How much profit should I make? (Minisode)

Welcome ladies to The Real Estate Investor Show, providing inspiration, strategies, and insight to empower women investors to live balanced and financially free lives. Now here are your co-hosts, Liz and Andresa Guidelli. Welcome back ladies.

This is Liz and this is Andresa.

Welcome back to The Real Estate Investor Show, minisode edition, right? I'm Jessa, where 10 minutes less, we get right to it, sharing content around investing, business, self-care, something that we're learning or have learned, and we are sharing it with you. So we like to kind of get to it quickly on our minisodes 'cause we know you ladies and men who listen to our show just, just have that limited time. So we wanna be respectful of that always.

And you know what, a lot of people that when they post on our Facebook group, group, we don't have the time to really like expand by, you know, typing back. So this specific mini-sode, it's about a question that we got at our Facebook group where the person was asking, how much profit should I count on? Should I make it in every single deal? And I gave my favorite answer, it depends. But here I want to break it down for you, my thought process and why I I take different directions depending on where I am at.

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All right, Liz, so we're going to talk about profit, which is very important, right? But here's the thing. When people ask me that question, right, how much profit should I make? I always think about it. Well, my answer 12 years ago when I got started and my answer now, it's completely different. In the past, I needed to get experience and I needed to get deals under my belt. Not that that's not important now to me, but it's not primary, it's secondary, right? I protect my time much more now than I did it in the past. And I wanted to learn, so I needed the deals. So I was open to take much more profit in the past in exchange for learning. And it was really strategic. I remember one of the deals I made under $8,000, but I learned a lot. Not what— let me just pause one second. When I say I learned a lot, it doesn't mean that I lost a lot of money or made a ton of mistakes. No, it means that my partner took a bigger chunk. Of the profit. That's what it means. We made a ton of money there. I made $7,000 because of the agreement that we had back then. And my time into it was more than what I would like to do it now. And the lessons that I learned, I learned how to rehab a burnt house. That's a lot. That's a lot to learn than just like a little, you know, TLC. So the first thing when I ask you, where are you at right now? In your career, in your real estate investment, because you might look at profit really different than you had in the past. So I've got questions, Liz, for people to ask themselves. But before I get to those questions, the biggest lesson that I've learned throughout my years, and you can share yours, Liz, is that I didn't have the word profit as a line item on my spreadsheet. It was really like at the end, what it was left, that's what it was. But I encourage all the women that when you are underwriting and running your numbers, that you add that line item way above, not the last one, because that is your number, that is your worth. What are you— how you're calculating how much time, You are worth that, and your experience is worth that. There's a lot that you, you can put on, but that was my, one of my biggest lessons that I didn't put that line item. It was just a quote unquote, an after, afterwards thought process that, yeah, was there.

I think the lesson that's taken me the longest to learn that I'm just beginning to learn is that profit isn't for me always where I'm, I'm 100% running it to get the most profit. In other words, What effort and energy and time can I, how can that be decreased even at the level of 10%, 20%? So I can, right, we can own more different, you know, lines of businesses and investment properties and not take the lion's share of the profit, but you're taking the, you're kind of maximizing your time. So I don't think I learned that until recently because it always like, okay, how do we get the most profit? And then you start to look at your time and energy and it's like, okay, well I also have to, 100% do all of that too. And so I think that was the learning though. And I think so much of it is where you are when you get involved in investing. You know, we were younger and we did it all right because we learned to do it all. But as you get older, you're like, okay, how do I not do that anymore?

I just don't want to.

I just don't want to. But wouldn't it be amazing, right? As we grow InvestHer and, you know, and, and grow our footprint, we're gonna serve a lot more women by, by right strategically partnering with different businesses and, and, and revenue streams so we can be of more service. So that's exciting to me. And I think that's the biggest learn, learn lesson I've had around quote unquote profit.

Absolutely. Let's break it down, right? Let's get to the nitty gritty here of questions I would recommend you to take in consideration, right? And we have not a long time to break it down. So those will be my first questions to ask you, right? After I say it depends. And this is what I mean by that. The first question is, am I going to do this project solo or with partner, right? If I am doing a project solo, my, my profit, my desire for profit is different than if I am doing with partners, because with partners, I am leveraging my time, my experience, my resources, and I am not taking a lot of my time. So when I'm going solo, it's 100% of my time. When I am going with partners, it's not 100% of my time. Therefore, I am okay taking less profit there. And let's continue the questions here. How far is this project from my house? Is it in my backyard? Is it 30 minutes, 40 minutes, an hour and a half? Is that out of state? It all depends, right? For smaller projects, I'm sorry, but I don't want to drive. I want to be super close to my house because if I am keeping an eye on it once a week or twice a week, whatever that is, I just don't want to drive a lot. In the past, I drove whatever. Now I just don't. So this is like my you factor. I don't want to do that. For out-of-state, Liz and I always talked about it, right? We're looking to areas where it's not too far from the airport that we can get in and can get out. This is another factor that is important. Imagine if we get something that, okay, we get into the airport and then it's like a 3-hour drive by car. I just don't want it. I just don't, don't, don't ask me for it. I'm not going, right? So that is also you take that in consideration. Far from my house is just a no. I don't care about the profit. You understand? It's just not, it's already a no. The third question is, will I need a new general contractor or my current general contractor or crews can handle it? It's also different because I can mitigate my risk much more if I have a general contractor that I don't need to go through basically anything because the person already knows the scope of work, the finishes, and how I do business. It's less time, less of my time managing it, and therefore I can, I'm okay taking a less profit based on the amount of time that I am putting into that. And I am mitigating my risk because I've worked with this person before. So I know that the final product is going to have the quality that I'm expecting. The fourth question is, have I done this type of project before or not? So think about it, right? If you are doing single families and then you're going to do new construction, Liz, I want to see a higher profit in projects that I'm doing it first. Higher profit, meaning either you put a higher profit or you put a big buffer over there. 'Cause I want to have cushion there because if I make mistakes, which I will, if I'm doing something new, I can reduce that. You either create a bigger profit for you or you put another line item, which is a buffer for mistakes. Your GC, nobody's going to know about the line item. You're not going to be on our budget. It's just there for your underwriting as a reserve because new projects, new general contractors, new areas, new states. That's the unknown. You couldn't even name that unknown. The unknown, the unforeseen line item, right? And sometimes you'll go 10% and 20% there because it's just new areas that you're navigating. The other thing is like, what is the estimated construction cost? Let me tell you, I keep hearing a lot of people say, oh, It's usually $30,000, my profit. And then I say, wait a minute, are you talking about a single-family house that you pay $300,000, $400,000, $100,000 in construction? Is that more or less of where you are at? Or you're seeing $30,000 out of a new construction, brand new house that it was $800,000 overall ARV. It's different. So it's not based on that number. How much time did you put into it? What is the construction cost? $30,000 in a, let's say, $100,000 project looks great. $30,000 on a $800,000, $1.5 million project looks horrible. So you gotta take in consideration also what is your construction cost, your ARV, your acquisition cost, holding cost, all of that. Please make sure It is proportional. And I don't want a woman to feel bad about making money. If you were able to make money on that, that's another topic for another time, but I want to make sure that you're fine. You keep going. The last thing, Liz, is what type of lending am I using? Because my profit will vary if I'm using my own cash, conventional loan, hard money loans. So all of that you've got to manage as you are preparing and underwriting. So think about like pluses and minuses. So there's not a single recipe to determine your profit as per what I just said, your time, your experience, what you're bringing to the table, your lending, construction, general contractor, all of that. And what do you feel comfortable with, right? So it's all a mix. If you take in consideration all those 6 topics, You will find something that works for you. And the good news is you try it, and if it doesn't work, you adjust the next deal. That's the key.

I love it. I love it. And the only thing I'd add to that too is how much is it worth to you to get the experience? Because sometimes profit's gonna become secondary over the experience of the opportunity. And I, and I think we get very wrapped up about money we're making versus what we're learning. And, and that could also be to your point, you took a lot less money at the beginning.

To learn.

And I think not enough people do that, and that would accelerate their growth. So don't forget about that learning.

Awesome. Love it. I hope you guys enjoy this episode. Let us know if you have more questions and what do you think about it.

Yes. Post in our Facebook group.

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