How to debrief like a fighter pilot, and apply it to real estate. When I was in the fighter squadron, my weapons officer always used to say, “All of the learning occurs in the debrief.” How do you get better at investing in real estate or anything you do in life? Similar to high level sports athletes reviewing tapes, the key to success is the debrief. You can apply it to anything, but today I’m going to talk about how to debrief to get better at flipping houses.
First, you need to come up with quantifiable objectives that you want to accomplish while flipping a house. You need quantifiable objectives so that you have something to debrief towards after the flip. The objectives cannot be ambiguous. For example, let’s use Time, Accurate rehab cost, and Profit. Now, those are not quantifiable so let’s make them quantifiable. 1) We want to flip this house within 6 months. Time is money so the longer we take, the less money we will make since likely we will be paying interest on some kind of loan. 2)We think it will cost X dollars plus or minus 10% to rehab. If we spend much over our rehab cost, we will reduce our profit and if we over-estimate our rehab cost, we will lose deals because we will not be able to go as high on our purchase price. 3) We want to make at least Y profit. Given that profit is sales price minus purchase price minus rehab costs, profit incorporates all aspects of the deal. A business will not survive if it’s not making a profit. We can add some sub-objectives under each main objective which we think are critical to accomplishing each main objective. We now have quantifiable objectives. Let’s go flip this house!
We close on the house and now it’s time for the debrief. It took us 9 months to flip the house instead of six. We failed at objective one. Why? Once we bought the house, someone came up to us to buy the house. Instead of flipping the house, we decided to wholesale it to that buyer. Wholesaling is buying a house which needs to be fixed up and instead of fixing it up, you sell it at a small profit to someone else to fix up. At the agreed upon price, we would make about the same as if we would if we had spent the time and money to fix it up and we would make that money in a significantly shorter period of time, win-win for everyone right? The problem is after waiting 40 days, the buyer did not qualify for financing, so the deal fell through. From our perspective we wasted 40 days. This is an execution error. Now here’s the key to the debrief and learning. We need to determine if we had a bad plan or did we not execute our plan? In this case, our plan was to flip the house in six months, we did not have a plan to wholesale. We did not execute our plan. Next time, if we just flipped the house instead of trying to wholesale it, we would have saved 40 days on our timeline and been closer to our 6 month objective to flip our house. This is the critical part, if we would have just executed our plan and flipped our house, instead of trying to wholesale, we might have been able to meet our Time objective. That’s the learning and how you get better, stronger, faster. Now can we incorporate wholesaling into our plan? Absolutely, more on that at the end.
Additionally, we had several contractors who took longer than expected and who did sub-par performance which needed to be corrected. Execution error. The plan was sound. We were unable to get the contractors to execute the plan. Get new contractors to execute the plan and it will allow us to meet our Time objective. Next was a title company delay. The title company took longer than expected and we ended up owning the house for two weeks before they communicated to us that it was ours. Execution error by our title company. Get a new title company. Another issue where two weeks was wasted on our timeline which contributed to preventing us from meeting our 6 month Time objective. We are now using a different local title company that we have a pre-existing relationship with. They are phenomenal at communicating with us and it is likely that we will get this house quicker than the last helping us better meet our time objective.
Now I have shown at least three execution errors here in the Time objective. Anytime there are multiple reasons why an objective is not met, there is a lesson or two to be learned there. I was always forced to complete the following sentence at the end of a debrief, “The next time I flip a house I will…” So, to apply to our above example, “The next time I flip a house I will only allow cash offers with proof of funds to a wholesale a property that I intend to flip.” This is a Lesson Learned and we will apply this lesson learned to our plan. Additionally, “The next time I hire a contractor I will use established contractors who have a history of quality work and can complete a project in an expeditious time frame even if it costs a little more so that I can meet my time objective, assuming it still fits into my rehab budget.” Sometimes in life the difference between success and failure can be a very fine line. Knowing how to debrief and pull out the lessons learned is key and will allow you to progress towards greatness. Feel free to reach out to me if you would like to discuss how to debrief more.
Vincent Cyran
LionHeartGroup, LLC