer who flipped houses on the side as a hobby. But when he got fired from his job, he never looked back, and he now runs a successful real estate business.
In this episode, Danny talks about the mental obstacles he needed to overcome to scale his business and achieve the lifestyle that he wanted. Because business is a numbers game, he shares the KPIs that you need to track and the mindset that you need to have when following up with sellers.
We drop some serious gems in today’s show so keep your ears peeled!
Flipping Masterclass – Real Estate Lessons Learned from a Flipping Junkie
I have a very exciting episode. I’m excited that I finally got this guest on our show because he is so intelligent. He has got his hands in a lot of different things that are all things real estate investing. I’m interviewing Danny Johnson. Danny is an author. He wrote an amazing book called Flipping Houses Exposed. He’s a show host. He’s very well-rounded. He’s coming here to talk about how he took flipping houses as a hobby and made it into a real business. Without further ado, let’s welcome Danny to the show.
Lauren, thanks for having me on.
How are you?
I’m doing great.
I am super excited to have you. You have your hands in a lot of different things in the real estate investing space. What interested me the most was your Flipping Houses Exposed book and your story about becoming a professional house flipper. Can you tell us a little bit about yourself and how you got into real estate investing?
I started in 2003. I graduated from college in 2000 as a software developer. My dad started flipping houses. He was having so much fun doing it. I was like, “I’m miserable in this office all day long. I want to do what he’s doing because he’s super excited about it.” He’s thrilled with his life and passionate about it. The whole idea of moving from trading hours for dollars into investing is obviously the whole Rich Dad Poor Dad concept. I had read that book. I got started in it and worked part-time in the business. A high-paying software job was hard to leave even though I was losing money because we were doing enough deals that we could do even more if I were full-time.
That helped me to see the 80/20, the 20% of things produce 80% of results. I only had so much time to do the job, the investing during my lunch breaks, my evenings, and weekends but it never felt like work. It never felt like it was something that I had to force myself to do. I couldn’t wait to do it. It was cool but I had to get fired from my job to go full-time. I could never get past that whole leaving the security thing until thankfully God intervened and had that happen.
It was funny because my manager was saying, “I’m going to fight for you. I’m going to keep you on.” I said, “No, don’t. This is a good thing. Don’t try to save my job for me. I want to get fired,” which is weird. I went full-time. My ex-wife and I ran the business ourselves, wearing all the hats for about 8 or 9 years. I want to stress that because sometimes, when you hear people on a show or read a book, the timeline gets out of whack.
You can learn a lot about business listening to podcasts, but it takes time and the experiences in failures to actually have that wisdom.
You hear of success and doing all these deals, and you think that happened within six months, a year, or it just happened for them. It didn’t. It took a long time. We struggled to grow and increase our investment, return, and how many deals we were doing past a certain point because we had success wearing all the hats.
We wanted to have more success and do more deals. We wanted to bump up to 50 deals a year. We hit a barrier because we were doing the things that we could do to do the number of deals that we were doing 20 to 30 or so a year. To double that required more hours. We were doing everything. It was this weird mindset thing that was happening because my idea was, “I’m doing this for fun.” That’s why I say hobby because it’s the whole freedom thing.
I’m making my way. I don’t have a boss telling me what to do. I can do whatever I want, but I didn’t want to hire anybody. I didn’t want to create that responsibility. We can take a vacation for two months and not have to keep everything going because we don’t have employees and their families to support. We can do that, but we never could. That was the problem. We’re doing marketing for motivated sellers. They call who’s going to go to the appointment. It was super stressful even to leave for a weekend because we were afraid that we were going to miss a deal or something.
There was that trap we got caught in and thinking that we could keep the business small, just us, and still have fun for a long time. Make a lot of money and grow our net worth that way, which is possible if you have lower goals. There are people who do six deals a year and are completely cool with that, living the lifestyle they want. When you want to do more, you hit a barrier, and that’s what happened.
You’ve said so many interesting things. I wrote some notes because I wanted to take you back to when you left your full-time job. You said you could not get yourself to leave the security of a full-time job. Can you explain what emotion is there? I’m sure a lot of people are reading this that can relate. They are you, probably terrified of not having a W-2 every two weeks’ paycheck coming in. Tell me a little bit about that.
It’s been a while. This thing of whatever I do in the flipping business outside of my job is the whipped cream on top or whatever. It doesn’t matter. There was no risk because I had my job. I had my security. It’s like a weird mindset thing, though. We got to a point where we were losing money because I was at my job instead of picking up more deals. It’s a weird idea that security is only had with the job. I was scared. There’s a lot of things that could happen in our business like the market changing, which it did big time in 2006, ’07, ’08.
Thankfully, I’d already been fired before that, so I had to deal with it. It was interesting because the fear of all that happened kept me from even making that move, when in reality, we have to do it. We have to make that jump. I would have done that probably after the first year if I were to do it over again. I would know. We were going to come across things. We did. The market changed, but we made it through that by being smart. That was the fun part of the business. We had to get creative and figure things out.
I tell people that are afraid of not having a W-2 or a job that you could always get fired, where when you’re an entrepreneur, you don’t get fired. I can share my story. I am divorced. I have an ex-husband. He has to have a W-2. He’s very comfortable in this space of working for our company and moving up within a company. He wants to be in a stable company. There was me who was the more entrepreneurial person. It was not as stable to him. Fast forward years later, we’re divorced but very good friends. We co-parent, so we talk a lot. He’s lost his job. It happened a couple of times. He had a very high-paying job.
He had lost it at one point. He got another high-paying job, lost that one in COVID. I finally told him. I said, “The thing about me is I know how to print money. I know how to make money. No matter what, if flipping went away, I would have business skills. This business was completely taken away. I’d probably take a month and think of other industries that I could pick up that I could sell for profit. I would find a way to make money. I could find a way to print it for myself. I can print my own checks. My ex-husband can’t. He’s stuck in, “I have to get another job.”
He was stuck for a while, unemployed during COVID. For anybody that thinks that your W-2 is secure, it is not. Your job is not secure. It’s not security. You can be fired. I can’t be fired. I’ve tried to fire myself, but I can’t. Whenever I’m having a bad day like, “You’re fired, Lauren.” There’s no stopping me. I always like to say that for people that are struggling with that emotion.
It’s what you hear about millionaires. If a millionaire loses $1 million, they’re going to earn it back within half the time or less than it took the first time because it’s the development of the skills. You understand and learn that what you’re doing is providing a solution for some problem. It’s interesting.
It’s crazy. I got this from my friend, Tony Javier, and I took it from him. In his first ten years, he was figuring out how to be a business owner. I’m hitting my ten years of being an entrepreneur pretty soon. I imagined my brain. There was this part of my brain that’s been grayed out because I hadn’t figured out stuff yet. I only had maybe these little light bulbs that were on. It’s taken ten years for more light bulbs in my brain to start turning on.
I’ve learned this game of business. It took time, though. I love that you made it a point to say 8 to 9 years because I’m the same way. I didn’t have overnight success in this business at all. I’m the first person to admit that. I used to get so frustrated when I would listen to podcasts, and people would say stuff like, “Go read Rich Dad Poor Dad. The next day I’ve bought my first deal. A week later, I bought ten. The first year I closed $1 million’s worth of a real estate.” I don’t know if these people are lying, by the way.
I don’t hear from them again after that first year. You see them and then you don’t ever hear from them again. I don’t know what happens. When the market’s good, that thing tends to happen a little bit more often. It’s interesting. It’s the whole thing of knowledge versus wisdom. We know a lot about business. You can learn a lot about business, listening to podcasts, all those things, but it takes time, those experiences, and failures to have that wisdom.
I’ll go through and truly get the wisdom out of things that I read many years ago. It’s like you think you know it, but you don’t know until you deal with some issue that you get. As you progress in business, it’s bigger problems. It’s higher leverage. It’s bigger problems, and you grow to new heights. I wish it were laid back and work in your underwear stuff after a certain amount of time. As entrepreneurs, we tend to want to keep creating.
Big investors always focus on one or two key marketing channels. They are not chasing new stuff, thus creating a machine.
Let’s go back to struggles zone 8 to 9 years. What did you learn from that? What were your action items? I know the first one you said was a lack of scaling. That was mainly the first thing. Give me some reasons why were we struggling for 8 to 9 years? What did you learn? Let’s cut the learning curve for those who are reading.
There were these false beliefs and ideas of, “Keeping it simple, super small, doing all the work myself,” because it would be more work to manage somebody else, teach them, have them do things. “Could I trust them to do as well as me? Could I trust them not to take what I teach them and go off and become my competition?” All of those things are going to come up whenever you decide that you might want to bring on somebody to help you out. I put it off forever.
We have a mutual friend, Justin Williams, who was saying, “I flip all these houses, and I do a four-hour workweek.” I didn’t believe him. I think he had started his podcast, and I went on it. After that conversation, after the podcast, I was sitting there stunned. I was thinking, “I’m going to go and hang out with him. I want to see how this is actually playing out.” I called him right back, and I was like, “Do you mind if I fly out there and hang out with you.” He’s in California. I’m in Texas.
He’s like, “Sure. We can book something in a couple of weeks.” I said, “I’m going to fly out tomorrow. Is that okay?” He’s like, “Sure. I guess.” I flew out there, and he picked me up at the airport. We were driving close to wherever he lived. He goes, “What do you want to do?” I said, “I don’t know. Let’s go look at some of your rehabs.” He goes, “I don’t know where they’re at. Even if I went there, the contractors wouldn’t know who I was.”
I was starting to doubt. I was like, ” Is this guy trying to be a guru saying that he’s done all these things?” As the trip progressed, he got on some phone calls, and then his COO, whoever was managing. I think it was Vanessa. We had lunch. I was like, “This is all legit.” It’s cool to see that he’s removed himself that much. That’s not for everybody, though. It showed that it was possible that it could all happen and work. You can have somebody that’s operating things in your business. It took several years, but we did that. We started hiring people. We built out a team.
Interestingly, when I wrote the book, Flipping Houses Exposed, 34 weeks of the business I documented, I generated 495 motivated seller leads. This isn’t like a list of leads. This was generating calls where people said, “Make me an offer to buy my house.” Of those 495 I bought, 11 or 13 are those. It’s 1 out of every 45 leads became a deal, which is atrocious, absolutely insane.
It did show a lot of people that it’s a numbers game, though. You make five offers, and you don’t get any accepted. It’s not to think that it doesn’t work in my market or whatever. It’s that you got to keep making more offers, but that was horrible. The transition was once we brought on a team, we were able to have people specialize in things where someone was always available to take the calls for the leads that came in. That’s huge.
Somebody was always available to take the appointment as soon as we could. It didn’t have to wait 2 or 3 days. They could go to the appointment right away if possible. They could spend two hours sitting on a couch, having a conversation, building a rapport and not having to rush through, make an offer to leave, go to the next one. The business was handled, and it created processes and efficiencies that made it to where we went from. The 1 out of roughly 45 leads becoming a deal to 1 out of every 5 to 1 out of every 7, which is a crazy improvement.
Think about how much it costs and how much time it takes to answer all those calls and analyze all those deals. Probably go on a big portion of those appointments if you have to do 45 of those versus doing 5 or 7. In a competitive market, time, and real estate market, you see how important that is. Your business becomes so much more efficient, and then you get so much more time back. That’s what happened.
The other side of it, the other big part of all that, even if you don’t feel like you’re ready to have a team, you can at least look at your numbers, track your KPIs. Even if you don’t have a team, you have to know what your numbers are. I didn’t know. I knew I had this many deals. I want to do this many. What was the solution? It’s always more money into marketing and trying new marketing. It’s an endless rat race, hamster wheel thing.
It’s trying to do more deals that way. It’s stupid. I did it for years. When you start looking at your numbers, you end up finding out which marketing channel is producing the best deals, and then you become an expert at that. All the big investors that I know that have done it for years, focusing on 1 or 2 key marketing channels. They become experts at it. That’s bread and butter. They’re not chasing new stuff all the time. It creates efficiency, machine and consistency. That’s what we all want. That’s the fear of quitting the job even. Is it going to be consistent for me? Is that business going to be consistent?
I only worked two marketing channels pretty much at a time. Even though I’ve done all of them, I only do two at a time for a while. My two best ones, I focus on those and those only. I move into like, “If this one’s not producing as much, maybe we try something different in place .” It’s too hard to have 3, 4 different marketing channels. It gets difficult.
Can I stop you back at the key changes? I love giving practical advice on my show. I imagine the readers with their notebooks out. Answering calls live and servicing the seller as fast as possible made a big difference and kept track of your KPIs. Let’s get micro on that. What KPIs do you track? What should everybody be tracking?
Our software for that does 27 different things. I don’t know if I can remember them off the top of my head, but basically, the key ones when you’re focused on lead to deal are your number of leads that come in and the number of those that are qualified. If you’re doing direct mail, you’re going to get a lot of calls, but they’re not necessarily qualified leads. A qualified lead is somebody that says, “Make me an offer. I want to sell my house.” That’s qualified leads. You have to know how many of those calls are qualified, and then appointments are set, appointments canceled, and then offers made, under contract, and closed.
Is that how many you got under contract?
The biggest reason why lead changes to deal so much is because of serious follow-ups.
Right. It’s closed or wholesaled. You can break it down even further by cost and by the campaign. You need to know and see that funnel for each of your marketing campaigns. You need to know how much I spent on this campaign. How many appointments did it create? How many are under contract? How many closed? You can calculate your return on investment for that campaign, not for your company overall. You can know that but knowing per campaign.
There are some campaigns that will generate a ton of leads, but they won’t generate a lot of deals. If you know all those numbers along the way, you can see where the problem in your business is. If you’re getting a ton of leads, but you’re not getting a lot of appointments, you can look at why. If you’ve got somebody taking calls, you can start saying, “Maybe I need to listen to the calls that person’s taking.” We had that situation one time, where all of a sudden, we weren’t getting deals.
We looked at the numbers and it was because the appointments started drying up. We weren’t getting as many appointments. It turned out that our lead intake started making assumptions about people’s motivation, and we’re not setting appointments. They’re like, “They weren’t motivated. What do you mean they weren’t motivated? How do you know that? They might sound like they’re not, but they got equity. In my opinion, they called us. They’re motivated. I’m going to go look at it.”
That is when I want to blow my head off. When we have someone that has been in that seat, doing that for a couple of months, it can be very hard to figure out what’s going on. You have to listen to their calls and figure out what they’re saying. It’s the worst. On my team, we have rules. Everybody gets an offer. Every seller that calls is a lead. Anybody that raises their hand is a lead. I took out any variable.
A person could have a subjective opinion, I removed it. I said, “If they raise their hand and want an offer, they say yes, or called, have to get an offer or at least you attempted to, if they ghosted you, then we keep track of the ghosts.” We have leads that came in and then the offers that were made. Usually, it’s about 50% because we do a lot of outbound. That’s cold calling, texting stuff.
When it’s outbound, it’s about 50% because you’re bugging them. A lot of them are tire kickers, and they’re like, “Sure, send me an offer.” They don’t want to get on the phone with you. I’m okay with that. Inbound, I’m like, “No.” Inbound is everybody pretty much should be getting an offer because they have the time to call you.
People’s subjective opinions of these things can change, too. You can onboard them on your team, teach them all these things and say, “No matter what, don’t assume that they’re not motivated.” All it takes is 1 or 2 people that yell at them or something on the phone, and then they start imagining everybody’s feeling that way. It’s like you have to go back.
The other side of this, too, that ties right into the biggest other pieces of this is the follow-up. That’s probably the biggest reason why our lead to deal changed so much. We got serious about making sure that we were doing follow-ups. It’s interesting. I’ll be quick about it, but we have Q&A calls for clients and the forefront every two weeks.
We asked the people on the call, “Who’s using the automated follow-up?” Half the people in the call were half weren’t. I didn’t even have to say anything. The people doing it started getting onto the ones that weren’t who were like, “You guys are missing out on deals. We’re getting deals.” It’s cool because we got to ask them, “Why are you not using it? Everybody knows the importance of follow-up. You have the capability. They’re already in your system.” Overwhelmingly, it was all, “We don’t want to be salesy or pushy.”
There you go. Another perception thing because those messages could be like, “I want to let you know that we’re still interested in buying the house or did you ever sell the house?” You’re not being salesy and pushy. If you imagine that every time you try to reach out to somebody that you’re being that way, you’ve got it all wrong. Some people might feel that but who cares? They’ll never go to sell it to you anyway. Who cares if you pissed them off?
You won’t even necessarily piss them off. This was something I learned from my dad, was always make the embarrassing offer. They could laugh at you. I remember one story he told me. He was laughing so loud for five minutes at him after he made an offer to her, random off her property. You make the offer, and they might say no or whatever but time has a way of motivating people.
It’s not so much that you’re trying to convince them to sell to you. You’re not pestering them, “Come on, sell it to me now.” With your follow-up, it’s, “I’m still here. I’m still interested.” Probably none of your competition is doing that because they’re afraid of being salesy or pushy. When the time has a way of motivating them because their circumstances change, who’s top of mind for them? It’s the person that bothered to follow up. When you get those calls, I’m sure you’ve had them too and they’re like, “You’re an angel. Thank God that you were there for me when I needed you to sell my house.” That stuff happens.
You’re right about this limiting belief. If you guys would take a week to be still and think of things you’re maybe could be doing better, I wasn’t still for long enough to realize that there were some things that I could have made so much easier.
We get so busy in our business that it’s so hard to take the time. If your days are maxed, and it’s time for dinner, you’re feeling frazzled. You’re like, “I don’t even know what I did. I was busy all day long.” If you’re doing that, you have to stop. You have to take a day and say, “I’m not doing anything tomorrow,” and you go and sit. Start looking at your business, work on your business. That one day out of a whole month to work on your business can change. Get rid of a lot of the crap that you’re doing that you don’t even need to be doing.
I think I want to schedule that in my month. It’s a day to work on your business. Another thing is going to masterminds, meetings or sitting in anything like that regularly, at least maybe twice a month. In those is when you’re going to get the little ideas. You need a drip campaign. It’s going to get thrown in your brain. You’re going to get the idea. When you’re doing your work on your business day is when you have this list of all the ideas you got that month that you’re now like, “I’m going to implement or figure out how I’m going to implement.”
If you have sellers canceling, you’re setting the appointment too far out. You’re not building trust and credibility.
You find out where you’re frustrated, stuck, your energy is being drained, and start considering bringing on part-time help. Even somebody that’s a family member who is staying at home could do some things with you and for you. That doesn’t need to be some crazy hire where you need to go to business school to figure out how to hire them and do stuff. If you have that day to look at your business like you’re looking at your KPIs weekly, the nice thing is you start to see trends before they become big problems. That’s the other side of it.
Do you look at your KPIs week-over-week instead of maybe month-over-month?
Yes. If you have a drop of 50% in something over one week, it’s maybe not enough. It’ll go up and down. Over time, you’ll start to see if there is a big change. All of a sudden, you can nip it in the bud before it gets to be a big problem and have a system that does that. Andy McFarland gave me the book, Traction. I flew out to see him too and hung out with him for a day as well.
Him giving me that book was better than meeting the people at his office and seeing all that stuff. Giving me that book changed more for me, but they have a software called Ninety.io. That’s made by the people for traction. You can do your meetings and have your KPIs in there. I got tired of putting the KPIs every week. I tried that before spreadsheets, and I couldn’t be consistent. It felt like a chore. It was hard to do. We built that into the forefront because all the data is already there. It automatically populates all your KPIs.
You never have to research them. There would be a situation where you see your numbers low, like appointments canceled or something was high. We had five appointments canceled. I was like, “I have to go figure out which leads or appointments those were.” If you’re looking at your KPIs, we made it to where you can click that number and see which ones. You automatically go into the system and know. You can read the notes and find out why they were canceled. Dig into the numbers and see what’s going on.
Why would canceled appointments be so important? You brought that up a couple of times. It seems like there’s something.
If you have sellers canceling, it can tell you a lot of things. You’re setting the appointment too far out. You’re not building trust and credibility. Other people are going. Before you get a contract, they don’t need you to come by anymore. You’re not building trust and credibility. They talk to somebody else, and they’re like, “I like this other person. I’m going to cancel that.” There are all kinds of reasons. If your team’s canceling them, for some reason, if somebody’s canceling an appointment that was set and moving it, you need to find out that thing is happening because it’s decreasing your odds of getting those deals.
I do everything over the phone because I’m virtual, so I don’t go to appointments. That’s why I don’t pay as much attention to that metric, but it’s the offers for us. That’s my big number. If it’s an outbound campaign, like texting or cold calling, remember that’s like you’re planting the seed to the seller. You are going to get a fair amount of tire kickers. What we found is that if we got 20 leads, 10 of them usually don’t answer the phone even to be qualified, to have the qualifying script. I call it a qualifying script.
Ten of them don’t even answer. They ghost you. The other ten are the ones that would be considered or interested and want to hear what you say. You have to make an offer to anybody that’ll listen to it and then pay attention to that. If my sales representative or acquisition manager has made less than 50% offers to the leads, that tells me it’s an acquisition manager issue.
I never thought of this. When you said it’s usually because they got yelled at some point, and then they started changing the way that we’re doing things, that’s so true. I’ve trained acquisition managers. They’re great at first. All of a sudden, their numbers start taking a dive, and they’re not closing any deals. They’re not getting any contracts. I have to reverse engineer and look back, “Why are you making 25% offers? That’s not what you were taught.”
You start looking at their notes. “So-and-so wants this price. It’s too high.” They distribute it to the cold bucket, and they don’t even say our price. I have a coaching program. I coached the sales funnel management and sales staff. I often say, “If asking the price on the first front call, the seller’s going to psych you out mentally, don’t ask.” It psyches them out. It gets them where they’re like, “She said she wants $200,000, and I’m going to say $140,000. I don’t want to say it. I’m going to be so embarrassed. I think I’m going to say that this isn’t. I’m going to put them in follow-up.”
Are you putting the ghosting people in follow-up?
I do. I always say this bucket is called follow-up cold. It’s anybody that’s ever-expressed interest in selling their home. Weirdly enough, the people sometimes ghost because it was not now. It’s, “In my head but not this minute. I’m too busy this minute. I’m even too busy to get on the phone with you.” How many things can you think of in your life that you’re like, “Not this minute, but I’m going to be interested in that? I’m going to do it. When I’m ready, you better be the person there ready to take me on?” We’ve dropped some serious gems in here. Danny, I love this episode. I’ve been gotten a lot. How can anyone that’s reading get ahold of you? Are you active on any of the social networks? I know you have a podcast, so pimp yourself out.
I started a new one also. I have Flipping Junkie podcast, and that’s been around forever. It’s older than whatever it is. I started a new podcast called Braver and that was to dig into some of the fears and the mindsets that people have in transitioning from doing everything themselves to building a small team. It doesn’t mean you build a huge team and be in multiple markets but build a true company that can work for you to have the actual lifestyle and the freedom you wanted when you got started in this business.
I see so many people that end up in this job. It’s a business. It’s their business, but they’re still in this job. They still have to do all this stuff. It’s like, “What happened to the freedom I was promised?” It’s digging into that. It’s cool. If anybody wants to reach out to me directly, you can reach me at Danny@ForefrontCRM.com. It’s my email address.
Danny, thank you so much for coming. If you found this episode interesting, insightful or inspirational, please share it with your friends. If you are looking to get into virtual wholesaling, I’ve got an awesome coaching program for you. Check out www.VirtualInvestingMastery.com. Guys, thank you so much for reading. We will see you next time.
- Flipping Houses Exposed
- Rich Dad Poor Dad Traction
- Flipping Junkie
About Lauren Hardy
Lauren Hardy is a Virtual Investing expert and Real Estate influencer who owns multiple companies in the real estate industry including real estate investment, coaching, and software companies. She is also a Wholesaling Inc coach and co-host of the Wholesaling Inc Podcast.
Her experience in the last decade has been focused on real estate investing and creating products and services to serve the real estate investing community. If you are interested in investing in real estate virtually, house flipping, or virtual landlording, Lauren’s your girl.