Data Driven Real Estate Podcast #11 – Scale And Operations In Your Flipping Business With Tarl Yarber of Fixated On Real Estate LLC. DDRE#11

Tarl Yarber is the CEO and founder of Fixated Real Estate LLC, a Pacific Northwest investment company with over $50MM in single-family residential properties purchased, rehabbed, and re-sold over the past seven years. Tarl founded the PNW Big Badass Real Estate Wealth Expo and the number one Pacific Northwest Meetup for real estate investors. He’s become passionate about helping the next generation of investors get more sophisticated in understanding the power of data and systems in business.

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Show Topics

• 00:00 Scaling your real estate investing business refining your operations with Tarl Yarber of Fixated on Real Estate LLC
• 03:14 How Tarl got into the real estate investing space in 2005 with no money and has now done over 600 flips
• 04:42 How experience taught Sean to go from the two-hour rule to tighten geographic location
• 05:25 The progression from only fix and flip properties to holding rentals and issues with wealth mentality
• 07:25 What triggered feeling like a real investor in 2019?
• 08:14 Where Tarl and his team source all their deals currently
• 08:49 How competitive has the Seattle market become due to Covid-19?
• 09:33 How to do volume flips with a small team?
• 10:14 A myth that mid-level real estate investors make about scaling business
• 10:59 How Tarl and Fixated on Real Estate adjusted as Covid occurred
• 12:51 Technology tools like Asana and SmartSheet that helps scale his real estate investing business and working with contractors
• 13:13 The data-driven approach and the questions to ask to identify inefficiencies in business
• 14:35 Why heavily documenting transaction will help better your business
• 15:09 How firing unprofessional subs that create tons of change orders, come to work unprepared, and extend timelines impacts business
• 16:00 How extra preparation before a rehab begins ends up saving in the long run
• 17:38 How data led to the firing of two specific trades on Tarl’s flips and how it has changed his jobs
• 19:58 Tarl’s current technology stack that helps him run his real estate flip business
• 22:05 Are all contractors working on site have to use the same technology stack Fixed on Real Estate uses?
• 24:29 Will good contractors choose to work with someone that is far more organized and data-driven? Why or why not?
• 26:12 The huge difference in contractor laws from California to Washington
• 28:12 Why Tarl keeps every single bid on every single flip project and why newer investors should start doing so yesterday
• 29:30 Data-driven real estate on the acquisition and sale side of real estate investing
• 30:48 Thanks that slow you down if your buy box is too big as a real estate investor
• 31:47 What are some of the key things defining purchase price from a wholesaler?
• 33:29 Some of the benefits of being a hyperlocal marketing expert and understanding things other investors don’t know
• 34:52 Some huge lessons data has taught Tarl on flips and why an internal team of employees wasn’t a fit for his business and goals
• 35:58 Some core metrics to follow to check the health of your business and to challenge assumptions
• 36:57 Tarl’s top three books that he recommends to real estate investors
• 37:33 How buying nails for a subcontractor changed everything in 2017
• 40:09 Writing goals and building the lifestyle formula
• 41:42 Why hating real estate has made Tarl an even stronger operations guy
• 42:14 Giving back and why education is important
• 44:45 PNW Big Badass Real Estate Wealth Expo and what changed in 2020
• 45:43 Wil wholesalers change their marketing criteria to mimic the buy box of serious buyers?

Show Transcript

Aaron Norris  00:02

Hi everybody, welcome to the Data Driven Real Estate Podcast. Today we've got Tarl Yarber. He is the CEO of Fixated Real Estate LLC, it's a Pacific Northwest investment company with over $50 million in single-family residential properties purchased, rehabbed, and resold over the last seven years. He is also the founder of PNW Big Badass Real Estate Expo, which is happening in September, which you won't want to miss. And we'll talk about later. But this week, we really talk about scaling operations. So the data on the operation side not as much on the acquisition. We talked about technology that Tarl and has his very small team has employed and how focusing on the data increased profitability, simplified life, but also helped him focus in on a buy box, where he was able to get more tightly focused in a very much a much smaller geographical area. Won't want to miss this week on the podcast. Welcome to the Data Driven Real Estate Podcast, the podcast for real estate professionals dedicated to driving business success using data. My I'm cohost Aaron Norris, with us is Sean O'Toole with PropertyRadar and Tarl Yarber. Welcome, Tarl.

Tarl Yarber  01:05

Thanks for having me.

Sean O'Toole  01:07

Yes, awesome. We are good. So we we met at San Francisco, or the Bay Area Real Estate Summit, and I got to listen to you talk. And, you know, I thought it was a great talk. And, you know, just led me to a lot of questions and stuff that I thought it'd be great for the Data Driven Real Estate Podcast that we do here. So thank you for joining us.

Tarl Yarber  01:32

I'm sure it was my talk or my eyes or my voice that intrigued you the most or

Sean O'Toole  01:37

Yeah, no, I was looking deeply into your eyes. No question.

Tarl Yarber  01:42

I know you I know. You talked with my acquisition guy, Nate for a little while. So he, he liked hanging out with you and talking to you. So I don't know if Nate had anything to do with you liking us also, but who knows?

Sean O'Toole  01:50

That was mostly your wife.

Tarl Yarber  01:52

I don't blame you there, right.

Sean O'Toole  01:53

Yeah, she's awesome too. Ya know, you got a great team and I think Serena is that was with you guys too. And yeah, So I don't know how much of that your total team that was, but everybody I met I liked a lot.

Tarl Yarber  02:06

Very cool. Glad to hear how let them know.

Sean O'Toole  02:08

Yeah. Cool. Awesome. Well, thank you again for, for joining us. And, you know, so that talk was on creating processes and procedures, right. And I know you did another one in the Bay Area simplifying and scaling your business. And, you know, just it occurred to me, we hadn't launched that is Driven Real Estate Podcast yet, but I was thinking about it at the time. And we're very focused on the acquisition side of data driven here at PropertyRadar. And it occurred to me that you were very focused on the data driven side of the operations and building and scaling. And, you know, that's an important part of this too. And I thought you'd be a great person to speak to that because I was pretty impressed with what you had to say and the kinds of things you were doing in your business.

Tarl Yarber  02:58

Thank you.

Sean O'Toole  03:00

Um, so we could, you know, we could jump into this a number of different ways. And, you know, but let's first tell us just a little bit about fixated real estate and how long you've been doing this and,

Tarl Yarber  03:14

Yeah, sure. So Fixated Real Estate officially became a business in 2014. Although I got started in real estate in 2005, I bought a seminar on how to wholesale real estate from a telethon. And basically, there's 40,000 people in LA at the time and Donald Trump was a keynote, and so was Robert Kiyosaki, and all those guys I'm like, I gotta go. And I was like 20 years old. So went there had no idea what celadon was about a seminar on wholesaling, real estate assignment contracts, did that for about six straight months pretty hardcore, made 100 grand on one transaction, and then quit because I hated every minute of it. And then get back into it till 2011 through a series of events and if you guys go to bigger pockets and listen to Episode 189 of their podcast. I tell the whole story they're not enough time to get into this but ultimately at the end of the day between 2011 and now we've done a little over 600 fix and flips prob about 646 50 something like that. single family homes. And it's it's been interesting Fixated Real Estate thing got started 2014 because between 2011-2014 had a partnership, that we did a ton of stuff nationwide. And then 2014 past that we've been mostly in the Puget Sound area Seattle, Tacoma market and Portland over here in our neck of the woods the Pacific Northwest. Prior to that, we're about seven states and then we consolidated when we got too fixated only

Sean O'Toole  04:42

So that's funny when I when I first started flipping I had a not was a national but I had a two hour rule. And then like the more deals I did that, like closer that diagram got like, Is this okay? I don't want to deal with this stuff so far away.

Tarl Yarber  04:56

It's a lot of stories what happened between 2011 and 2014 that led to me starting my own business and leaving the partnership, but there's reasons why we're in other states and a lot to get into, but I never want to go back to that again. Let's just put it that way.

Sean O'Toole  05:11

Nice to be local. Yeah, for sure. Yeah. Good, good. Um, and so, you mentioned 650 fix and flips. So just fix and flips? Do you do hold rentals and stuff as well?

Tarl Yarber  05:25

So yes, now, so between so get this at the end of 2017. We were 500 something properties or whatever. And I had zero rentals. So we just flipped that's it. And I had that mentality stuck in my head that like, I make $60 grand when I sell this thing right now as a flip or I'd make $300 a month cash flow on it. Why the hell would I keep it so the but I didn't really understand anything else like it was this transactional base. I know this is not part of this podcast, but I had a wealth mentality issue because I really focused on not being broke and making income versus building any wealth, I didn't really understand the difference internally because I grew up super broke. And so it kind of a whole bunch stuff came to a head at the end of 2017 that woke me up to realize I need to start keeping these properties. Plus also start changing my lifestyle. So that way we can travel have a lot more fun, my wife and I could be together all the time. And we feel we actually scaled back and systemize the hell out of our business at the end of 2017. So that we can travel anytime I could run my entire business from my phone, and then we started keeping properties. We only get about 22 single families now that are rentals that are ours, but they're all for full BRRRR properties by rehab, rehab, rent, refinance, repeat, so they all got high equity. We have very little into them if at anything at all. Very low loan-to-values and they all cash flow. So those are the ones we keep which is they're essentially flips that we decided to keep right so that's Yeah, yeah,

Sean O'Toole  06:53

Yeah, you're right. That is such a hard thing for flippers and you know, you hear that from every flipper, right like it's like I get all this income now or this little tiny bit of income, but yeah, it's a tough transition. So congratulations for making it happen.

Tarl Yarber  07:07

Now you pay less taxes too.

Aaron Norris  07:11

True story. My my father was the same way. He was a flipper for many years. And I think he started very late in his career because he ran into some old timers. And you might have run into some of the old timers that they basically make fun of you if you flip it.

Tarl Yarber  07:25

I didn't, I did not feel like a real investor until 2019. We did our first 1031 exchange. And the and when we did that, I'm like, I get it. Like I actually understand why people do this. Like this makes a lot of sense. Like because I never understood why somebody would buy a five cap or something like that on a property and like, why would anybody do a four or five cap in our area? In Seattle, that's like super normal for commercial property and multifamily. Like why would he do that I get like a 50,000 cap like nobody here doing single family BRRRRs or whatever right at the end. So we did a 1031 into commercial building that was like a five cap. But because of how much you rolled into it and how it all worked out like, this all makes sense. Now I get it. So, but that was the first time I felt like a grown up.

Aaron Norris  08:11

Where are you sourcing all your deals currently?

Tarl Yarber  08:14

Good question. So we, we do most of our deal sourcing through networking with people that work with companies like yours, and they go out there and do all the acquisitions and so forth. And we spent a lot of time getting really good at our disposition and when we actually buy the properties, raising capital, and we do we actually have a lot of experience teaching people how to source deals, but that the main reason why we do that and teach them how to use your guys's company and other companies like yours is so that we can get those deals from them and be the kind like the main source that people want to send deals to. So and they will just pay assignment fees, wholesalers, we don't pay nowadays, we don't buy a lot of properties on market in our neck of the woods because there's far too much competition, even then, in the King and Pierce county markets in Seattle, it's off markets becoming almost more competitive than on a market. So it's interesting, interesting right now, so, to say the least, but that's where we get most of our deals.

Sean O'Toole  09:11

Yeah, certainly a lot a lot of people out there looking for for deals, no questions. We want to drive and dive in, though to the, you know, kind of how you use data on the operational side and how you got to the point where you can do kind of the quantity of deals that you're doing. And, you know, I you have a fairly small team to write doing all these deals.

Tarl Yarber  09:33

Yeah, it's very small team. And we have officially, if you the core team is me, my wife, Serena. And that's it. And the four people now like and the we've had a revolving door on other positions and like project managers, that sort of stuff, and we've just basically systemized our business and I need those types of people anymore. And it also redefined our buy box to where we don't need like when you do a $300,000 remodel is different than $100,000 remodel here. So we just eliminated sort of some of those headaches so that we can have more streamlined processes. And then everybody else has independent contractors, they're, you know, hopefully they're not listening here, but they're all expendable. And the the better get to work. And they, so it's, but it's part of scalability. And one of the challenges I think most people, especially when they're newer to investing, or even when they're not, when they're mid-level investor, they think scaling means only up. And so scaling also means down do so and how quickly can you scale up and down when you need to. And that's something we decided at the end of 2017. Going into 2018. We wanted to have a business we can scale up and down, like on a moment's notice. And just so we can have a better lifestyle too, and also less stress. And in case we wanted to shift our investment strategies or personality, we didn't have this huge overhead and we wanted to have less, basically less stress and more free time in our life. And that's what we did.

Sean O'Toole  10:55

That probably served you really well here a few months ago with COVID.

Tarl Yarber  10:59

Oh, yeah, it was so for us, like nothing changed and stuff, because we're like, oh, well, whatever, that's, I just didn't maybe by that month or whatever. And we did have, you know, not to get into that too much. But we did have about like a two week process. When we had to lock down up here that all of our private investors that we basically raised capital three, we're like, Can we not buy anything for a little bit to see what happens? And, like, no, we gotta buy this one. But that was about two weeks where we're like, Okay, well, everybody wants to chill for a second. And but we were it was okay. For us. It didn't change anything.

Sean O'Toole  11:33

Yeah, and that ability to scale is good. So what, uh, you know, there's so many pieces here to you know, scaling a business and getting it. What things did you focus on when you decided to kind of head that direction and make your business more scalable? Is there a process you took or you know, give us some give us some thoughts about the process you went through to do that?

Tarl Yarber  11:59

So that I love the name of your podcast day to day data driven real estate. Right? That's it all right. Yeah. Okay. The but the even though we don't do a lot of data on the acquisition side as far as like, you know, marketing and you know, scrubbing lists down to where they need to be like you're just getting like that, that one unique buyer that you're looking to sell or that you're looking for. We collect a ton of data on our activity. So pretty much I can tell you since I started getting hardcore on it in 2014, really hardcore, but prior to that, like I can tell you any property right now and should not tell you show you any property I've done. And over the last few years, and so any of them and so you want to see like the pictures we took before and I got them, you want to see the pictures, we took wallets partway through the rehab, we got them right. And they're all organized. You want to see the invoice we paid. You want to see the contract the six bids we got we have them right. So it's we have everything. It's all stored. It's all organized and it's all there. So and we also use Asana as a to do our communication and project management between the team. So we document processes in there too. We document inside our Dropbox we use Smartsheet. But we've so backing up to where we became so systemized is that we already had all this data, and we're constantly looking at what are we doing right? What are we doing wrong? Where do we waste our time? Right? Where do we not waste our time? Where do we get the most reward where we not? And we're finding all these processes? Where do we need people? Where don't we, right? What can we eliminate what causes the biggest headaches, what doesn't? And but that took going through a ton of headaches and a lot of stuff to realize what we don't want. But what I find a lot of people in my part, especially house flippers, they don't collect any of that data, like they don't they don't track their properties. If I say, Hey, I don't know how many properties have you done? I've done 20 great, like, what is what did the eighth one looked like? I don't remember right. So they are, you know, do you even have a photo of it? No, right? It's just they don't have Have any data on it, they have no idea how they got where they're going. So the we would so we've always done that. And because of that, we were able to go through it especially at the end of 2017 and go like okay, what? Let's just take a single family home, right we by flip where do we have the biggest stress? What create What's that? What's that one thing that makes the rest of the project a pain in the ass if we don't do it right, and the and get all the change orders and all the issues and create all the timeline issues everything for the project. And for us..

Sean O'Toole  14:31

Is that like in Asana with like the number of messages going back and forth and that kind of stuff.

Tarl Yarber  14:35

You can see it through there. You can see it through the timelines that we have, like we've done the whole Gantt chart stuff, but like we just don't use them anymore. But the you can see it through our photo histories because we store everything in Dropbox and I would use Google Drive going back in time but we're to, to integrate into Dropbox but the but you can see just from like the way the the way we organize our photos in there you can even before even if we weren't documented thoroughly in Asana. We use BaseCamp a lot too prior to that, the you can see that like, Okay, well, the countertops took us three weeks to get in why, right? Because it's the way it's documented in the photos. Or you can see that on the schedule that was in Basecamp and or Asana with depending on what, when we were doing the changes. So you can see all those things. But when we would, when we would also figuring out just from the pain and hassles and stuff like that, of dealing with contractors dealing with the change orders that would come up and deal with the costs associated with those changes, the holding costs, we'd have all of that documented. We know how much per day we were spending on all our holding costs, like it's, it would be if we had all charted out. But going back in time, sorry, going back on the story. We found that like if you take a traditional single family home after analyzing all this stuff, if we would just spend more time on the planning phase. So we buy the property and we plan it or we know we're going to buy it and we plan it and we just figured out before we demo it before we trash anything out before we get a contractor on site before anything. What do we need to do on this project or have done On this project, so we know everything we're going to do on the project and we can start mapping it out correctly. So that way we could skip all the issues later down the line. Whereas most people in my industry, they just buy a house and they just go, they trashed it out the demo stuff, and all of a sudden, they shouldn't have debited something or like, something got missed. And there's a change order, and there's something hidden, and there's like, it just goes on and on and on. And they have all this chaos. And so we said, screw that we'll know everything about the property before we even touch it, right? Even floor plans, like even if we don't change the floor plan, we still make a floor plan like it's all in there. So we lost a deal that fast. And that saved us so many headaches when we just spend that extra week, right? That will sharpen the axe mentality kind of thing. That extra week or two weeks or three weeks or four weeks right before we even touched it. The other part of the data we found too, when we because we tracked it. Out of all the contractors we had the biggest issues with all the time is always our electrician and our plumber, no matter what, like period. And if you're in this business, you're always trying to save as much money as possible. on construction and rehab, as a house flipper and a lot of house flipper say there's no good contractors. I'm like, Well, no, there's a lot of great contractors, you just won't pay for them and the cheaper guy, the but what we found is that those two subs, we'd have GC for everything else, but we it's about the plumbing electrician. Those two subs cause the biggest issues for us all the time and the longest delays. The most change orders the longest cause they piss off everybody. And it's because we always went for the, for lack of better word, more of the cheaper subs, the plumbers and electricians as we go, Well, if we just based on that data, we saw that we can track it. We had the communications we saw the schedule getting pushed out we saw the GCs leaving the jobs because the plumber pissed them off and like, we saw that and we go, well, that plumber cost us five grand for the job for his bid. Right? But in reality he cost us eight grand or nine grand because extra holding costs and change orders and this and pissed off the GC like or whatever Already electrician to. So what if we just paid seven grand to get better plumber that showed up on time did their stuff and got out. And we did that with that same thing with electrician, we paid a little bit more for both, we found the right ones. And it saved us way more money because we would have because now because we had that data to see those are the two subs screwing everything up, right? So pay more and it actually saved us more, way more over the long run. And that changed our entire It was so weird. But those two things from 2018 to 2019 changed our entire construction business big time, just from those two subs and just knowing that data to know that that was causing issue as long as a long winded story, but I just kept going sorry.

Sean O'Toole  18:39

No, no, it's a great example. Yeah, I found that true in a lot of things, right? Like even attorneys like my favorite attorney is ridiculously expensive. He's four times what everybody else charges and he finishes everything in one 10th the time and saves me so much money

Tarl Yarber  18:57

Exactly. Like our electrician, he says he's going to be on on Monday, rewires the whole house by Tuesday. Right? Plumbing, same thing. We replumbed the whole house within 48 hours typically, right? Where's my older, older plumber, which he don't, he doesn't listen to stuff. He's still a friend. But like, he take two to three weeks easily to do the same thing. And then like, Oh, I got to come back because I got this other job and like this, and we're like, we got shit going on, like, come back, right? And then it just doesn't matter. But it's paying that extra. It's saved us so much more over the long run. And we wouldn't have known that if we weren't tracking it.

Sean O'Toole  19:35

Okay, so lots of data going into driving operations and operational efficiency, right, like, around the the contractors, and and that side. So you mentioned some tools, right. Sounds like Asana is your primary communication kind of task management tool, right? Yes. You're keeping all your photos in Dropbox.

Tarl Yarber  19:58

Yeah, so Dropbox, all files stored there. Asana, all communication and task management. And then we use Smartsheet as well. Okay, so in Smartsheet, where we use, that's where we store all of our templates did things like our scope of works, or accounting archive sheets that we tracked for every property, because not everybody needs access to my QuickBooks. So we track it all through Smartsheet instead, which is then connected into the scope of work. And then we also tracker and tie all of our finished packets are built through Smartsheet as well, which is kind of another way we systemized our business is we, we can right now go into Smartsheet. Open up that file, every finished we've ever done that we like is organized in three different templated finished packets. And we'd go in there and just check a box on each one we want. And then click Print as a PDF and only the checkbox ones come out and it has a signing part for the contract or the sign at the end of it. So the it's it's systemized big time

Sean O'Toole  20:57

for our folks who are listening and maybe haven't heard of Smartsheet It's kind of like Excel or Google Sheets, except a little bit on steroids, right? You can also kind of use it as a database, you can kind of use it in all these different, different ways. And it's pretty powerful little tool for sure.

Tarl Yarber  21:14

I want to be very clear, I say this everybody, because they're like, oh, I'll get Smartsheet. Like, you're gonna buy, you're gonna open it and you'd be like, this is just Excel. This sucks. Why did I spend so much money on this? And you have to build it, or you have to pay for somebody else to build it. So it's, it's, and then when I get it, right, it's frickin awesome. But have you guys thought about building and selling your Smartsheet templates? Is that a business said templates for smart sheets. I have never looked it up. But I definitely have had it on our to do list to look it up. Yeah,

Sean O'Toole  21:42

You know, cuz even for websites, there's templates for all these other things. There's templates. And I know a lot of folks use what is it a Podio...

Tarl Yarber  21:49

You can license out like you can license Podio out, you can get it yet to get Citrix part of it and a few other things and then you can actually license out your Podio template.

Sean O'Toole  21:58

And I'm curious now if Smartsheet does that, there's a there's an opportunity there I think.

Tarl Yarber  22:02

White label it in some way and then sell it.

Aaron Norris  22:06

Do all contractors have to sort of plug into the technology that you're you're using? So do they use Asana?

Tarl Yarber  22:14

So there's two versions of the story. One was the past, right? In the past. Yes. And in the past, when we were doing higher volume in multiple states during the wild and wacky REO days, between for us mainly 2011-2014 was the most of our Aria we ever did, and bleeding into 2015. But the during that time period, we used a program called BuilderTrend. And that's because our, it doesn't matter why but like that, but basically, we were, we were part of another business that worked with Fannie Mae for construction purposes, that we use builder Tran to track all the subs and contractors. So we just bled that over into our construction and it was easy for contractors to use BuilderTrend at that point, but it's expensive now unless you're doing high volume and you really are running the construction, BuilderTrend's not worth it. So that but it was simple. It was simple for the subs to use, they knew how to use it. I am terrified in my neck of the woods. I know my contractors are they're all great guys, some of them would be able to use our Asana very well, some would absolutely mess it up. So we're like, let's just not include them in any of that stuff and just have some checks and balances that they have to uphold on there and that they have to turn in and they have to they have to follow and more simplified version of what they need to do on their end. So that way, we can track it on our side.

Aaron Norris  23:33

Okay.

Tarl Yarber  23:34

Yeah, but I think it would work with a lot of the more business savvy contractors and not to make fun of Washington State contractors, but..

Aaron Norris  23:44

You know, I think that's definitely difficult because if they're doing other jobs, it's not just yours. So everybody has their own process and their own programs. So I was just curious.

Tarl Yarber  23:53

Yeah, they were doing I mean, if they're just doing one job for us, then like, that's just not wait that's a waste of their time. They'll go somewhere else but if they when we were doing the REO, like big time REO, stuff between 2011 and 2014, we'd have contractors that 20, 30, 40 projects like they were their business, right? So therefore, they would plug into our system. And here in the Seattle market, there's so much competition for construction and contractors and stuff that, you know, if you're not, unless you can feed them 10 or 15 projects at a time, then they're not going to plug into your system. They don't need to so...

Aaron Norris  24:29

Do the contractors typically like that you're so organized, is that a tipping point for them to select you as somebody to work with?

Tarl Yarber  24:35

I like to think yes, and I'm pretty confident That's it? Yes. The but it goes both ways. And it's some contractors don't like that, because they like to be the one in charge of the project and how to teach you how to do it and charge you what they want to charge you and they don't like that, you know what it cost them per square foot to do XYZ thing. Right? So that's, so there's so there's a lot of contractors that don't like that because they'd rather just tell you that it costs like $800 a square to replace a roof when you know it costs them, their cost is like $140 or whatever. So, like, they don't like that, you know that sometimes. But a lot of the contractors we work with love it because they just want to work, right that typically our best contractors we found through data, right is also they have, they have bags on like they're able to work on themselves. They have a couple people on their team, but they really don't like to market themselves. They don't have that business side to sit there and go put out their own marketing. And they would love to work with a company like ours that says, Here's your stuff, here's your scope, here's your here's your finish sheet. Here's literally the entire project. You just follow ABC, ABC, right? Here's your draw schedule. And here's your timeline for when it completed, signed the contract, right sign all our stuff, you don't need to worry about that crap, right? And they go like cool, and then they just go do it and they get another house afterwards. And they don't have to market themselves. Right. That's our favorite contractor there. That's we're their favorite clients. But that's not every contractor.

Sean O'Toole  25:56

That's so true, right? I mean, there's so many these folks that got into the business because they love doing that work. And they don't love marketing, they don't love sales, they don't even know how to do it right and so that repeat business where they don't have to do that piece is pretty attractive

Tarl Yarber  26:12

And you're out of California so like the California State contractor laws are very very different than Washington State. So California you kind of have to have a business and no business to have a contractor like contractor's license right so because it's a lot of work to get it in Washington it's $115 bucks a background check and 30 minutes waiting in line with no testing whatsoever like at all. You literally just fill out a form and wait and then you walk out able to build someone's house so the that's that's our licensing up here that's that's why...

Sean O'Toole  26:41

You're not joking?

Tarl Yarber  26:42

Not joking. Do you want to get I don't always want to go down this rabbit hole but labor and industry here's like a racket. I think they're like the mafia but the for they straight up, they had a law like so labor industries here had like a it's not a law is their regulation, whatever you want to call it, that if you flip houses, you had to had a general contractor's license in the state of Washington. And the now they only recently changed a couple years ago to where you can, okay, you can flip houses without a GC license, but you have to hire a GC. And you can't sub anybody out. Unless you are a GC. Right? And so now how do you become a GC. Well, what I tell you? Pay $115 bucks application fee, now you have to have your your license and your so you have to have your insurance and your bond, right? So you're basically actually technically paying about 1200 dollars total for an annual insurance, your bond and your application fee. And then 30 minutes of your time and an LNI office and you walk out ready to build people subdivisions. And so...

Sean O'Toole  27:35

I think in California, it's two years apprenticeship or a college degree in a related you know, field like construction management or something like so that's a big difference.

Tarl Yarber  27:47

I hear it all.

Aaron Norris  27:50

You mentioned something about you find your contractors using data. What did you mean by that?

Tarl Yarber  27:55

So for a while backing up on it, I don't know if I said that. Exactly. The but for As it's I don't know how I said data but that I've I'm able to find out...

Sean O'Toole  28:05

Who's good and who's not

Tarl Yarber  28:06

Who's good, who's not there you go, from our on our stuff from the data, the but not from sourcing them

Aaron Norris  28:11

Okay

Tarl Yarber  28:12

So the sourcing of it just comes from, you know, referrals, talking to other people, you know, that kind of stuff. And I guess that's data, referral points. But on the other side, we do have every single bid we've ever received from anyone is stored. For the last, however long I've been in business, and that also allows us to take that data to start averaging out what the cost of things are. And that's something that we were pretty big onto because I didn't as a newer investor, that had to get learn how to do construction. I didn't know anything about what it should cost and per markets different especially when you're multiple markets. And so if somebody tell if somebody tells me cost $2,000 bucks to replace the flooring, well, how do I know that it's, I'm getting a great deal or not a great deal, right? And then you do enough floors and you collect enough bids and you get enough contractors out there. You start to realize okay, it's This is $2,000 bucks for a great deal, right? And I'm on track for that. So what's the average cost per square footage, then? It would they're charged me, okay, they charged me two bucks per square foot for this floor. And that's the average cost of this area for a, you know, decent contractor to do this for me. So let's put that in our scope of work. So we can know now going forward for future houses that is two bucks a square foot for this type of flooring for these houses. And we could confidently bet on that before we buy the house. So that's the type of data we definitely track with contractors all the time.

Sean O'Toole  29:28

You talked a lot about contractors. Let's talk about I want to talk both about you know how you've used data on the acquisition side in terms of maybe tracking your wholesalers and then on the other side on the sales side to and if you're using it, you know where else you're using in the process. So you've got you're building these relationships primarily with wholesalers bringing you deals are you tracking how each wholesaler steals kind of perform or that tendency or zero? Just what are you doing to Like validate the properties that are bringing you figure out what to pay them what a fair fee is that kind of side.

Tarl Yarber  30:08

So that I mean it's, we don't to answer directly on one side we don't like track saying, Okay this wholesaler brought eight deals and they've all performed this way. Like we haven't gone that far with the wholesalers because once for me it's been like if I agree to buy it, and something goes wrong, it's not the wholesalers fault, it's my fault. And so the so that's why we don't really care like which wholesaler brought it to us because we have our own due diligence our own stuff that we got to do and once we buy it then it's on us. Right? At that ...

Sean O'Toole  30:35

Everybody bring you stuff that's cool. Not gonna worry about that side now and about the data and looking at the properties before you you know, before you did make that decision and how quickly are you able to do that?

Tarl Yarber  30:48

So it used to be slow, got faster, but what we found is if your buy box is really big, I think it takes longer. The but if you really narrow down your buy box to what you are going to focus on it becomes a lot faster because you can say no to everything really fast. And so I've felt that we used to have a bigger buy box like, which was a pretty general term of 15% plus cash on cash in King Pierce counties, and Portland. And as long as I wasn't doing an addition or a pop top, then we would buy it that just basically left it open to interpretation for everything else.

Sean O'Toole  31:27

You use the term buy box a lot, but just for folks maybe who are tuning in for the first time, right, like

Tarl Yarber  31:32

My buying criteria.

Sean O'Toole  31:34

Alright, so buying Criteria, right? And is it mostly around you know, the the return on investment, or is it also like square footage or location or number of stories or so, price range?

Tarl Yarber  31:47

When we're doing a big portion of our volume, right, it was typically just ROI, right return on investment. And we had a few other categories of geography and we also had a few things of mainly like we won't do anything that's going to require like a six month permitting process or something. So, so you're leaning towards like, so I wouldn't be able to do a pop top which is, you know, take it up another story. And I wouldn't do anything that increased the footprint of the property. So by doing additions on the sides because those took longer to get permits, but if something had an unfinished basement or unfinished attic space, that's not adding that's not adding footprint and that's not doing the pop up so therefore we would do it so but if it fits that single family 15% plus cash on cash in those geographic areas and wasn't a pop up or additional square or sorry, additional footprint that left it open for everything else. So the no matter what, and but what that also did is it made us have to spend a lot more time we didn't have any limit on remodel cost or anything like that. So it made us spend a lot more time having to figure out okay, well can we handle this? Can we not like what's the construction? Can we find everything detailed about it? Okay, this is a $300,000 project. Do we have time for that? Like, this so versus We changed all of that dramatically for us. And we also bought a lot of properties because that's a big, big buy box like we were able to buy a lot in those in those numbers. But it made it to where we weren't focused on any one thing or any one location. So we were able to just like go. Which also meant we weren't specialized in any one place, either. We'd have investors in the core areas of Seattle, which would be like, it doesn't matter if the core is a Seattle just say that. So the where they were, they would buy a house that I'd pass on. Because I'm like, I don't know if that would work out for us, but they'd buy it because they knew that that those couple city blocks super super well, right. They knew that data of that area, they knew a Starbucks is getting, you know, built right next to it, or they knew that a metropolitan market, which is a fancy place here is getting done down the street or that the zoning just changed recently and that it's worth more because of that. I didn't know that because we weren't tracking that specific neighborhood. We're tracking large geographic areas. So so the answer your question in a really really long way. Back in the day, no. So we would just had that big, huge broad brushstrokes and by, and it always worked out. Now we're more specific. And so now we're now we want a more specific deal, more purpose, more specific rehab, we want multiple exit strategies. We're looking for more of an infill situation inside cities when we can. How can we develop 2, 3, 4 potential investment strategies out of this one deal? How can we get more focused, and that part of that is because we don't want as much work. And we just want to be higher margin, less work versus back in the day, it was lower margin more work. So because we've just do more deals, but

Sean O'Toole  34:39

And part of how you got there was looking at all those past deals, and figuring out where the where the best returns were with the least amount of work.

Tarl Yarber  34:49

Yes.

Sean O'Toole  34:49

And then kind of focusing on that. So kind of data driven there?

Tarl Yarber  34:52

Very data driven. And because if you want to add, so you, there's not just the data of what you get from these properties. It's also the data what you're getting internally in your business, so even on your financial data, like what does your financial data look like? And in 2016, we did a lot of properties for Seattle, right? If you do more than 10, in a year in Seattle, you're like, top five, just so everybody's clear. But so in, in 2016, I think we did close to 40 in the area. 38, I think was the number 2016, something like that. And in 2017, we did roughly the same amount of numbers here, but we did, we did more, bigger projects, bigger potential reward, higher margins, all this kind of stuff. But we also did and we also subbed everything out with contractors, we brought everything in house, I had higher overhead, I hired more people. So at the end of the day, my business's revenue was a lot higher, I think was almost like 40% higher than it was in 2016. Right revenue wise. However, I personally made the same amount of money between the two years

Sean O'Toole  35:56

And you worked a lot harder for it.

Tarl Yarber  35:58

I worked a lot harder with a lot more stress a lot more overhead and a lot more bullshit for like, like, for managing some of this stuff and a lot more stuff way more stress. And that was one of those triggers to if I didn't have that financial data and I wasn't tracking it like thoroughly and tracking all our properties, what the average time completion the average rehab costs, the average holding costs, the you know, how much effort how many staff were involved in those projects, like all that kind of stuff, how many contractors we had going back and forth everything going between comparing the two then I might have thought Oh, this is working out let's keep going right? But it wasn't it wasn't at all right. And so that was another switch at the end of 2017 that gave us that you know, desire and push to start changing things dramatically in our business so we can actually have a better quality of life.

Sean O'Toole  36:48

How did you have that realization? Did you read like the you know, Tim Ferriss book or something or what led you to that epiphany that that, you know, this was happening?

Tarl Yarber  36:57

So I'm a hardcore personal development guy. Right I read a lot of I don't read real estate books at all. All my books if you know see if I turned my bookshelf like which is facing I'm looking at it right now. The it's all leadership, personal development and some more fun books but most of its leadership and personal moment. So, Tim Ferriss' Four Hour Work Week is definitely you know, there's three books that I recommend to people for my system, which is Four Hour Work Week, the Checklist Manifesto by Atul Gawande, and then also The One Thing by Gary Keller, Gary Keller, so those are three books that like I'm like, you put those three together, that's what I do. That's what we focus on. But the realization clicked was towards the end of 2017. We were doing we did ton of projects, we had a bunch of delays, we had a lot of stress, we had a lot of internal costs we were paying for literally like nails for a contractor. When in 2015 I got super pissed off because we bought light bulbs one time and the like, why are we buying light bulbs like that is dumb. And the because we didn't even touch any materials whatsoever that all of a sudden fast forward two years later, we're literally has a contractor at Home Depot calling my project manager to buy nails, right? I'm like, how did it get to this right? And the so it's so we had all that stress going on we had way more costs way more. We had accountants we had all this I'm sorry bookkeepers, we had multiple project managers, a bunch of acquisition stuff going on. And it's, we weren't making enough money, right? And I had to sell, that's where I remember now, I had, I was finally gonna start keeping some of these those rentals. And one of them right was a super cool property in Tacoma that was ready to also either be rented out or sold. We had so much overhead going on and so much money out from all these construction projects that we would make about $78 grand or $80 grand if we sold the single family flip, right? And but I wanted to keep it as a rental facility cash flowed like $600 bucks a month. But at that exact moment, I'm like, we need to sell this house so we can keep feeding the machine of our operations just from a timing of a cash crunch at this point, like for this like little 45 day window of time, right? And I was so pissed that we had to sell that property in order to keep the Machine moving on top of my project manager, I found that at that time was stealing from us and embezzling. He was getting bids from a contractor for $2k and putting it in for $2,800 or whatever and then keeping the difference and things like that started happening.

Sean O'Toole  39:13

So common in this business I don't know a single investor that's been around for a while it doesn't have that story.

Tarl Yarber  39:18

Yeah. And it's also lead towards my wife and I weren't spending time together, right? We really wanted to be together. She worked at WT, which we weren't working together at the time. I had my business she had hers. And the it was like, there's a bunch of other stuff. But then it led to a buddy of mine Thatch Nguyen who's Awesome, awesome dude up here. He said. He had read the latest civilization in his business about a decade ago, which is like, most people design their business and they build their entire life around their business. And whatever time they have left, they put they revolve it around that right? For their lifestyle. It's like why don't you just design the lifestyle you want like and how you want to live your life with you and your family, and then make your business molded to fit that, right? At that exact he said that the right timing right situation, right circumstances and I'm like, why the hell are we doing that that sounds so easy, like the

Aaron Norris  40:09

What?

Tarl Yarber  40:09

And so I rush home talk to my wife, I'm like, this weekend, we're gonna put your paper out and we're gonna draw out what we really want in our life to be like, and we just started saying, Okay, well, we want to make our money this way we want to run our business that way we want to contribute this much to charity, we want to, we just started doing it, what do we not want to do? And we started cutting out saying, I don't want to do these type of projects anymore. I don't want to be in these geographic locations. I don't want this type of overhead. I don't want this kind of staff. I personally don't want to do these things in my business at all. So I started doing the the not-to list like the not list. And we also part of that data because we found out these type of projects suck, right? So for us because our systems didn't work for him. So let's go back to what we're good at. And we started mapping that allowed spent a few weeks doing that. My wife quit her job came, you know, basically work with us, and the and we've been together every single day since then, and it's what we'd love to do. And it's in our whole business changed, like dramatically, but it came to that switch with a lot of things going wrong to lead to something right.

Sean O'Toole  41:07

Your t-shirt's a little cut off, but that seems like a Yeah, there you go. Right like discipline equals freedom. Love it. I love it. I was getting close on time. And I did want to talk about the sell side too. But maybe we'll do that next time. You do you you give back a lot. You do a lot of speaking. You also put on an event in the Seattle area that's getting pretty big. And maybe tell us a little bit about that.

Tarl Yarber  41:39

Yeah, so now it's worldwide.

Sean O'Toole  41:41

Yeah, right.

Tarl Yarber  41:42

Sure. So the every in 2017 to 2016 December 2016. We decided to do our first meetup. Right? And I was like, we should just go meet more people. I hate by the way I did. We never talked about this but I hate real estate. I don't like real estate that much. The I and I had a business go tell me years ago, the reason why I'm good at real estate is because I don't like real estate. So I figure out systems and processes so I don't have to do it. Right. So that's, I mean, a lot of sense to me at the time, because I've only done real estate for money. I've never done it for any other reason. That's it. And the so now it's like. So anyways, back, but I love helping people figure stuff out. I love networking. I love meeting people. And so I'm like, let's do a meetup so we can meet more people. And so we did that December 2016. We had 110 people show up with two weeks notice. And I'm like, I guess people want to do a meetup. Right. And then the next one, we had 220 people show up in January, and then it just kept going and going and going. And then we're like, why don't we do an event in Seattle? Nobody runs a conference in Seattle for real estate investors ever. You always have to fly to Arizona or somewhere in California or on the east coast. And so let's do one right, we called it the PNW Big Badass Real Estate Wealth Expo. And the our first one was 2017 with 510 people there. Our second one was 2018 was six almost 700 people there and the and then our last one 2019 we had 1,000 people that one. We raised between the entire advance we've raised $350,000 for charity so far, and for specifically Travis Mills Foundation. This year, we were on track for about 1,500 people based off of because it's becoming it's now the largest and most successful real estate conference on the West Coast. And the for real estate investors specifically. And the so we had all this great stuff going I was like massive networking events like parties like 70 sponsor exhibitor booths, like full on exhibiting thing this whole, you know, you know, cold shows up and makes it to where we lock down the the US, right? And we can't do the in person event. So it's now switched over to virtual only. We weren't going to do it unless we can facilitate networking. So networking is the main reason why people do go to conferences from my experience, and virtual events kind of suck because you're just doing a webinar for the most part. So we solve that with some software and so we paid a lot of money for it. To where now any attendee that joins this can network just like we're doing right now on Zoom. They can set up their own community boards, their own networking sessions, they can have as many people as they want to part of it. Same thing with exhibitors, so we're able to do these at least face to fit, you could FaceTime by click a button any attendee that wants to with you, right? You can't just like blast people. And it's, it's all designed so people kind of have these facilitated networking's that we're going to help out with. Plus 40 plus speakers. BiggerPockets as a part of it. Now they're an affiliate with it. So we expect somewhere between 3,000 to 5,000 people coming up September 18 and 19th. Most of us right not to not Seattle, because it's pretty wide berth now, and it's gonna be a lot of fun. So that's September 18-19, you can go to virtualwealthexpo.com or you can go to PNWrealestateexpo.com it takes you to the same place.

Sean O'Toole  44:47

Okay? And wholesalers in the Seattle area that want to sell you a deal that FixatedonRealEstate.com.

Tarl Yarber  44:54

Fixatedonrealestate.com, the that's our networking Meetup group and stuff for that but you can also So just go to my Instagram at Tarl, at Tara Yarber. I'm the only one there with that name. Or find me on BiggerPockets write to me email there too. And you'll get a hold of me sooner or later.

Sean O'Toole  45:10

It's great to have a unique name. You see that in public records a lot, right? Like a unique name is pretty easy to find and non

Tarl Yarber  45:18

It's good and bad actually.

Sean O'Toole  45:20

Yeah, for sure. For sure.

Tarl Yarber  45:22

You can ever do anything wrong, that's for sure. Find me.

Aaron Norris  45:28

All right, Tarl.

Sean O'Toole  45:29

Any other questions for you?

Aaron Norris  45:31

One other one just because it's marketing related. When you decided to hone in your buy box did your wholesalers follow suit and change their marketing box as one of the biggest people that they would flip their houses to?

Tarl Yarber  45:43

Some some did because some already had like large businesses so they didn't care. They just would adjust like okay cool Tarl in this buy box now so we just send him these type of deals, right? And and then other ones, the ones that were like feeding us the most they started trying to adjust for that as much as possible. But in reality in our neck of the woods in our market, there's so many people that will just buy the property. And that if we don't have those relationships, then we won't get the deal. Because the because they can just email it out to a bunch of other people like me, that will just buy it. Right. So the so we don't, back in the day, I was more spoiled, right? Nowadays, I can't be spoiled, we have to continue to foster those relationships and build people up. And newer investors, newer wholesalers tend to like us a lot, because we can show them when they send us a bad deal. We'll show and tell them why. Right so they can get better at it, and so forth. But it also typically, they know if they're gonna send it to us, we are going to close it, we'd say we're going to close and they don't have to worry about that portion of it. But you know, there's a lot of competition out these days. And that's okay.

Aaron Norris  46:49

Indeed. Nope, that's all I've got. I really appreciate your time.

Tarl Yarber  46:52

Appreciate your time.

Sean O'Toole  46:53

Yeah. Thanks for joining us here and really ask keep tuning in to the Data Driven Real Estate Podcast. Appreciate you listening in. And good luck with your event.

Tarl Yarber  47:03

Thank you.

Aaron Norris  47:04

Thank you for listening to the Data Driven Real Estate Podcast. You can find show notes and links to some of the resources mentioned in the show at datadrivenrealestate.com. Click that join the community, and you'll be forwarded to the PropertyRadar community where you can ask questions about the current show and even see upcoming guests and ask questions there. We'd love to engage with you in the community. So check it out. Please don't forget to like favorite, subscribe, and share on your favorite platform where you're listening to the show. It helps us out a great deal. Thanks for listening, and we'll see you next week.