Conquer Your Fears: Master the Real Estate Trifecta for Lasting Success

Brett McCollum (00:00.942)
All right, guys, welcome back to the show. I am your host, Brett McCollum, and I’m here today with Ernie Smith. And today we’re going to talk about the trifecta. What does that mean? Stay tuned. Before we do, guys, at Investor Fuel, we help real estate investors, service providers, and real estate entrepreneurs to 2 to 5x their businesses to allow them to build the businesses they’ve always wanted and allow them to build the lives they’ve always dreamed of. Without further ado, Ernie, how are you,

Ernest Smith (00:19.586)
Did you? Did you?

Ernest Smith (00:26.495)
I am fantastic, Britt. What’s going on with you?

Brett McCollum (00:30.542)
Oh man, it’s been good just getting to know you a little bit. We talked before the show, catching up with each other there. And man, guys, I say this all the time. You know I do. But I’m actually really excited to talk with Ernie and get to know him a bit more, introduce him to you guys. And we have a lot coming up. But before we do, Ernie, catch us up and speed a little bit. Who are you? Give us some history, some background. Who’s Ernie Smith?

Ernest Smith (00:55.171)
Well, I appreciate that and thanks for having me on the show. So yeah, who is Ernie Smith? That’s a good question, right? So everybody’s like, hey, Ernie, where’s Bert? And I always joke because my mom’s name is Bert. So I literally have, and I was named after my father, so I literally have Bert and Ernie as my parents. And I didn’t tell you that before. So I started out and we’re kind of,

Brett McCollum (01:05.442)
You

Brett McCollum (01:17.102)
That’s

Ernest Smith (01:23.588)
got into, I started into drafting design engineering. So I started out designing houses and designing structures. So everything that was on paper and then it’s translated into the knowledge of what went into a property. then eventually I ended up buying my first property and was funded by the bank of mom and dad. And then I got into kind of a house hacking situation where I had lived in them for a little while, fixed them up and sold them. And then eventually I ended up going to get a

kind of increase my authority, if you will, in this space and I became a general contractor and a real estate broker. So all of the above.

Brett McCollum (02:04.13)
Wow, yeah, thanks mom and dad, right, for that intro into real estate. How long ago was this?

Ernest Smith (02:11.428)
Um, actually this is, uh, like 20, 23, 24 years ago. You know, I know I look like I’m in my mid thirties, but you know, I’m in that 50 rings now. So.

Brett McCollum (02:18.104)
Yeah. Yeah, so.

Brett McCollum (02:25.742)
You pushing it a little bit. Yeah, I’m uh, I’m actually closing in on 40 and I’m like second-guessing everything about my whole life and like oh my gosh I’m actually like starting to this is real middle-aged coming up here. What’s happening right now? You know life happens to us all man, but yeah, so alright, so you’re in college Were you in college still when you when this kind of your first, you know Real estate or was it post college? When was that?

Ernest Smith (02:37.473)
Yep, yep.

Ernest Smith (02:52.644)
No, you know, being, you know, as most people’s stories go, when we talk with our parents, there’s always that parental guidance that they give you. So my first property I was going to buy was when I was 19 years old. And it was like, if you can imagine, from where I lived in Ohio, it’s right on the border of West Virginia and Pennsylvania. And so this particular property was in West Virginia, which is right across the border.

And it was a law cabin style house. So was a very big 12 by 12 Oak Beans. It’s gorgeous. And we had a friend of ours, friend of my parents that the son had passed away and it was his house that he was working on. Well, I had an opportunity to buy this house for like $42,000 or something like that. I was like, yes, I love this thing. want it. And you know, the parents being like, well, you know, it needs a lot of work and it needs a lot of money, you know. And so they talked me down off of it.

And I think that kind of held me up a little bit. So I was like, you know what, I’m going to go to college, I’m doing these things. So let me do that. long story short, it might have been good that they did, because at least I went to college and did some of that academics. And I learned more about the architectural side. I learned more about the structure. I learned more about what went into doing the houses. And so I was building the knowledge base behind it. And so I loved it. I mean, it was great.

Brett McCollum (04:23.98)
Yeah, that’s incredible. Yeah, I mean, just having kind of that support system behind you and knowing that they’re, you that’s incredible, honestly, because a lot of us don’t, know, some of us do, or some of us don’t get to have that, and know, and you’re getting to do that. you’re, you were what, 20, how old were you when you got the first house?

Ernest Smith (04:45.187)
Um, jeez, you’re gonna… I was 20… 21? Going on 22? Something like that.

Brett McCollum (04:55.106)
Yeah, mean, young enough to like, let’s go in, but still, you know, like, I’m ready to take the world by, you know, by the horns kind of thing. when did you ultimately start like really like, not that you weren’t serious about it, but like, when did you really go, real estate is like a thing for me. Like when, when, when did that kind of happen?

Ernest Smith (05:13.634)
It wasn’t really until like, I got licensed in 2014, think, like I was working a W2 job up until like 2016. And then I was like, you know, I’m just going to do my own thing. You know, and it was fine because like when I, you don’t know what you don’t know, right? And that’s really what this all comes down to. And so, you know, for me, we didn’t have the YouTube universities. We didn’t have all this information that we have on the internet now.

I mean, back then we had AOL and it was like slow as Moses, right? And when I was in college, I mean, we did everything through on paper and we were hand drawing it. And then when I was starting to get out of college is when we started getting the AutoCADs and the three-dimensional drawings and all those things started to go into it. And so things were just starting to evolve. And so if you could think of it from that standpoint, it’s like the rotary phones back then, like kids nowadays don’t know what a rotary phone is, let alone how to figure it out, how to use it.

Brett McCollum (06:10.626)
Yeah.

Ernest Smith (06:13.056)
But, know, so all in all, all those things together, you know, is really kind of built into the experience of Fleshy. So I guess, you know, the big caveat to it all is kind of, it’s like 2020, I was 21. It was like maybe in 2001, 2002, I ended up buying the first property. It was in 2014, I got my license. I left corporate America in 2016 and I’ve just kind of been doing real estate since.

full-time with it.

Brett McCollum (06:43.756)
Nice. What was the, and I know we kind of talked a little bit before, like the W-2, what were you doing then?

Ernest Smith (06:50.976)
So actually it’s kind of multiple things. So in my early sector from like 98 to 2003 I partnered with a friend of mine and we opened up a couple small chain not chain but small restaurants that we called juice companies and so we did smoothies and juices and breakfast wraps and all that so I was in the restaurant four side for probably about five years or so and then Then we had 9-eleven happen and then that

played a big havoc on the economy, right? And so then I found myself getting into doing sales for food companies. So I worked with two of the largest food companies that are out there, US Foods in Cisco. And I eat for about six or seven years or so, something like that. And it was good because my customers didn’t want to see me at breakfast, lunch, and dinner. So it allowed me to go see all my houses at breakfast, lunch, and dinner.

And so I was just kind of doing the flips, you know, in between all of my other stuff. And, and it was nice because, you know, I do a couple of flips a year. I’d make, you know, 40, 80 grand extra. It’s like, this is great. you know, but all that dynamic changed, when I started doing a full time. So now it’s a matter of like, how do we do more scale, more grow faster, do more, you know, like, and, know, there’s a lot of that comes into it I’m sure we’ll dive a little bit more into all that.

Brett McCollum (08:03.747)
Yeah.

Ernest Smith (08:18.108)
as we talk.

Brett McCollum (08:19.694)
Yeah, no, and I like just hearing the evolution of how things were, just kind of the core of it all. You’ve been an entrepreneur for how long? You had your own, yeah, that’s incredible. And the resilience of 2001 going through something that…

Like, I don’t know what it did, but like it definitely probably shook you, you know, as far as the mental of like, how do I navigate a world that’s changing? And boy, does that translate till today, right? You know, and, but you’ve been there.

Ernest Smith (08:56.094)
That’s very similar to COVID, if you think about it. mean, we didn’t have to shut down and all that stuff. mean, economic side of how it all transpired out of the World Trade Towers, you know, all that happening. You know, I was in a place, you what mean, but I was actually in Charlotte also at the time. And Charlotte has always kind of been like the number two industry for the banking behind like New York.

Brett McCollum (09:07.405)
Yeah.

Ernest Smith (09:25.476)
And so we didn’t feel like a lot of effect from it, but yeah, we did feel it. And it made us change and have to pivot a lot more with what was going on.

Brett McCollum (09:32.439)
Absolutely.

Brett McCollum (09:37.868)
Yeah, absolutely did. It’s that timing, you know, and just like I said, going through that, you know, know, and then when you’re faced with.

Difficult things coming on. It’s like man. I’ve already I’ve done this and I’ve been through it I know I’ve got the muscle it’s different But my that muscle that was required to get through that has been built You have that rate you can go back to that that cornerstone if you will that pillar of I’ve done like I’ve been here I can do this too and I think we need stuff like like honestly like Every entrepreneur that you had said if you haven’t had challenges, you know, you just haven’t been doing it long enough But you having these challenges

Ernest Smith (10:12.476)
Yeah.

Brett McCollum (10:17.304)
Like you’re able to look back and then reflect on like the new, because it’s not always good, it’s just different, right? It’s a new challenge now. But you have that mental reflection of I’ve been through this one, I’ve been through that one, I’ve gotten through all of them, I can get through this one too, you know?

Ernest Smith (10:32.636)
Well, to your point, so nowadays we have a lot more opportunities for mentorship, have a lot more opportunities for coaching, and not to say that we didn’t back then, it’s just not as readily available as it is today. And you have other resources and there’s other groups around, sports around that can help you out in whatever venture you’re in.

Brett McCollum (10:49.282)
That’s ability.

Ernest Smith (10:58.04)
So there’s I’m sure there’s someone that you can learn from that’s been there and done that of what you’re going through, right? So I was kind of talking it’s kind of funny So last night I was doing a presentation and I use the analogy of like, know when you first start out snow skiing as a kid or even as an adult you typically have a coach that shows you have snow plow right and You know being in Florida, you may not know what I’m talking about, but

Brett McCollum (11:24.523)
I’m Nathan from Ohio, I’m with you.

Ernest Smith (11:25.66)
All right. But you know, you got a snowplow. Well, then, you know, if I wanted to excel and go start racing slalom down the hill, that same coach is not going to be my coach going and teach me how to do that. Right. So so you have to change. You have to, hey, what am I looking at doing? Do I want to increase to a million dollar business, a five million dollar business or 50? You know, you’re going have to find people that are in those positions that can help you get to that level because, you know, and that’s really kind of the name of the game.

And it was different back then because we just didn’t have those. Or if we did, you know, me being an Ohio boy out in the middle of the country, like, I didn’t know those resources. You know, those didn’t really apply. It’s a school of hard knocks in learning it.

Brett McCollum (12:14.86)
Yeah, definitely. mean, it’s a, it’s life is especially grown up the way we did and times are a little bit different than they are now. And accessibility is at an all time high. Like you think of something you can have in front of you in two seconds, right? You know, and more and more as coaches are coming out and say, cause it’s, we’re in that information age, you know, you mentioned YouTube university earlier, you know, you know, that people are seeking.

coaching and they’re seeking isolated information. you know, maybe not like, don’t want to learn about all of this. I want to learn about this, you know, and it’s interesting to see how that’s changed. That’s for sure. Cause you know, when we were getting started, wasn’t readily, you had to know where to look or knew somebody that knew something, right? You know, and yeah, man, it’s an incredible, you know,

testament to you that you’ve grown through that and gotten kind of where we are, but kind of a good transition point I think Ernie. So fast forward, catch up, know, kind of, are, like, because we kind of let off the trifecta and like, what is that? And then walk that back a little bit and like kind of make, kind of build that out, make it make sense for everybody.

Ernest Smith (13:32.023)
Okay, so kind of trifecta is really the perfect triple combo, right? So it’s a matter of like, if you think about it in the sports sense, we always hear more of the trifecta around betting, if you will, against like typically horses, right? You always hear kind of the trifecta side. But really what it is is like when you pick those numbers, you’re picking them in the correct order that they’re going to cross the finish line. So when I look at it from this side, I’m dealing in real estate.

Brett McCollum (13:40.032)
Thank

Brett McCollum (13:48.428)
Right.

Ernest Smith (14:00.439)
And so in real estate side, who’s my primary customer is mostly the sellers, right? Because they have a product that I need in order to do a service in order for me to be able to do full cycle it and sell it as my own product. So when we look at things kind of in that side, I’m gearing those opportunities. So now being a licensed general contractor and a licensed realtor, I can now do really a full cycle.

Hey, as an investor, you don’t have to do anything. Like we can come in, buy your house as is, turnkey, you can just walk away, we’ll get it, you know, take it over. And there’s also all the creative ways to be able to do it. Subject to, the owner financing, lease with the option, cash, you know, so you have all these options inside of that. The side of it is that most of the people that are hurting,

They want a fast solution and they want the most amount of money because they feel like that’s going to be their solve for. And so when we walk them through the pain points of what all that is, well, you want retail, but your house doesn’t show retail. So we can help you with that with our general contracting services and then get you to the finish line by us selling the property for you. And then that’s our, our commissions out of those scenarios, right? Our fees.

Or we can just take it from you right now and add a discounted rate, and then we’ll just do the contract and close on it as it is. And so it allows us to be able to talk through each of those processes thoroughly, and it allows them to sit there and make a choice. Do we want it now, or do we want potentially a little bit larger amount later? And it just allows that conversation to happen more fluently.

Brett McCollum (15:55.566)
Yeah, from a place of trust ultimately, yeah, the homeowner that you’re sitting like, hey, I’m actually a general contractor. This is what I, like, I’m not just a, you know, cause man, see, I promise you, anybody, like anywhere you’re at, I don’t care where you are listening from, go onto Google and say, sell my house fast, right? Like some of these people do or whatever the version of that is that people, know, there are zoom.

Websites out there and come up 90 % of them are wholesaling right? Very few of them are actually going to be able to perform in a way that you guys like what your company does Ernie because they can’t actually articulate the I actually do the construction. I own the construction. This is what I do So we can do this or that and you tell me what’s best for you They’re raising their hand that they want to sell it great. Let’s get you there

And you fit in, dude, what a sweet situation, right? Like to be able to fit into that. And it is, it’s the trifecta, that’s perfect. I love the analogy. You fit into that box, that’s really good. I would imagine though, and how are you guys, so, it’s a really cool thing. all right, let me back up a little bit. I’ve said it a lot of times on the show and you’ve heard, here’s she who controls the money, controls the deal.

That’s said a lot of times, okay? But I think it’s even more he or she who owns the construction really controls the deal. What is your feeling on that?

Ernest Smith (17:35.939)
about the construction side.

Brett McCollum (17:38.904)
construction side. Yeah, if you own the construction, you really can control the deal. How do you feel about that?

Ernest Smith (17:46.109)
Yeah, mean, it’s in extent, so…

What it does is that knowledge or information that I have about the construction allows me to negotiate with the sellers differently than just giving them kind of a ballpark round number. So I’ll give you for instance, so we did a project here just recently and so the wholesaler had the rights to be able to sell it on the MLS as well as marketing it to their list.

And this particular wholesaler was out of California and this is a property that’s right here in North Carolina. And so, you know, so I can’t talk, I’m not talking to the seller specifically, I’m talking to the wholesaler, right? Now they had the relationship, but what it is is that so on the retail market, they are asking 1.34 million. On the wholesale market, they’re asking 1.15 million. So we’re about $200,000 difference. Well,

Brett McCollum (18:44.718)
Mm-hmm.

Ernest Smith (18:49.957)
I’d like the lower number better myself, right? So when you start looking at, all right, now I have the opportunity to get in front of the seller because I called the wholesaler and said, hey, I’m on my way. I would like to go see this property when you want to go see it in 15 minutes. There’s a sense of urgency around it. So he made it happen. I got in front of the seller, didn’t really talk to the seller. My business partner were close by. I had them come by.

And I said hey, let’s walk the property and so looking at the property There’s just a lot a lot of deferred maintenance to it and this is like a 3600 square foot house, but again, we’re in a higher dollar amount It’s on the lake. There’s a lot of different opportunities with it and But immediately I’m adding these numbers up in my head as we’re walking around and these new fascia boards and these new cutters and these new doors. It’s got wood right here, you know

pool is painted black so it looks nasty. It’s like we started just adding up all these ticket items and stuff along with it. And then ultimately we came up with a number. So I went back to the seller or I went back to the wholesaler and I said, hey, you’re asking 1.15 million, but it needs a lot of work. I’m willing to offer you $972,655.78. And they’re like,

What? They never have numbers like that thrown at them, right? And so they’re like, okay, well, and then they come back and they’re like, well, we can come down to 1.05. So they dropped it $100,000 more. And I’m like, okay, well, I like where it’s going. And I appreciate that moving forward. But the best I could do on this thing is maybe $995,000 or whatever.

Brett McCollum (20:18.326)
Very specific.

Ernest Smith (20:46.726)
And they’re like, okay, well, let’s, we’ll need to go back and talk to the seller. And so they did. They renegotiate with the seller and we got the deal closed.

Brett McCollum (20:57.934)
Nice. Yeah, I mean, that’s because of when you know the construction, because it’s in, do you guys do it in house? Like when you’re GCing, you keep it all in house, I’m assuming, right? Yeah, so you know those numbers are dialed in, it’s built for profit inside of the company as well for the construction side, and you get to capitalize that on the backend to the flipping business side of it. That’s what I mean, like man, when you get to control that construction.

You’re like those levers are pulled like you just perfectly showcased it right there You pull those levers just right because you know, hey if I’m running this this is the job new facial boards new this new this new this and I know what that costs because it’s my business and I know how much you know and you can it’s incredible

Ernest Smith (21:41.852)
Well, mean, an extent, there are still quite a few things that we hire subcontractors out for. So like all the &P stuff we hire out for, know, maybe like gutters and different things like we hire out for, like we don’t do, you know, a lot of things like that in-house. But there are quite a few things that we do, you know, we had a couple different models. We had the employee models for a while and that’s worked out pretty decently. But then there’s a lot of over cost head.

Brett McCollum (21:49.09)
Sure.

Ernest Smith (22:11.273)
overhead cost they go along with that versus just kind of going the subcontractor route but you don’t have as much control in some of those scenarios and stuff with it you know so

Brett McCollum (22:23.202)
Right, mean, one of the big perks on the construction, like for you and that, that I see is you really get to, some with the subs, maybe not, but like more or less though, you can control the timeline of that rehab because, you know, I’m not.

like me, where I’m dependent on you. Like, let’s say you’re in my VC, okay? Ernie. And I’m dependent on Ernie’s comp, you know, to do what he said. You know, I’m dependent on you. But when, it was my, I control the timeline. And that is a really powerful place, you know, inside of our flips. It’s when the, cause that’s a lot of our problems, right? It’s over budget, over time. You know, which ultimately means you’re like when you’re flipping houses, that is a recipe for not good, you know?

Ernest Smith (23:05.531)
Yeah.

Brett McCollum (23:08.91)
That’s really, I love that you’ve got that, man. That’s really cool.

Ernest Smith (23:10.417)
There we are, we’re back.

Brett McCollum (23:13.623)
Yes, sir.

Ernest Smith (23:13.969)
All right,

Brett McCollum (23:18.542)
That’s okay. No, was just complimenting the fact that you get to keep that in-house, you know, and I think it’s really cool. You know, I think it’s a special thing.

Ernest Smith (23:25.713)
It’s definitely has its pluses and minuses for sure, but the fact that we’re able to go in and know the process and get the right people and we can control that process allows us to be able to, because there’s really three ways that you make money throughout the process, right? So you have to make money on the buy side, you have to make money on the fix side, and then you have to make money on the sell side. And so there’s always kind of like those three areas.

But it really comes down to how you buy it. They always say, buy low, sell high. But there’s times that you can’t sell high. There’s times that markets dip and you bought incorrectly and shit goes sideways. there are times that things like that happen, but you want to mitigate that as much as possible.

Ernest Smith (24:22.416)
between the two. Apologize. No, it shouldn’t be good. Are you there?

Ernest Smith (24:34.68)
Missing you.