[0:01:33.9] MF: Hey it’s Mark and we’re back with another guest for this week’s episode on the InvestFourMore real estate podcast. I’m really excited for this guest. Today, we have Christopher Waters from Waters International Reality and he has built a really cool brokerage, around the team model and as many of you know, I just started my own brokerage as well so we’re just getting up and running.
I’m excited to talk to Christopher and learn about how he built his business. My way to help my listeners out but to help myself as well. Christopher, thank you so much for being on the show, how are you?
[0:02:04.4] CW: I’m good man, thanks for having me on.
[0:02:06.3] MF: No, I appreciate it. You know, I always start every episode with some background, some history on my guest. Let’s get right into it and can you tell us, you know, when did you first get started in real estate, what sparked that interest in the business?
[0:02:19.0] CW: Yeah, great question. In 2006, I was in my senior year of college and to pay my way through school, I was mowing lawns – I mowed a lot of yards. I was doing about 20 to 25 homes per day. I would pick-up day laborers to help me and was doing about a hundred lawns a week.
One of my pain in the ass customers had a – he was a really nice guy, his wife was even nicer but it was a pain in the ass because he was so particular about his yard. So anyways, he had a small mom and pop real estate team and my senior year of college, you know, he asked me what I was going to do when I graduated and said that I was getting a degree in finance and I was going to go on all these job interviews.
As I got closer to graduating, he was telling me, he said, “You know, you should really consider getting into real estate.” He had personally been in the finance world and told me about the ups and downs of corporate America and I started actually going into job interviews and I don’t know, this will sound very, maybe slightly egotistical but I was like going on this job interviews and I had these people interviewing me and I felt like you know, they should be working for me, not me working for them.
It was like the weirdest kind of feeling, you know? I had built a pretty successful lawn care business, I mean, I get it, that’s like not some really sexy business or whatever but you know, you learn all the fundamentals of building a business, accounting, managing people, all that good stuff, invoicing and what not. I just had this, I got this like sense of being like almost like unemployable. I couldn’t go work for somebody.
I joined this real estate team and was on the team for four months and I was going on all the training and reading all these books, this was end of 2006 and of ‘07, right after I graduated. I was not very humble at that point in my life and felt like I could do everything bigger, better and faster than everyone else.
Against the wishes of the team leader I had at the time, I started doing some different lead generation activities and about four months in, basically gave my notice and quit. I went enjoying this boutique brokerage that focused on farm and ranch and I had no farm and ranch background by the way.
I’m like, grew up in suburbia of Austin Texas and no background in real estate, no entrepreneurs in my family or anything like that, we lived in just like a typical house. But I had a customer refer me to this guy, he was like “Hey, you really need to go work for this guy.” I joined on his boutique brokerage and then this guy said, “Chris, you’re 21, you should go learn as much as you can about the industry.”
Like all the behind the scene stuff. In 2007, the oil and gas industry was on fire, the price of natural gas was $13 per MCF, it’s now $2 per MCF by the way. Natural gas. He convinced me to become what’s called a land man. I was kind of like a freelancer if you will, my job was to go track down the owners of mineral rights and basically spend a lot of time at the court house researching deeds and figuring out who owned the land and so I do that for two and a half years and was like super miserable.
I hated the research part of it, it just sucked. The whole time I was in it, I just kept reading and learning about real estate and marketing and was fascinated by lead generation and I started a blog on this website called activerain.com and you could go find my blog articles, I posted back from like 2007.
I was just becoming kind of obsessed with lead generation but I was, during the day, I was a land man and in 2009, the market crashed, completely, the Dow Jones went from 10,000 down to like 4,000 or whatever it was. It was just massive hysteria in 2009, people were running around panicking and so I actually got laid off as a land man. They let go of a thousand people in Dallas Fort Worth where I was working as a land man.
For that whole three years, I was still kind of moonlighting as a real estate agent but not really doing any deals and you know, the market was horrible and I was like “Man, what can I do to make money in a down market.” So for whatever random reason, I stumbled upon an article that said that alcohol sales typically go up when the market goes down.
I had never in the bar and restaurant business, there was a loan officer that I knew, that I used to send deals to. He grew up in a bar and restaurant business and he was struggling too and so I invested all of this money into this bar and restaurant in the beginning of 2009 and it was an epic failure in a matter of only seven months.
When the bar and restaurant closed down, it had now been four years since I graduated – going on four years since I graduated college and all I thought about was marketing and lead generation specific to real estate. I said, “You know what? I’m going to do whatever the hell it takes to succeed in real estate and I’m just going to dive in and I’m not going to be moonlighting as a real estate agent.” Shit, I wasn’t even moonlighting, I wasn’t doing any deals. I was just reading and learning.
I was literally at the end of 2009, I was dead broke because I lost all my money from this bar and restaurant and my girlfriend at the time was buying me taquitos, like 99 cent taquitos from Whataburger and I was sleeping on a red IKEA couch in her apartment and I was like, beyond broke. I owed more people money than I could even remember.
The market’s horrible at the end of 2009 and I said, “You know what? I’m going to just get laser focused, I don’t care how bad it sucks, I’m just going to dive into real estate.” I put my membership fees on a credit card and I just started cold calling like crazy, listings that had failed to sell.
Basically, between the beginning of 2010 and 2013, I started off building the traditional brokerage and I hired like 15 to 20 people and at the end of my first year, we had like, somewhere between 15 and 20 people. Our whole team had sold like – I think it was like 90 some odd houses.
I was like, “Man, this is horrible, this is pathetic.” I knew people that were a single agent selling a hundred homes and I’ve got 20 people. In the summer of 2010, I believe it was 2010 or end of 2010. I had said, I’m just going to burn all this down and start over. I started employing this team model and it worked like gangbusters, the following three years, my team grew up to 325 transactions.
We did, I think it was around two and a half million in GCI and that was annually, 325 transactions annually, two and a half million, somewhere around there in GCI. In those three short years, I netted a million bucks. Now, you know, I’m able to net a million dollars every single year.
It grew super-fast, it worked really well and then you know, started expanding outside of my local market after that. That’s my long-winded answer to your question.
[0:09:56.3] MF: No, that was great. It’s funny, because I had a degree in business finance and I went to looking at jobs and I’m just like, “Man, I feel like I’m going to be a bank teller, that’s what’s available for me right now.” My dad was in real estate so I’m like, “I’ll just work part time for him” and that’s how I got into the business. But yeah, I have the same mind set of just like, I can’t work for somebody else, it’s just not going to work out. That’s funny.
Going back to when you first were building your first team and cold calling, listings. What was your life like back then, were you just calling like crazy, how many hours were you working, what was it like?
[0:10:33.6] CW: Yeah, I mean, in the beginning, I didn’t have a lot of business, you know, in the first three to six months, I didn’t have a lot of business but basically, what my day looked like was from 7:45 in the morning until about 11 or 12, I was prospecting, setting appointments and then in the afternoons, I was you know, going on those appointments.
You know, for the first three years, I pretty much worked seven days a week around the clock, I mean, I would start my day at 6:30 in the morning and sometimes would go until one or 2:00 in the morning. You know, I started building a team pretty quickly and so my schedule look like as I kind of shifted to building a team was I would spend my mornings prospecting for listings.
I would then finish in the morning, usually like the last – 7:45 to 11, I would prospect then from like 11 to 12 or 11 to one, I was prospecting to find talent to join my team. I spent all afternoon and evenings going on appointments and then meeting people.
I mean, that’s pretty much what my schedule looks like for up until the summer of 2013. The summer of 2013 is when I took myself out of the business completely. I stopped working with buyers, I stopped working with sellers and I just focused on building the business.
[0:11:57.1] MF: Right, when you were building your team, who was the first person you hired to help you out?
[0:12:03.8] CW: When I started building a listing inventory, two parts to this question. One is, when I first started building a listing inventory, the first thing I delegated was like putting stuff in the MLS and like getting stuff listed all over the web, Zillow, Realtor, Trulia.com, you know, Craigslist, all those different types of things. Making fliers, all that kind of stuff. I started leveraging that out using a virtual assistant service and I used what’s called myoutdesk.com.
It's a staffing agency and it started specifically for real estate. The guy that started the company ran a real estate team and so he understood real estate and he built all these training programs to train virtual assistants in the Philippines.
I had him working for me at like $7 an hour which included them covering the cost of training that person and holding them accountable. That’s the very first person I brought on. Kind of like the operation side so that I could leverage my time and get more efficient. Then you know, I was generating a crap ton of buyer leads with my listings from signed calls to people inquiring from Craigslist and online.
I started hiring buyer’s agents to work these buyer agent leads and you know, after – there’s kind of this whole roadmap of like who to hire and when. I screwed this up like every wayimaginable. You know, there’s a book written by Gary Keller called The Millionaire Real Estate Agent and that was my original source of inspiration but honestly, I found a lot of holes in the book.
You know, not to discredit Gary Keller, I think the guy is genius but you know, his book was written in the late 90’s and in the mid 2000’s, technology really changed the game immensely and the whole idea of using virtual assistants and all of these things like it changed immensely.
In the 90’s, people didn’t have like an MLS they logged into, they used like a binder and all the MLS listings you had to print out. The game really got changed in the late 90’s and then, even more so from a lead generation perspective in the mid 2000’s. I actually personally wrote a book called The Million-Dollar Real Estate Team.
Basically, documented my journey and like who to hire and when to hire them. For example, you know, you want to hire buyer’s agent for every 30 to 40 leads you’re generating. For example, once you’ve got more than between – I think a high-end number is 20 listing appointments.
Once you’ve got 20 listing appointments being set per month, you want to make sure you’ve got a listing agent to go on those. Your transaction coordinators can handle about 50 files at one time. About 20 of those can be an escrow, about 20 of those can be active and 10 coming soon, like that’s what their pipeline looks like.
There’s all these things that I kind of just documented through the book of like you know, who to hire, when, how much work can that person handle. You know, we would need a much longer call for me to tell you exactly who to hire and when but I think for anybody who is just starting out, your first hire should be a virtual assistant, or a secondary option is hire somebody local and just get them part time to help you do a lot of the administrative task. So you can focus on maximizing your revenue dollar per hour that you’re producing as a sales person.
[0:15:32.6] MF: No, that’s great information. I know yeah, we don’t need to go into all the exact details but yeah, leveraging your time is so important no matter what business you’re doing, and we do have a lot of agents and investors who are listeners to the podcast.
One thing I like to ask you too, when you first start out, you’re doing all these cold calling, where did you find success in getting clients? Were you doing something different from other agents, was it just persistence and a number of – were there so many deals per calls you made. Was there something different you were doing than other agents were doing?
[0:16:02.7] CW: You know, the thing that I got – I just built a habit of – there’s kind of in the sales game, you hear all these like statistics about how 86% of people will call a lead, the first time, 40% of sales people will call a lead. The second time, 20% will call a lead a third time, you know, then like, when you get to call six. Call attempt number six, I don’t know, some crazy low statistic like three or 4% of sales people will call.
Yet, the most optimal number of call attempts that have the highest conversion is between call attempt number six and seven. What I did in the beginning was, I had a dialer called Mojo and Mojo, you can – I don’t use this anymore but it still exists. I think the laws have changed around speed dialers but mojo is a speed dialer and you load all these phone number into mojo and it will call up to three numbers at a time.
I basically built database, back then I used something called red X which still exist. Super inexpensive and I built a large database of expires and withdraws. I was going two to three years back in time and so I had thousands and thousands of expires and withdrawns especially because the market was horrendous at the time. There were so many listings failing.
I load up into Mojo and I just, I was reaching those five, six and seven call attempts because I was just calling them over and over. That was like one habit I dealt with was getting really disappointed about the dialer and not letting my mindset get affected negatively. You know, whenever I had a call list and it would show me that I tried calling them like four and five times.
I think a lot of people can like poo-poo on the idea of they tell you to call expired and withdrawns and try calling them once or twice and then you're like, “This doesn’t work.” The real secret sauce is not to get discouraged after calls one, two, three, four. I mean, you know, dial six and seven are the most optimal dials for highest conversion. Then they say that after call attempt number seven, it’s a law of diminishing return.
That’s the important thing. That really doesn’t matter what lead source you’re working. Every single lead source, you should be dumping into a dialer and calling it six to seven times. The thing that I found that I think really, to answer your question. Differentiated what I was doing from everyone else is just my sheer volume of the number of time I would try to reach somebody.
That’s all kind of like step number one, that’s like the first domino you got to knock down and then the second domino in terms of like best practices from a lead conversion perspective, was every time I hung up the phone with somebody my goal was to get their permission to call them back.
If they weren’t ready to buy or sell in three to – if they weren’t ready to buy or sell right now, I was asking them for permission to follow up and then I asked them to tell me when they would like me to call them back. For example, expired withdrawn listing, you know, they’d say, we’re going to list it next year in the spring.
I would then follow up and ask them, “Well when should I fall back up the queue to interview for the job of getting your home sold?” They’d say, “Call me in February.” What I would do is I’d usually cut that time in half, right? They would say, “Call me in 12 months” and I’d start calling them at month six.
I had a calendar with like just a massive to do list of callbacks. To be honest, my results, the first six months, I was prospecting were horrendous. I was terrible. I was prospecting three hours a day, four hours a day, calling hundreds and hundreds of numbers and I was lucky to set one appointment a week.
You know, by the first six months, I was taking like maybe two listings a month on a good month and we’re talking about prospecting, you know, weekends, seven days a week, you know? I was applying massive amounts of effort. Those are the two big things is your call attempts and then secondly, building a huge list of callbacks.
Ideally, you also collect their email address and you add them to your email list and create like a market snap shot for their neighborhood, so you can stay in touch with them via email also. Those were the big – I think actions that I was taking the differentiate from other agents.
[0:20:44.7] MF: No, that’s great information and it’s funny because I was going to buy some properties in Florida, I didn’t end up doing it but I was trying to talk to agents down there and I would call people and I would send emails and I’d say, one out of five agents would respond to me. For me, contacting them.
Yeah, it takes a lot of work to become successful at anything and persistence is definitely key when you want to be a good agent. Looking back on how you started and how your business runs now, how do you do things differently for lead generation and using your time to get those leads?
[0:21:19.4] CW: What’s kind of interesting is like, your lead quality from what I have found is in direct proportion to what you’re willing to spend per lead. The more you spend per lead, typically, the higher the quality of the lead. I deem the quality of a lead, you know, how fast they’re going to buy.
You know, you’ve got good contact details and they’re ready to buy within the next 90 days. I think you need a blend of lead generation strategies. You know, if you’re a brand-new agent, you don’t want to go drop $200 per lead. Because your sales skills are not that good. Even if you have a sales background and you’re a proven sales person. The thing you’re going to find in the first six months, as an agent is that, you know, you’ve got to develop a script and like, get really good at overcoming objections and getting the marbles out of your mouth.
The first six months, you know, you should be going after generating just like massive quantities of leads at a really low cost per lead so you can sharpen your sales skills and then as your sales skills improve, spend more in terms of your cost per lead, spend more.
We have a massive arsenal of stuff, we do – we spend money with Zillow, Trulia, Realtor, Google ad words, retargeting ads. We spend money on Facebook, That’s all the digital type stuff, we spend money on radio, TV, billboards, newspaper, direct mail.
What’s kind of interesting is like, those old school medias, your cost per lead is really high but the quality is also very high. You’re not going to get as many leads but it’s going to be a warm lead and Ideally, the conversion cycle is substantially shorter.
Anyways, it’s over the long term, you want to diversify your lead sources so you’re not reliant on just one because I think lead generation is always changing and then two, I think you want to pick your lead generation strategy based off you know, how skilled you are and if you’re a single agent, you know, you’re going to be the most efficient in terms of generating the most money per hour by focusing on listings.
I would do a lot of my lead gen focused on sellers and not buyers. Those are two totally different beasts in terms of how you generate a buyer lead versus a seller lead.
[0:23:55.8] MF: No, that’s fantastic information and we do love the same thing ourselves and it is just yeah, getting your name out there and just yes, bombarding the market. I mean, when you first started your brokerage, did it take a while before you kind of gained some traction and had name recognition in your area or were you kind of just go on all out from the very beginning?
[0:24:14.9] CW: Yeah, I mean, I was broke, I didn’t have any money to spend on marketing in the beginning and I don’t think anybody knew who I was until I started doing more mass media, radio, TV, Billboards. I think that’s when people really recognized who we were. That’s kind of more just a function of your advertising budget, you know?
You could dominate the web and I think you could build a lot of awareness in the market place like if you’re – if you have the number one website that drives more traffic than any other website in your entire market, I think that’s a quick way to build a lot of name recognition.
I read this book by Jack Welch who was the former CEO of General Electric and he said something really interesting in the book, he said, “You’re either number one or number two,” in a particular niche or product or market or whatever.
The people that are three, four, five, six, seven, eight, nine, 10, et cetera. They are all just fighting for crumbs. My advice to anybody is to try to pursue a lead generation source where there’s going to be an ample number of leads but where it’s not a crowded space. I think that’s really important.
If you can go into your market and execute a lead generation strategy, that’s very scalable. What I mean by scalable is like, you could get hundreds and hundreds of leads from it, that’s where you should go because you know, it’s like – if you’re going to go do a direct mail campaign and like go target a neighborhood, you’d never want to go into a neighborhood where some competitor already has 30% market share.
It would be a total waste of time. There’s another really good book called The 22 Immutable Laws Of Marketing and I think it’s a good little checklist to help you determine which kind of niches you should develop in your market place to generate buyer and seller leads.
[0:26:12.5] MF: Great information. I think one thing I’m really curious about, I bet a lot of other people are too because I’ve never done radio or television advertising. I know agents in my area have. What kind of cost are involved if you want to advertise in the radio or television?
[0:26:28.6] CW: I mean, every market’s different but I think your keys to success on radio is even if you’re in a small market and it’s a lower cost, you need to have a pretty significant amount of money in the bank and you need to look at radio as being like a minimum of a one year investment before you start seeing your return.
For example, if you’re going to invest in radio, I think the minimum amount of money you need to have set aside is at least 50 to $60,000. The reason I say that amount is because you know, radio is at minimum is going to be about three to $5,000 per month to really crush it. I reference something called, I read this in a book, it’s called a cash conversion cycle. In other words, if you invest a dollar into radio, the question is, how long until you get that dollar back?
Typically, the answer is, a minimum of six months. You start getting some cash flow back in month six but in the first six months, you’ve got, you know, six months times call it five grand, $5,000 per month in advertising, that’s 30,000. Then you’ve got the expenses of taking a listing on. Now, if you are a single agent and you do radio, you’re throwing our money away.
You shouldn’t do radio until you already have some brand recognition and you’ve got a minimum of 20, 30, 40 listings. If you don’t have a minimum of 20, 30, 40 listings don’t even waste your time. You’ve got to have a little bit of name credibility, so people are hearing about it on radio and then they are seeing your physical signs. That is the one two punch you have to have to make radio work and then again, secondly the money. So 30 grand will cover your hard cost for six months.
But then again, you’ve got the variable expenses and taking a listing on, so like paying a courier to deliver fliers, putting the sign up, putting an MLS, paying to get fliers created, maybe you do boosted ads on Facebook for listing, you do a direct mail campaign. There is all these variable expenses when you take on a listing. If someone is listening to this call and they are saying, “You know it only cost me $200 to list a property,” it is probably because they are not doing a very effective job marketing it.
Or two, they are a single agent and they are doing everything themselves, so that’s why I say you need about 50 to 60K because you’ve got your upfront expense of the radio and then you’ve got the variable expense of each individual listing. Then you’ve got to wait six months for it to come back and then the third piece is you’ve got to nail your call to action. You’ve got to have a really compelling call to action to get people to call.
I think those are some of the pieces to the recipe if you will. I had used an agency called Motivate Media and this guy was in radio for 20 years and he has it dialed in. He knows exactly how to make your campaign work and produce amazing return on investment and that’s who I personally use it’s called Motivate Media. It’s based out of Austin and super sharp guy that runs that agency. What’s cool is it doesn’t cost anything to hire an agency.
The radio stations, the TV stations they pay a commission to agencies and so it doesn’t cost you anything to use them and they will help you set everything up. So anyways, those are my little tidbits on radio.
[0:30:12.2] MF: Awesome. No that’s great information. A lot of agents won’t ever get to that point where they do radio advertising, but it is interesting to hear the cost, how it works and what’s involved in it. I have to ask you this, you mentioned a little bit what’s your call to action or one of them you use on the radio?
[0:30:28.9] CW: So I use three different ones. So one is an immediate cash out option, like you know we’ll make an offer on a house for cash and close in for as little as five days. Then our second call to action is you are home sold guaranteed or will buy it and then our third call to action is “Your home sold guaranteed or we’ll buy it,” and “Your home sold guaranteed or I will sell it for free.” We put a timeline on all of these like 59 days. Your house sold on 59 days or we will sell it for free or sold in 59 days or we’ll buy it.
There’s some other calls to action like for example, we’ll guarantee to sell your home in 59 days or we will pay the mortgage. There is a lot of different creative things you can come up with, those are three that I use.
[0:31:17.0] MF: Cool, very cool and piggy backing off that because I hear those guarantees and different things as well, how often do you buy a house or have that guarantee come through where you have to fulfill it?
[0:31:28.1] CW: So what is interesting is most of the people that hire us they hire us because they hear that guarantee and it exhibits a level of confidence in your marketing. So we have a commission menu of options for consumers so they pick which commission menu or program they want and we have our guaranteed sale option and a surprising number of people do not select it. It is at a higher commission and so a surprising number of people don’t select it.
But to answer your question about how many we buy for a month, we are probably buying about two to three homes every single month but surprisingly most of them are people where it is a situation they are about to be foreclosed on, the house is in disarray like foundation issues, roof issues, they don’t have money to get it fixed. They are behind on payments, all of those types of scenarios those are typically the ones we are buying.
I think the guaranteed sale program it’s a good option for people who are in a distressed sale situation. I think we pay a premium compared to like the “We buy ugly homes” people. We typically pay 90% of the third-party appraisal minus the standard closing cost any seller would pay if they were to sell their house and then a lot of people say, “Let me see the fine print of those guaranteed sale programs” and the truth is there is very little fine print in ours.
The only fine print is that if the home is located in an area where there is more than six months of inventory then it doesn’t qualify. That is typically a horrendous market if you’ve got more than six months of inventory. Usually something, like something bigger is going on that is causing the market to be really, really bad. So that is one exception and then if the house has previous foundation repairs or needs work or roof repairs that needs work or has insurance claims over $5,000 because of water damage or things like that, the home won’t qualify for our guaranteed sale.
It will qualify for us to make an immediate cash out offer to buy it, but it won’t qualify for us to list it traditionally and guarantee that it sells. We’ll still take the listing on but we can’t put the guarantee on there so that is the fine print of our guarantee sale program pretty simple. I am pretty sure forward, so anyways we have two to three homes a month is probably what we buy on average.
[0:34:04.0] MF: No that is a very good business model and thank you for sharing all of the details behind it. I appreciate that. Switching gears a little bit you’ve turned as agent, had a lot of ups and downs, other businesses along the way, you created your brokerage and now you’ve got this team that sounds like extremely well where you are making quite a bit of money. Can you talk about the structure of your team and what your business looks like right now?
[0:34:26.8] CW: Yep so some pieces that were missing in the Million Dollar Real Estate Agent book in my opinion was a full-time trainer and a full-time recruiter. So, if you are in the real estate brokerage business, you are in the game of recruiting top tier talent and it is very difficult to find out who is going to work and who is not going to work. So, I read a book called The Rare Find and this author spent like four decades going into every single industry imaginable.
And the purpose of the book is for him to share his stories of all of these different industries from the military to Teachers for America that is a non-profit to corporate America and he wanted to find out what made people tick, the ones that were highly successful. What he said in the book was that the only way you find out who is going to be successful or not is to see them in action because the attributes of people that are highly successful is they are incredibly resilient.
They are very focused, they are very resourceful, they are very quick to embrace change and they have very much this mindset of wanting to learn and get better and better at all times at all things. You only see those attributes in people through action like you are not going to see it in a face to face interview and so the way we kind of set up our program for finding talent is we created this 30 day ramp up program and we tell people at the very beginning of it only one out of four are actually going to make it.
And that one of you is going to quit because you didn’t realize that real estate was about building a five plan of leads and nurturing the leads and making an absorbent number of calls and trying to maintain a huge database of potential leads. So one person will quit because of that, the second person will quit because they are not disciplined enough. They’ll show up the first two weeks and then week three they will miss a day. So that is another thing that is very common.
People that I see, they’re not disciplined and committed enough to it. They think it sounds sexy, the idea of being your own boss and having a flexible schedule and then the third person that usually leaves is somebody that is just not coachable. Like you tell them what to say, how to say it, you give them guidance and they are like a know it all and they’re not in a humble enough place in their life. I totally appreciate this more than most because this is exactly what my problem was when I was 21.
I just wasn’t coachable. I was right out of college and I had this successful business, long care business that I sold and was way too ego driven and so that is usually why the third person quits. The fourth person is typically our keeper that will be with us for a really, really long time and so because of that ratio of out of four people you keep one, you’ve got to be constantly be recruiting and looking for people. So, it is literary a full-time job to be recruiting and a full-time job to be training and executing on this ramp up program.
So, what our team looks like is beyond our recruiter and trainer is I have a director of sales who oversees the listing team and the buyer agent team and then I’ve got a director of operations and that person is responsible for overseeing all the W2 employees. So transaction coordinators, our listing manager, our courier, we have photographer on staff, our front desk gal, she manages a lot of different things for us. Like helping us put together our quarterly client appreciation events and things like that. And then we’ve also got a director of lead generation.
So there is three key leaders and again, this is something that was not in the book that I read. That was published by Gary Beck in the 90’s and it is a director of lead generation and the director of lead generation oversees a marketing coordinator. They also work with outside agencies and lead generation systems and tools. They also might have a technology person underneath them.
Another common thing is that you build out the team is you don’t ever think you really need like an IT type of person but the more and more people you have, you start finding you as the owner get suck into fixing people’s computers and trying to help them or show how to do stuff. So that director of lead gen kind of helps oversee a tech person that helps with user adoption, education, training and things like that. They oversee a marketing manager and then they’ve got all of these auxiliary people they use.
For example, the agency that manages our radio and TV and the agency we use to manage ad words, Facebook and then they’ve got a graphics designer that helps with collateral. So those are your three key leaders and a little bit about the people underneath them, does that make sense?
[0:39:46.7] MF: Yeah, that is extremely helpful and again thank you for taking the time to go over how you’ve built this in such detail. I know your book will probably go over this as well but it is really, really helpful. One question I have too for building a team as a team owner or agents who want to join a team, is how do you pay your listing agents, your buyer agents who work with you?
[0:40:07.9] CW: Yeah, great question. So it’s really interesting like I never really understood the importance of HR documentation more so than in the last couple of years. I think that you can read any recruiting or sales book that top talent doesn’t need to be managed. You just need to get out of their way and another thing is like you can’t actually manage people. In the early years, I had this belief that maybe I could help people be successful.
And what I realized is either people have the internal drive to succeed or they don’t. So anyways, the position agreements and how people are paid is so important. So you want to think about your compensation structure in terms of what specific actions do you want your people to take. Another key thing about paying people is for every incentive there needs to be a disincentive if they take the wrong action. I actually got that idea and philosophy if you will from a book called Seeking Wisdom by a guy named Charlie Monger.
Monger is the right hand man to Warren Buffett and Warren Buffett and Bill Gates both said, “Charlie Monger is the smartest man that I have ever met in my entire life” and if you go YouTube this guy, Charlie Monger, you’d see him speaking when they do the annual shareholder meetings for Berkshire Hathaway. The guy says three sentences and when he talks these three sentences will be so deep it takes you 10 minutes to digest what he says because it is so deep and he puts so much thought into what he says.
So I got the idea of like having an incentive based structure where you incentivize positive actions and you disincentivize negative actions. I know this is a really long-winded answer to your question and I know you just want me to say there’s this split and that split. But it is a little more complicated and the team model and brokerage, you are trying to get people the right positive reviews for example. So you can have better conversions and click throughs on Zillow and Truly and Google.
And so, one thing on our position agreements are that if the agent gets a four star or five star review, they get a small bump in their commission. It is nothing huge. It’s just small, it is 2.5% if they get the review online. Now if they don’t get a review like no review at all or it is a bad review they take a reduction of their commission rate of 2.5%. So that is one small little nuance and it’s what Charlie Monger says in his book, “People frequently discount how powerful incentives are.”
But the key to it is for every positive incentive there needs to be an equal negative incentive for a negative outcome or no action. So our position agreements are a little bit complicated because of how our team is set up but in a nutshell it all is set up based on the actions sales people take. So another example is like we have this commission menu of options for consumers and there’s all of these value add items for people when they pay 7% or 8% or 10%.
That are included in those commission options and so if a sales person for example get somebody signed up at seven, eight or 10% they’re going to make a little bit more money and so their commission split is going to be better than if they just took a traditional listing at 6%. Some people might be wondering, “Are you just charging people more and you are not doing anything more for them?” and that is totally incorrect. Our commission menu for example at 10% that’s our guaranteed sale option.
You know our 8% option for example includes an insurance policy to cover the client after the sale and so it is up to $25,000 in legal fees. So I don’t know about in other states but in Texas we have ENO insurance which protects the broker but it doesn’t protect the consumer. So if you sell a house as a consumer and something comes back on you even if you didn’t do anything wrong you are going to get tied into legal fees trying to defend yourself and on average, it’s anywhere from 10 to $20,000.
So one of the perks at the higher commission option for example is what’s called Seller Shield which is an insurance policy. It was created by an attorney and they give you up to $25,000 in prepaid legal fees which protects you after the sale of the home. So it protects the consumer not the agent. Agents have ENO insurance. Anyways there is a little bit more work that goes into the higher commissioned price to menu items and so that is why the listing agents make a little bit more money.
So I am sorry I can’t give you an exact number. Again, I need an hour to go through the position agreements to show you how our buyer agents and listing agents get paid but I can tell you it is a tiered structure and our business model is set up to create a 30% pre-taxed profit. That is our goal. I can’t guarantee somebody will buy one of my franchises and create that but that is how our business model is set up and if you execute correctly you should be able to hit it. I’ve got teams that are at 35% pre-tax profit.
[0:46:12.9] MF: Cool, that helps and again, thank you for going into detail. I know we are spending a lot of time on details and going through some of the stuff but I think it is really helpful for agents and brokers as well to hear that information. You’ve got quite a business you set up so congratulations on all the work that you put into it and the results that you’ve seen. Are you looking to keep building it, are you looking to stay where you’re at? Are you happy with how things are going, or do you have any huge plans for the future?
[0:46:37.3] CW: Yeah, so as I eluded to just a second ago, I found a really big hole in the real estate industry and the hole that I found was that there’s not a franchise system that currently exists to help people scale the team model and there is not a road map that exists. I published that book last fall and it was my personal journey of doing it and it is a book. There is only 200 somewhat pages and so I can’t document everything perfectly, but I talked about the failures.
I talked about what worked and I talked about the different stages of growth but to really accelerate your growth curve, you really need a full-time coach that’s been there and done it. And so, what I found was when I studied all of these franchises, none of them were focused on making agents highly productive. In fact, the way the system is set up is that it is set up for agents to fail. Most agents for example when they join a brokerage, they’ve got to pay for a desk.
They’ve got to pay for lead generation, they’ve got to pay for marketing, they’ve got to pay for all of this stuff and they run out of money. Primarily a lot of it is because it takes so long for you to get a deal and then they get the deal closed and unless you have a big bank roll, you’re going to be behind the eight ball. Then finding somebody to mentor you, coach you and train you that is another challenge and most traditional brokerages are set up so that you, as a broker or owner of a franchise, for example your goal and the business plan is that you just recruit as many agents as humanly possible and then up-sell them on your training.
So again, it just sucks the money out of the agents pocket and they can barely afford to live and so in the team model, there is a strategy we implement and we set up something called the Brand Ambassador Program for the team and that is how we raised the capital at no cost to the franchisee owner. So that they can bank roll the success of their agents and also bank roll their lead generation efforts.
So my big hairy audacious goal is to basically build a franchise system across the United States and we actually received approval from the FTC last fall and so we are now licensed in 32 states and I am taking on people to basically coach, train and help them find massive success as an independent brokerage using the team model in executing on the processes and systems we’ve developed and helping them do that in record time.
You know my goal is to get somebody to scale to over a million dollars in gross commission in less than three years. I started doing this with people like testing it in other markets back in 2015 and they are having amazing success. It took one guy that did zero deals. He relocated to a new city and he’s in his second year this year and he is going to close just under 260 transactions this year for just under 1.5 million GCI. That is what he’s on pace for and he moved to a city he had never lived in before. He had no marketing budget.
I also did this in a really small town in Texas called Amarillo. This woman had been an agent before but she hit a ceiling and she couldn’t figure out how to exceed this ceiling of 30 to 40 transactions and in less than 18 months, she got to a 167 closings. Again, didn’t have to put in a small fortune to really ramp up. So my goal is to really help create a really clear roadmap for people to build the team model within a brokerage and do it really, really quickly.
So that’s my ultimate goal, I’ve mapped out the entire US. I see that we could have 2100 franchisees and I want every single one of them to be selling north of 500 homes and be operating on a 30% pre-taxed profit. So that is my big hairy audacious goal.
[0:50:56.9] MF: Awesome. Great job and congratulations on not holding yourself back that’s for sure. Great information, amazing detail you went into on a lot of these different stuff and if people want to reach you, they want to maybe get more information on your book or the franchise, what is the best way for them to get in touch with you?
[0:51:16.2] CW: Yeah, great question. So you can go to Amazon and it’s called The Million Dollar Real Estate Team by Chris Watters and Bradley Pounds and we created a landing page for the book and if you order it from that landing page, you’ll get a signed copy. It’s wirbook.com and then I’m also really easy to reach on Facebook. My information is on the back of the book. The book was really written for people that are already agents and they want to find out how to grow really fast and my information is on the back of the book. Yeah I think you can read reviews about the book on Amazon.
We published it last fall, so it’s been out for six months now so yeah people can call or reach out to me or on Facebook whatever and if they are interested in taking about the opportunity to be invited into our franchise system. I am only taking on very select people right now. My goal is to take on 25 people and make them crazy wildly successful before we really blow it up if you will. I am personally coaching and training everybody and helping them through the processes on growing and building a mega team so anyways check out the book and my information is in the book.
[0:52:30.8] MF: Awesome, well Chris thank you so much. I think that is all I had anything we’d miss or anything else you want to go over real quick?
[0:52:37.2] CW: No man, I am excited to be on your podcast and I’m happy to answer any follow up questions from any of your listeners and anything I can do to constantly help improve the industry and make other people better is only going to help all of us in the long run. So yeah, I am looking forward to hearing from your listeners and hearing what they think and answer any questions they may have.
[0:53:00.7] MF: Awesome, well Chris thanks so much for being on. We’ll have the shownotes up on the website and people can comment there and ask questions and it will also be on YouTube where people can ask questions as well. I really appreciate the detail that you went into and all the information you’ve provided. It was a ton of help and yeah, we’ll have to keep in touch for sure and thanks again for doing the podcast.
[0:53:18.8] CW: Yeah, thanks for having me on.
[END]
