Have questions or feedback? Each show is posted on the Data Driven Real Estate Podcast #11 in our community. Catch pre-show research and continue the dialogue online after the show.

Connect, subscribe and like on: YouTube, iTunes, Spotify, Stitcher, TuneIn, Google Podcast

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 apartnership, 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 alll 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.

The post The Data Driven Real Estate Podcast #11 – Scale and Operations in Your Flipping Business with Tarl Yarber, Fixated on Real Estate appeared first on PropertyRadar.

Have questions or feedback? Each show is posted on the Data Driven Real Estate Podcast #10 in our community. Catch pre-show research and continue the dialogue online after the show.

Connect, subscribe and like on: YouTube, iTunes, Spotify, Stitcher, TuneIn, Google Podcast

Show Topics

• 00:00 Vacation rental investing with AirDNA CEO, Scott Shatford
• 00:52 From economics to Wall Street hedge funds to a top HR firm, Korn Ferry
• 2:50 Identifying the arbitrage in short term rentals vs. long term rentals
• 06:44 When did AirDNA begin?
• 09:44 Scott’s secret weapon? His software engineer father
• 10:55 Creating AirDNA and how it helped answer: How are you doing that?
• 12:12 Solving your own business problems end sup helping others.
• 13:29 How AirDNA becoming a key part of the short-term rental ecosystem has been key for data relationships
• 16:47 What is AirDNA?
• 18:22 Is AirDNA tracking specific features like Peloton Bikes?
• 21:08 How the vacation rental game has changed with features
• 21:39 Why vacation rentals are doing so much better than hotels post-Covid
• 22:39 Covid trends for short term rentals in urban markets
• 23:27 AirDNA’s media and press strategy using its data
• 26:06 How vacation rental sites have started to focus on 30+ days rentals
• 28:17 Consolidation and professionalization of vacation rentals
• 28:32 Covid impacts on Sonder, Lyric, Domio and Stay Alfred
• 29:33 Will Airbnb focus more on small vacation rental owners post-Covid?
• 29:58 Why focusing on local operators of vacation rentals helps with villainization of Airbnb rentals
• 30:58 Has the hotel lobby come around to support vacation rentals?
• 31:13 Vacation rentals growing 20% faster than hotels?
• 32:09 What is the impact of short term rentals on affordable housing?
• 32:42 The main reasons NIMBYs don’t like vacation rentals
• 32:59 How many second homes are there in the US? How many sit empty?
• 33:31 Who is to blame for affordable housing but who gets blamed because it’s easy
• 37:59 Advice for new vacation rental investors and avoiding getting shut down
• 40:16 The importance of understanding local political conversations around vacation rentals
• 41:40 Why isn’t there a professional lobby association for vacation rental investors?
• 43:48 Why weird works with short term rentals
• 44:52 How have the metrics changed on short-term rentals because of Covid?
• 46:21 50% of Airbnb stays are very last minute. Is it also increasing the average nightly rate?
• 48:59 How attached accessory dwelling units are being used to comply with local regulation in short term rentals
• 50:11 Will struggling commercial space afford opportunity for repurposing to vacation rental conversions?
• 51:09 Why Covid has scared away the master leasing model for vacation rentals
• 54:00 How seasonal vacation rental markets have changed because of Covid
• 54:34 Hampton market was up 800%!?
• 55:27 The opportunity that real estate agents miss and how they can turn data into massive business and local expertise
• 57:51 What technology is exciting to help manage Airbnb rentals?
• 1:01:21 Does AirDNA connection to property management systems to help with pricing automation?
• 1:03:21 Pricing is the single biggest decisions investors should be making
• 1:04:57 is Airbnb going public presenting any unique opportunity?
• 1:09:22 The opportunities for connected trip with vacation rentals
• 1:10:13 What’s next for AirDNA
• 1:12:17 Opportunities for investors, Realtors, and home service providers in vacation rentals

Show Transcript

Aaron Norris  00:00

Hi everybody, welcome to the Data Driven Real Estate Podcast, the podcast for real estate professionals dedicated to driving business success using data. I’m your cohost, Aaron Norris with us, we’ve got Sean O’Toole up in our Truckee office and with us Scott Shatford with air DNA. I’m very excited for this interview. Scott is the CEO of AirDNA. And he’s an author, vocal advocate and industry expert in short term rentals. And he utilizes his 15 plus years in the data data analyst space to empower entrepreneur entrepreneurs to make the most out of short term rental market. I’ve used your tool for years, helping investors stay out of trouble. So welcome to the show.

Scott Shatford  00:40

Thanks for having me here. Thanks, Sean.

Sean O’Toole  00:42

Yeah, no, I appreciate you making the time.

Aaron Norris  00:45

Your background data analysts. Tell me what happened after high school. Where’d you go?

Scott Shatford  00:52

To high school? Yeah, whenever the University of Arizona uh, you know, it was a choice. More out of I went to They’re in the middle of the winter and the pool parties look really good. So it was a, it was a choice made out of. Yeah, I don’t know if it’s academics driving my decisions there, but it ended up being great school got a degree in economics over in Arizona, and five and a half years. And then yeah, trying to figure out what I was gonna do next my life. But yeah, it was it was a Yeah, so I went to Arizona, and then, you know, like a lot of college kids didn’t know what I wanted to do. Had this degree, I had some. You know, I did work at some hedge funds out in New York City during the summertime and I was lucky enough to have an uncle that was a hedge fund manager. And so that sort of exposed me to a bit of sort of, you know, how to use data, how to sort of think about it. They were much more complicated quants, guys than I would ever be. But you know, sort of got me interested on the data side of things. But yeah, I’m after college and landed in, you know, at a consulting company. I mean, their recruiting company really called the Korn Ferry International. for nine years there, my formative years, you know, just stuck in Excel as a monkey for about five of those years. And that’s sort of where I just hone the craft of how to you know, create stories, you know, how to articulate things through visualizations how to be able to communicate to executives, through data. So, you know, I definitely, yeah, whatever you want to call it, right. I mean, it was it was a long, five years, but very formative in terms of like, just how to think about massive amounts of data and how to create stories from it.

Aaron Norris  02:30

So how did you… Go ahead, Sean.

Sean O’Toole  02:33

I was gonna say, you were the first guy I met that started kind of hacking, Airbnbs, if I remember correctly, we met back in 2015. Yeah. And you were renting places as long-term rentals and doing short-term rentals. Is that right? Do I remember correctly?

Scott Shatford  02:50

That’s, that’s absolutely right. Yeah. Yeah, I wouldn’t say I mean, I started mean, I started the model, but I was definitely one of the first ones that that really realized that there was this new what we call now as arbitrage opportunity is that you could go rent these properties, even as a corporate rental just being straight up, like I’m gonna have different tenants in here all the time. Maybe pay a 10 to 20% premium on that on that long term, rental, but then furnishing it for $5,000 bucks turning it on Airbnb within a week, and then, you know, making 100 to 300% more than you could as a long-term rental per month. Right. So the real numbers like in Santa Monica was I could rent a nice property right by the Third Street promenade, main tourist district for about $3,000 bucks a month, I would make at least $7,000 every single month on that on that property with pretty minimal operating expenses. And so it was the early days it was the Wild West see now that these there wasn’t enough supply out there and although towels and Santa Monica were call it $400 bucks a night and so there was just this huge opportunity for a bigger place with amenities and the washer and dryer for people staying For a couple weeks willing to pay 250 or $300 a night. Yeah. And so it was it was the good days, the golden days, as I call them, when you could pretty much just get anything thrown on Airbnb and it would just destroy it, you just have 90% occupancy, you couldn’t mess it up. But obviously, the world’s change is much more competitive and expectations from customers are a lot different than they were back in 2012 to 15.

Sean O’Toole  04:27

I remember after meeting you, right, like it was a big epiphany for me. And I was on the speaking circuit. And I did a whole set of slides basically saying he was everybody’s like, Oh, you know, prices have gone up so much. We’re at a peak. And basically, I did the math to show how prices would likely go up at least 10 to 20% more, at least in areas where the Airbnb you know, model works where there is demand for that short term rental. And boy, that was So it was it was a good. It was a good day when I met you. It made me look pretty smart.

Scott Shatford  05:07

Yeah, it’s nice. You know, we have a lot of predictions on where the future is gonna go and at least half of them right as well as what I always say. At least half. But yeah, I mean short term rentals…

Sean O’Toole  05:20

I just got the word likely. And you’re always right.

Scott Shatford  05:23

Right. Um, yeah, it’s been a wild ride, you know, we wouldn’t get to a more but, you know, at that time, there just wasn’t enough. There wasn’t enough data, there wasn’t enough, you know, predictability and like what these properties would do, and so people weren’t willing to take, you know, half million million dollar swings at the plate to sort of hope for the best as a short term rental. But, you know, you know, now, five years later, you know, with 1.5 million properties and the short term rental market in the US, you know, you can just sort of look at a lot of comps, there’s a lot of full time rental investment property. It’s just a lot easier. to triangulate in on like, what is the performer look like what is going to be the revenue in June versus January and so that’s a lot of what we’re doing here is giving people a lot more comfortable about what what those projections look like as properties a short term rental. So yeah, huge proliferation and in these COVID times, you know, there’s there’s a whole lot of there this whole nother demand driver, which is, you know, I don’t know people wanting to buy that second home anyways, and you now’s the time to do it. And whenever they want to get out of that second home and return to that Metropolitan market, you know, they have that investment property to fall back on. So we just see a lot of activity in the space right now the more than we ever have on, you know, buying these sort of second homes and traditional vacation rental markets.

Aaron Norris  06:44

When did the, what year did you open AirDNA?

Scott Shatford  06:47

We opened in 2015.

Aaron Norris  06:49

So it’s only five years old?

Scott Shatford  06:51

Yeah, we’re just over five years old. Yeah, I think Sean when he stopped by the garage, and we met, maybe I was too embarrassed to show him the garage five years ago.

Sean O’Toole  06:59

I didn’t see the garage.

Scott Shatford  07:00

The local waterhole, yeah, did you? Yeah.

Sean O’Toole  07:03

Oh, well, yeah. Local watering hole. It was a yeah, Some favorite spotty years down in Santa Monica was pretty cool. Yeah. I remember that. Yeah. This is nice hanging outside. I, you know, it feels a little bit like Truckee, you know, in the perfect day in the summer. It seems like it’s like bad down there all the time.

Scott Shatford  07:22

Yeah, it’s not a bad spot, not a bad spot.

Sean O’Toole  07:25

You still there?

Scott Shatford  07:26

No, we went to Denver, so we relocated here, four years ago now. So, you know, right when we’re thinking about scaling this thing and getting out of that garage. Yeah, and we’re just looking for a lot of, you know, talented developers in LA was a very hard place to find. Surprisingly, you know, you think it was good, but back in the day, not even snap was, you know, there and that was sort of one of the companies that really brought tech to LA. But it’s hard to find people, reliable people, affordable people. And so that was one of the big reasons moved to Denver just pulled town out here was better. worked out well. worked out great so far. Yeah, no, it’s been great. I mean, we’re sort of, we opened up office in Barcelona. We’re sort of split, you know, about 3030 people in Barcelona, but 25 people here in Denver. We’ve got all that the techies, the nerds, I say, you know, adoringly to them here and all the salespeople in Barcelona. But yeah, so it’s worked out great, and that Denver’s been a great place to live.

Sean O’Toole  08:24

Not Barcelona, Spain?

Scott Shatford  08:26

Barcelona, Spain. Yeah, that’s where the other half the business is.

Sean O’Toole  08:29

You’re kidding.

Scott Shatford  08:29

Yeah.

Sean O’Toole  08:30

Wow. That’s an interesting choice. That must have been a lifestyle decision or personal interest decision.

Scott Shatford  08:37

Yeah, there’s definitely there’s definitely a part of that. Yeah. I’m one of my co founders here early employees as well. He wasn’t a US citizen. So I said, yeah, well go find a place you want to live in that. Make sure they have some vacation rental activity there. And Barcelona nice choice.

Aaron Norris  08:53

It’s a great city.

Sean O’Toole  08:56

That’s awesome.

Aaron Norris  08:58

Talk a little bit about the genesis of AirDNA and how you willed that to be.

Scott Shatford  09:03

Yeah, so we’ve sort of covered the basics. You know, it is one of those kind of classic founder stories is that I was stealing this rental arbitrage business going around Santa Monica convincing landlords to rent me their apartment to put it on Airbnb. You know, I think there was some regulation, you know, some signs that that was gonna happen in Santa Monica. So I started looking, you know, across California, down south and San Diego, maybe up in Napa Sonoma is trying to just think about, you know, I have all this Where should I go next, right, where do I diversify my portfolio? You know, and I was doing great in Santa Monica, but maybe it’s better Newport Beach, right? Just trying to really understand where I want to go next. You know, I had the secret weapon. My father who was a data engineer, you know, who was an engineer and he you know, we talked about sort of some things I heard about scraping Airbnb. What can we do with the calendars really understand availability often see how rates are changing? So I could sort of put that data, get some, you know, free Zillow data and just see, like, you know, where was the biggest mismatch? You know, where were properties, earning $100,000 a year where you could buy it for three or $400,000. Right? And like, just where’d that cap rate make the most sense? And so that’s where I sort of started as my own purpose. And then, you know, just being the, you know, data dweeb, I am just really nerded out on, you know, how do I price more effectively? How how far in advance are people booking, you know, what could what’s my price on my weekend versus my Tuesdays and Wednesdays? How much should that really be changing? Just none of that data was really available at the time. So, you know, when, when Santa Monica finally made short term rentals illegal. You know, that’s sort of when I had that lightbulb moment. It’s like, hey, I’ve got a lot of friends asked me about this information. I’ve got a lot of people wondering, you know, how the hell I’m doing so well. With these properties. At one point time I had to top five one bedroom properties in all of our Angeles and they were in Santa Monica. They were doing like $80,000 a year in revenue. And the people are like, how are you doing that? I was like, Yeah, well, the data, the data is helpful to help me do it right. And so that was that was sort of the idea is like, how do you sell, you know, this, the shovels to the Gold Rush instead of mining for it yourself is the analogy A lot of people say so just giving people the tools to sort of create their own short term rental businesses. You know, there were a lot then but you know, now there’s three and a half million hosts on Airbnb, you know, we think about three quarters of a million people doing this professionally as a full time living. So there’s a lot of people out there and sort of support in their day to day decisions and investment decisions as well.

Sean O’Toole  11:43

Yeah, I mean, I always think that’s the best. You know, in Silicon Valley, we’re always trying to solve other people’s problems. And it’s so great when you’re, you know, build a product that solving your own problem, which is what happened with me with PropertyRadar, what happened with you with AirDNA, right? And because you have that kind of real world experience and you know, it works and you know, you know? Yeah, I think that’s, that’s a really, you know, cool, cool thing. I think most of the best businesses come out of that. So…

Scott Shatford  12:11

That’s great too, isn’t it? It’s just such a luxury because you know, you don’t have to do customer surveys, you don’t have to go call 100 people, you’re just like, I know exactly what my pain point is, and I’m gonna go solve, it actually gets way harder as you’re thinking about, like, what new bells and whistles do I need to add and like, as you get further away from your, you know, your problems of past, just sort of make sure you’re building the right stuff and solving the right problems. So, you know, it is, you know, it’s a luxury to because you can spend years this sort of building the product that you wish was on the market when you when you have this problem?

Sean O’Toole  12:44

Totally, you know, when we met back in 2015, like one of my big, you know, concerns we were looking at, you know, we’re working with you to incorporate your data in our product. And, you know, I just couldn’t get around the fact that I just thought you’d get a, you know, cease and desist letter or somehow, you know, Airbnb would come after you to shut you down, or that kind of thing, right? And was just like, wow, do I make an investment in this? And obviously, you decided to go ahead and make the investment. And that was a very good decision on your part bad decision on my part. But, you know, how is that? How has that been? Is that still a risk for you? Or is that, you know, pretty much you kind of worked work beyond that you’re important part of the ecosystem now,

Scott Shatford  13:29

I think is a key part of it, right? Is, is being a key part of the ecosystem and making sure Airbnb and VRBO and everybody knows, knows that, you know, you know, you don’t have a whole lot to lose early on, right? And so you’re willing to just throw it out there and sort of see what happens but you know, as you mature, and as you hire your folks and you got a real team in place, you got to sort of shore up some of those risks. And so, you know, we do that through having good partnerships with them through having good dialogue with Airbnb, you know, making sure we’re better building stuff that’s valuable to their end user and is getting people to buy properties and put them on their platforms, you know, they’re not going to shut you down. If you’re, you know, adding another hundred thousand properties that are platform on annual basis, right, there’s a lot of value to that a lot of value to like making people think like professional hospitality, individuals, right thinking about improving the quality of their properties, pricing them more effectively having better like customer care. And so yeah, as long as as long as you can show that value to them, you sort of become an indispensable part of the industry. And so, you know, we’re thoughtful not to poke the bears as much as we can. But yeah, at the end of the day, you know, if you’re adding value to them, then you know that they need you. They want you and don’t want to shut you down. You know, is is people get public and they get big and they’re going IPO you need to be even more cautious about that. Just because this sort of the risk you present to them as a company becomes a lot greater. So yeah, It’s just, you know, it’s a delicate balance that we have to ride is giving enough information to our users, you know, without giving too much to regulators or law enforcement people or people trying to shut down and sue people, right? And so we’re just very thoughtful about, you know, not, you know, providing our selling our data to people that aren’t within our mission and values that sort of grow in the short term rental space and a motivating entrepreneurs around the world to dive into this market.

Sean O’Toole  15:29

Now, last points really interesting because like some other people have built some good sized businesses off of things like host compliance and that kind of thing. And I would imagine that would be a lot more you know, combative with for somebody like an Airbnb versus somebody trying to help them grow their business.

Scott Shatford  15:47

Absolutely. Yeah. We feel like we’d be pretty low on the totem pole, if they went through that that process if we really want to shut down. I mean, there’s a lot of people ahead of us now that we feel pretty good about that risk, but you know, it’s great. Always is risky and you never know if you know there’s just a new CFO or a new CTO that comes into town it’s like, nah, don’t like it and like this make it difficult on people, we don’t see lawsuits as being it, but we think that, you know, there are ways that they can make tech look

Sean O’Toole  16:17

Make it a little harder.

Scott Shatford  16:18

Just more more. More just costly, really to do it at this point in time, but anyways. Don’t give them any any good ideas.

Aaron Norris  16:33

I’m familiar with the product. Can we just, can you give us an overview quickly, cuz I know we’re going to cover a lot more complicated stuff, but just in case they don’t know who AirDNA is. Can we cover it real quick?

Scott Shatford  16:45

Sure. Sure, we see we see ourselves as you know, the short-term rental market intelligence tool, and what does that really mean? Let’s dive into it. I mean, so what we do is we cover over 100,000 cities markets around the world. And you know, for an average price of $50 bucks a month, you can see all the details every short term rental in that market, all the aggregated stats on how much they’re earning, how often they’re occupied. What does the seasonality in the marketplace look like? How to price those properties. So you can actually onboard it, you upload a property and then get recommendations on how to price it on a regular basis. There’s also investing tools. So you can sort of look at what are the top performing properties in particular market, I always like to just tell people stop thinking so hard, find the best performing properties and buy the one next door and decorated exactly the same, and you’re going to be in good shape, right? And so yeah, so like mark, you know, market comparison tools, if you’re going to go to Denver, like should you buy this zip code or that zip code? How are two bedrooms performing versus three bedrooms, like just a lot of data on how to price how to think about investing, how to think about market research on short term rental properties. So I think that’s the sort of a general gist of what it is. It was up and running. There’s all these benchmarking tools like are you performing well or not? And that’s really hard to tell in this space is, you know, I’m making $50,000 a year I’m doing great, like the guy next door to us doing $90k you’re doing terrible and people didn’t know that before. We were around right. And so there’s a lot of that sort of benchmarking components as well.

Sean O’Toole  18:22

One of the things I’ve got a friend who’s got quite a few units and he started kind of trying to build his own brand around it so he’s adding like specific amenities like every unit has a Peloton every unit has like you know, some of these other amenities are you guys tracking things at that level to say like, folks with a peloton get X dollars more a year or folks with you know, some other amenity or, you know, bunk beds or bunk rooms, you know, whatever.

Scott Shatford  18:53

Sure. Yeah, there’s sort of a standard list of amenities on Airbnb and on VRBO. There’s probably about like 40 different amenities that you can track a Peloton is not going to be one of them. But you know, jacuzzi would be a good example and like Tahoe, right? Like, should I spend $5,000 a a jacuzzi? What’s the return on investment? Are they really making that much more money in the winter time? So you can do that analysis, not really in our Market Minder tool but like you know, people buy our raw data to do their own analysis a lot of times so they can dive deeper into concepts and think about amenities and think about you know, building out much more exact estimates and predictions on how much properties would earn so yeah, we have that in the dataset Yeah, for sure. Yeah, I mean, we know we know that lots of people we found that like you know, hey, there’s there’s some basic stuff a pool, a jacuzzi in location are really important, right, like having a lake view or ski in ski out are really important. But at the end, you know, at the end of the day too I think people want to be doing stuff there. They want to have activities and maybe we don’t really track a pool table or foosball table or you know ping pong table or whatever, like but those things so those things work but I wouldn’t say we have like the perfect stats on you know how much your game room is gonna earn you but it is definitely people are upping their game now you can’t just have you know beds and pillows and a bathroom like you got to be having a fire pit and a jacuzzi and like bags out in the back and like that’s really where how people with small investment can get really nice returns on those little investments on properties.

Aaron Norris  20:31

I was thinking about why Airbnb would would love you to be there because it helps a lot of amateurs from entering into the ecosystem and getting into properties that they’re going to get buried in. So I love the feature on the website where you can see the top performing properties just for that seeing the kind of features that they installed. Why recreate the wheel if you notice what’s working in the market, my it’s had some investors in Florida very interested in air, Airbnb being properties or VRBO. And I was showing them, well, if you’re going to do that you better build it with a pool. There’s definitely a set of criteria that if you didn’t meet, you’re gonna make so much less money.

Scott Shatford  21:08

Right? Yeah, there has to be super compelling property. You know, it’s not like how I used to do it just like no art on the wall, just you know, throw it there, IKEA that up, then you’re in the money, right? It’s just so much more competitive now. So all the good people, it’s, it’s free now. It’s really curated in terms of all your color schemes and your How do you get cheap a good looking artwork, but how do you create sort of that experience and these properties and that sort of just the name of the game is, you know, not just having a place to sleep but having something to do while you’re there. And that’s, you know, that’s that’s how people are making the big big bucks these days is, you know, group travel is huge, getting 12 people into a spot now or getting a big family. It’s you know, that’s, that’s critical right now. That’s why short term rentals have been so much better than than hotels and hotels just can’t compete with the short term rental environment with the amenities with theto To cook your own meals, not go out to restaurants to be able to get your whole extended family into one place for a vacation. mean vacations have a super bright future. I mean, especially in the sort of COVID era where everybody’s scared of strangers. You know, there’s no check in, there’s no elevators, there’s no common space, there’s none of that. That stuff, which is sort of, you know, scary to people these days. And so, that’s why you’re seeing this, you know, crazy numbers and these traditional vacation rental markets, so like tacos or Myrtle Beach or, you know, panhandle of, you know, sort of Florida area, and then they’re putting up numbers they’d never put up before even in this day where people are scared to get in the airplane or really go anywhere too far away. You know, vacation rentals are holding up really, really well. You know, the city’s different story. You know, nobody wants to own a vacation, right all in San Francisco right now. Even that’s not really illegal market. Yeah, the urban markets are pretty decimated at the moment, as people are sort of fling fleeing the urban center. But, you know, it looks like it’s coming back a little bit. Now. It’s not as terrible as it was, you know, the last couple months, but it’s definitely not the place you want to be right now.

Sean O’Toole  23:09

Are you guys doing or working with reporters or doing any reporting on that kind of stuff are you pretty much just stay focused on helping the investors and stuff? Because you got a lot of really interesting data, but like, kinda like you were saying early, right, it could be used in ways that are kind of anti short term rental too.

Scott Shatford  23:25

Yeah.  Yeah, we do tons of research into blog posts, and we’re in a ton of newspapers. And that was one of our initial strategies was like, how do we get in as many newspapers and you know, publications as possible? Because, you know, we knew Airbnb was a big part of the conversation, whether it was disruption to hotels or how it was, you know, reducing affordable housing or whatever the conversation was and how much merit it had. There was a lot of conversation about it. So we’ve Yeah, but we’ve been in every major publication. Like literally in the world, like you know, even the Wall Street Journal, New York Times, Financial Times all in the last week. And so like that was a big part of our strategy was how do we become the the data provider of record? Where anybody writing a story on what was happening in the short term rental space came to us. And now that you know now as you know, a lot of research reports, you know, we work with hotel data companies sort of merge it all together, compare what’s happening across hotels versus vacation rentals. We work with CBRE, we work with just a bunch of people yeah, trying to figure out what’s what’s the new and interesting trends. So yeah, come to our blog. We’ve heard a lot of content there.

Sean O’Toole  23:26

So… Awesome. Are you guys tracking the corporate use separate from the vacation use at all? You know, there’s some new companies popping up there like Zeus living and others that are trying to really go after you know, more of the corporate Airbnb and I think vo both have corporate departments too.

Scott Shatford  24:52

Yep.

Sean O’Toole  24:53

Are you able to track that separately? Any insights on that?

Scott Shatford  24:56

I think it’s a good market. I think it’s an interesting market. It’s not a market that we we track particularly well. It is complicated in this space where nobody really knows how to define a, an apartment a corporate rental. I love the term apart-hotel because I get very confused and apartment or hotel like I tracked it or shouldn’t attract that. And so a there’s so much gray area. Anyone today it’s like we try not to think about too much as 30 day plus rental, which we call a sort of mid term rental, which is what most of these Zeus living it’s pretty much all 30 day plus as far as I’m aware. And so I think it’s a big market. There’s a lot of people raising a lot of money around that. And now in that space, I think right now that it’s digital nomad movement, this sort of 30 to 90 day rental is probably the fastest growing segment in lodging right now. But to be honest, it’s not really the space where my data, my algorithms, my partnership, sort of releasing the track that are really kind of understand that As much as I do like the three day, 14 day booking sort of marketplace.

Sean O’Toole  26:06

Yeah, I didn’t even know until very recently, like Airbnb and I don’t know about VRBO had gotten into that, like 30 day minimum, you know, kind of rentals. And you know, I have said it’s kind of tempting, right? Go check out a new area before if you’re thinking about moving and go do that long term. Stay. So it’s definitely an interesting space.

Scott Shatford  26:27

Yeah, a lot that was out of necessity. Like, you know, nobody was booking one night stays or two night weekend getaways with their spouse, right. And all they saw was demand for people getting out of San Francisco and going booking something for three months out in Napa or something. And so they knew they had to sort of facilitate like bigger discounts. They had to figure out like how to motivate their host to be like, here’s the demand, go over there and like figure out how to price your place appropriately for the only, you know, demand that’s out in the marketplace right now. The market opportunity is huge. All right, like how many people don’t want to go through the hassle of signing a six month lease you know or working for it you’re doing it for work or even an annual lease I think there’s going to be there’s going to be a big migration to using these these tools so like just reduce all the headaches of like, the credit checks and the application process isn’t everything to sort of get into a property. And so yeah, I think…

Sean O’Toole  27:25

There’s furnished right because the only furnished offerings have been like these long-term stay hotels and it’s just just a dreary you know thing to go do you know when you want to go check out a new area or something and so the Airbnb is get really nicely furnished, especially in a competitive market. So that’s where those long term furnished, you know, nicely furnished units become pretty interesting. Anyways. I just thought that that was an interesting thing. I was wondering what your guys’s take on it was. Aaron, I’m sure you’ve got a lot I’ll let you get one in here.

Aaron Norris  28:01

Okay, yeah, I got a ton before COVID-19. Were you seeing any specific trends as far as the professionalization of the space or COVID-19 has definitely changed some things, but anything in particular, sort of three years run up to COVID some things that were happening.

Scott Shatford  28:17

Yeah, lots of things. I’m sort of thinking about what’s most relevant for your listeners here. I mean, I think you sort of hit on it, right sort of consolidation, professionalization, there’s always this sort of thought there’s going to be the brands and short term rentals that there had to be a brand that emerges. And so you saw a lot of money, money being thrown into companies like Sonder, Lyric, Domio, Stay Alfred, these are companies that raised $100 million dollars plus, and they thought that this would be like the new brand and emerges as a short term rental option of a cos as another sort of unicorn in the space. I think COVID is put those business models to test and sort of seeing that like, really, you know, consolidation is hard in this day. Having 10,000 disparate units in disparate locations with, you know, different cleaning crews, and different furniture and different pool types, and like, it just became like, too hard to figure out how to do this at scale, and like the most efficient way to run these businesses is with, you know, a guy with three properties that can go and sort of give them the love and attention they need. And, you know, be somebody that they’re that had asked in the phone calls from people that they check in or check out. And so I think, you know, it’s, it’s interesting, and I think Airbnb is changing their business model to really focus on this small host, individual operator instead of like, you know, the behemoths that were sort of emerging running up into the COVID era. So that was definitely one thing that’s, you know, it’s being tried, I think three out of the five of those companies I mentioned are now out of business or close to being out of business. So that’s pretty interesting. What else, what else?

Sean O’Toole  29:58

I just I think it’s a good, better story for Airbnb, too. Like, if it’s small local hosts, you know, making a living in the community, it’s a lot harder to go attack them then, you know, national companies that have raised a ton of money, right?

Scott Shatford  30:11

Totally, they were being villainized out there, as you know, just taking up all the housing stock and increasing the home prices and, you know, really, you know, turning multifamily buildings into hotels that really weren’t in need for hotels. But somehow they’re sort of able to gain the zoning and permitting and turn into the de facto hotels, and there was a lot of bad press about it, for better or worse, whether it was really having any meaningful impact on the city with a population of 10 million to half, you know, 1000 short term rentals. I think there’s, you know, not a whole lot of credence to that mathematically. But yeah, it wasn’t it wasn’t a great press coverage for them for sure.

Aaron Norris  30:48

Did the hotel lobby eventually come around? Or are they investing in the vacation rental space, and they change their tune?

Scott Shatford  30:58

It’s a good question. Yeah, I think there’s definitely that love hate relationship with short term rentals, they are there, they can’t deny that there is this big future where short term rentals call 8 or 20% of housing supply in the US that’s a pretty, pretty good number that it’s growing four times faster than hotels and eventually you’ll be 50% of the of the lodging supply unless it gets regulated out of existence. But you know, consumers love product. They love it right now.

Sean O’Toole  31:28

And maybe there’ll be stockholders of it too and Airbnb goes public, that it’d be pretty hard to sort of rip away that income potential from people in markets like Lake Tahoe, even though they try their hardest in South Lake Tahoe in other markets to make it a real pain in your butt to do it. Got it going on here in North Lake Tahoe again, right now, there’s a real push for saying you know, you can’t do short term rentals more than x days per year. And you know, the, the starting number there is a pretty small number and and you know, it’s like, changing these rules after the fact, and let’s talk a little bit about exempt. I mean, that’s one of the biggest controversy areas, right is like how this is impacting affordable housing in the rest. And you know, I do have big picture thoughts there like on his short term rentals, are they really the core problem? I have my own answer. So,

Scott Shatford  32:21

You know, housing economics is is very complicated. And so it’s really hard to sort of have that sort of two sentences. I’m like, you know, what is housing economics? What I can say is in a market like Lake Tahoe, having a bunch of second homes that nobody’s at is impacting your housing economics a lot more than people coming in and check into a short term rental. The only people people don’t like the short term rentals, the nuisance, the parking, the partying and like, just really like the NIMBY population that’s like, I don’t want this in my backyard. I miss my gray-haired neighbor. But that’s not really that’s not really impacting, you know, home values. If you think about like, I think they just think about though like how many second homes are there in the US, there’s 7 million. How many of those are occupied for less than 30 days out of the year and sit vacant, like a lot? A lot. And so you’re not going to build more, you’re not going to let us build higher, you’re not going to let us fill those properties, then something has to give, we have to build more build, hire, or let us populate our empty spaces. Right. I think that’s the conversation that has to be had with local planners or local city councils is you got to give us something here because people want to come there’s nowhere to go.

Sean O’Toole  33:31

Yeah, I mean, I think these local, they’re all looking for somebody to blame. And for somebody who passed the bill to, you know, buck to on affordable housing, but at the end of the day, it’s it’s usually you know, it’s usually a problem they brought on themselves and it would exist with or without short term rentals. Right. affordable housing, especially in California has a lot more to do with regulation and lack of building and everybody wanted to close the door behind them. So, you know,

Scott Shatford  34:03

Exactly.

Sean O’Toole  34:03

Vacation rentals are the punching bag of the day.

Scott Shatford  34:07

Right? There’s just so many things are going into, like, why are home prices going up so much? You know, this is foreign investment, it’s our, our tax policy is is a lot of things. It’s definitely not short term rentals, but every likes to sort of scapegoat to to wring their neck, and it’s easy to wring the neck with big tech company these days. It seems like the trend to do, obviously, but, you know, I think when you when you look at all the different things going on like that, you know, just new asset classes, single family homes, right people buying these up and a million homes is owned by these, you know, large companies, you know, nobody talks about that there’s probably more homes owned by this sort of, you know, I don’t even know even what uh, what’s the right term, but people just buying up 150,000 single family homes and then renting them long term and nobody talks about that. That’s it. The market which is controlling a lot of this hundred thousand at $300,000 home value, right and that’s a lot more than this affordable home you know affordable housing supply stock that it is a million dollar Lake Tahoe property.

Sean O’Toole  35:14

Aaron’s Dad and I went back to Washington during the crisis and you know, tried to get them to free up some of this bank owned inventory to the small local investors. And, you know, Fannie, Freddie, etc. And it was just incredible when we were in those meetings like they had no interest in the small local investors even though they would pay more like they just wanted to do big deals with big funds, you know, likely so they could go get a job with that funds later and pad their resume or, you know, I don’t even know what the the driver was, but it is it was, you know, really disappointing. I know we came back from that trip pretty disappointed in the in that result. And of course, we saw hundreds of times thousands of homes get bought by big institutional players.

Scott Shatford  36:04

Right, exactly. Yeah, you know, and back to my economics degree in college, you know, I feel like these things all worked themselves out in a natural market environment, right, like, you’ll build more homes, you know, like, there’s only so many people that want to stay in a short term rental property and pay a premium on a daily basis. So, you know, when that happens, that hotels will build more and take some of that supply and like, it’s all gonna work itself out in a free market environment. And whenever the government steps in and says, like, oh, we’re the smartest guy in the room, and we’re gonna sort of you know, manipulate everything control housing stock, it always just goes the wrong way. And then like, Denver is a great example. They came in sort of put a limit on, you can only rent to your primary residence on Airbnb. And so what he did is he kicked out every like, you know, local guy with one property and when it is a brought in saunder brought in dolmio. And they were then like, oh, there’s this massive lack of supply in Denver. Yeah, just kicked out all the average guys out of the market. Now they started, you know, buying, you know, hundreds, more than 1000 properties here. But these big institutional investors that could get the right permit, get their rights own convert the right asset into accommodate that sort of rental supply. So, you know, by trying to, I don’t know, you know, sort of has all of these unintended consequences you start to go in there and check in with the system because the smart connected guys always going to figure out the way around your your new rules and regulations.

Sean O’Toole  37:25

Yeah, hundred percent agree with that. The whole unintended consequences thing, right. Like, and I think I would add is that we haven’t had a free market and housing as long as I have looked at it,

Scott Shatford  37:41

Yeah, I hear ya. And that’s why I just my very altruistic, naive self. It’s like, why can’t you just like let us figure it out. And the short term rental market it was the Wild West when I started and maybe I just I still dream and those good days when there was no oversight, no regulations, no permits.

Sean O’Toole  37:59

What advice do you give an investor who’s looking at jumping into short term rentals? Right? So hey, I’m looking at a taco or whatever. And I’m trying to figure out which market to go into. Is there advice you’d give them to give them a better chance of avoiding having the rug pulled out from under them?

Scott Shatford  38:19

Yeah, that’s good question. I mean, I think, you know, there’s a few ways to think about it. And Lake Tahoe is it’s a sort of a in between exam because Lake Tahoe seems like it would be a great example of a history of being a tourist destination, both winter and summer. Great. Yeah. And like, it’s a lifeblood of a lot of the businesses and the restaurants and their everything that’s going on in that market, all the tour operators and you know, all that stuff. And so that’s one of the things that people are typically looking for, like, how much is this really the lifeblood of our local economy? Like how much is this really impacting all the businesses the local Chamber of Commerce, and like typically, people aren’t going to pull the rug completely out of that industry, because there’s such a backlash from every business owner, every mainstream, you know, operator, that, you know, they’re going to go out of business if you pull that away from them. And so you know, it used to be in the cities, that was the best opportunity, but talking about regulation is just keep it there. That’s typically how we thought about it. But we’ve continually been surprised, to be honest with you. Like, it’s gotten to a point now, they haven’t done anything draconian at this point in time, it’s probably not going to get too terrible. It might put a few more limitations on here to increase your permit fees or increase your tax or something like that, but it’s not going to go to an outright ban. And we feel more confident in going into the next year that these cities are trying to shut down economic activity, right. They’re trying to get more people to visit. They’re trying to put some more money in the pockets of their local residents. And so there’s a much louder voice or let’s stimulate the economy and let’s not pull the rug out from our local residents. So I do feel like it’s a more Positive regulatory outcome, you know, in the next 12 months is that a, you know, affordable housing conversation is pretty moot at the moment.

Sean O’Toole  40:10

Right, gotta get the economy going gotta get Yeah, businesses

Scott Shatford  40:16

There’s is not really a good public resource for me. I know a lot of these companies have internal sources that like are all tracking on the city council notes. And a lot of people are getting pretty sophisticated about like, really understanding, you know, which way the winds blowing on regulation and every in every city. It’s not something we specialize in. But there’s no doubt in my decision, you know, when you’re looking at investment is really understanding where they’ve been, what the conversation that been locally, where they landed, and if you’re in a market, you should get involved, talking to your city council people, donating funds, getting people organized around it, because if you don’t hotels come in and do it for you. It will kill your way.

Sean O’Toole  40:56

I think it’s probably time for I mean, I’ve thought this for a long time. Just for the small real estate investors that it’s probably time to, like, organize, you know, an association lobbyist group like the I’m a pilot, the ALPA for pilots, right has a really strong lobbyist arm and we all pay dues every year and they’re always asking for more money, but that’s okay. Right. Like, it really helped make sure that airports stay open, but I’m really seeing that for real estate investors and for short term rental folks and that that feels like that’s an opportunity. I know, I would certainly give generously to something like that. And have you ever had those conversations or talk to anybody who’s thought about that?

Scott Shatford  41:40

Yeah, I talked to I talked to a fair amount of them, you know, and it’s, it’s a tricky one. It’s sort of this like, I don’t know, chicken in the egg conversation. And it’s just like, you know, how effective Can you be right? And this isn’t like an industry full of a bunch of multi gazillionaires where you can just go and sell Say, Hey, you know, we’re gonna take a nice little fee from you on the basis like it is it’s a it’s 200,000 individuals that are sort of making a little bit of side cash on it. So it’s really hard for the individual person to see that they can sort of make a difference. So from a lobbying lobbyists perspective, yeah, there’s a couple that VRBO and Airbnb have hired to sort of like, you know, take the brunt of that effort on themselves, they have the most to lose. And so, you know, they’re willing to spend the most. Well, I think what they’ve tried to do is motivated at a very local level, because what they found to be impactful is maybe not spending in Washington, but hearing voices and local cleaners, local residents, local business owners, you know, telling their story about you know, how this is going to impact their their lives. And so, it’s more about sort of rallying the local residents into getting and just being present and being a part of the conversation. And that’s typically what’s even more successful. And it’s almost always in the city level, if we can talk about for a while, but you know, there we go. There’s been a lot of work and trying to get this done the state level, right, you know, like so Arizona has state policy, you can’t Oh, you can’t regulate short term rentals any any further than you are a long term rental in terms of like, what residents can be there or you know how long you could rent it out as one or the other. And so that’s the most effective way to do this. Because the problem with City Council’s they they swap out very often they always have different reviews, and they don’t have a lot to do apparently. So. Yeah, they just sort of waffle back and forth between yes and no, depending on each seat. So state state legislation, legislation is the way to go. Yeah, there’s a couple organizations that actually slipped my mind right now. So maybe get back on some notes on who’s out there doing this in the moment.

Aaron Norris  43:48

A couple years ago, I was doing a lot of research and I stumbled upon a report that said the number one fastest growing trend in the experience category was treehouse Airbnbs. Is…

Scott Shatford  44:00

Yeah I love it honestly anything funky but it tent up put it in like a shipping container in your backyard like people love weird thing. And I that is like the key I’ve got guys putting up yurts in Joshua Tree and just making a killing and like, it is really about how creative you can get the unique supply. I got a guy dragging old airplanes to sleep in it’s in different locations and yeah, there’s a bunch of like people love created unique, funky. They love to tell a good story. Take a good Instagram photo. And like that’s really what what’s out it’s just different and unique.

Aaron Norris  44:35

Interesting.

Sean O’Toole  44:35

Twig, inner leaf twig nests. Yeah, crazy stuff.

Aaron Norris  44:41

I knew somebody in Mexico doing that he was creating mud huts for airbnbs I don’t know how it went. But that was his goal. The mud hut experience sounds wonderful. Now COVID-19 It seems like a lot more people are staying local. Has any of the metrics changed as far as how long people are wanting to stay Is it just they’re getting away for a week because they’re tired of being in LA?

Scott Shatford  45:04

Yeah. So your length of stay is gone up dramatically. So it used to be just shy of four days was sort of the average like this day across the US. I went up to about nine days depth of COVID back down to about a week now but that’s a pretty seismic shift for you know, that’s, that’s pretty big. So, with that is a lot of people staying 30 days or longer, a lot of these people are, you know, 30 day Plus, it’s a relocation thing if they’re packing their bags or getting out of Dodge, so you know, like, and so people are much more in this nomadic lifestyle now, right now, just getting out of the major metropolitan hubs. So that’s a big trend. The other trends people have no confidence in the future so people aren’t booking Christmas anymore. People are booking Thanksgiving, people are gonna wait until two to four weeks out to book that just because they don’t know what’s happening, what’s going to be shut down, what’s going on. So we that’s the hard part is starting to predict where things are going to be trying to like do revenue management right now it’s just it’s really difficult because it’s a lot of people booking for tomorrow and not booking for six to 12 months. That’s just pretty unheard of at the moment, which, you know, makes sense. Obviously

Sean O’Toole  46:12

It makes, but it’s a huge insight that it’s gotten that short term I mean that you know, tomorrow right I already kind of doing last minute.

Scott Shatford  46:22

Data is showing that over 50% of their stays there for today or tomorrow. And so that’s not like a planned vacation. That’s like, I’m on the I’m in the car and I’m going to go here or I just need to get out of my house because my I don’t know my dad’s in it or something right?

Aaron Norris  46:38

I’m out.

Sean O’Toole  46:40

Well, I’ve had days I’m ready to go right then.

Aaron Norris  46:45

With that being the case is it impacting the the per night rate, since it is so last minute, are you seeing the average stay amount per night change much?

Scott Shatford  46:54

Surprisingly, not actually. Average daily rate is up year over year and we sort of keep like making sure that Numbers rikes it doesn’t make a whole lot of sense but it is larger properties getting booked gets higher and properties getting booked some of that’s just like sort of the the makeup or distribution of bookings is not going to studios in Tulsa, Oklahoma, that’s going to the four bedroom properties and the nicer spots more in the suburbs. So that’s sort of driving a little bit, you know, EDRs obviously down in major metropolitan markets, but, I mean, in Lake Tahoe I didn’t look at it, but I would be out it’s up towards probably up 20-25% year over year would be my guess. You know, everybody’s calendars were empty, coming out of COVID. Demand sorry, came up out of nowhere, as soon as lockdowns are removed and and people yeah, I’ve just seen you know, unheard of demand in these markets. So people are pricing accordingly. But it’s all you know, everything right now is market by market by market. There’s not like one it’s hard to find threads these DC Besides, every market is different in So, so go buy your market minor. I don’t even think about that. It’s perfect plug for your day. Perfect. Yeah.

Sean O’Toole  48:02

Are you seeing? Are you able to track or see? Or do you have any insights on like ADUs is becoming a really hot topic I can assess? Are they delivering units, you know, these these things that you put in the backyard that are one bedroom, you know, whatever. Is that? Is that a thing that’s popping up for you at all, or…

Scott Shatford  48:21

it’s only thing I hear about in California. I’ve got two startups that I know about friends, friends of friends starting that it’s cool, it’s cool business obviously, solves a lot of problems. You know, affordable housing is one of them and just getting more housing supply without having to deal with, you know, the government and the planning, folks. So I think it’s an interesting, I just, I’ve only heard about it in California. So I’m sure it’s a it’s a it’s a thing there, but I just don’t hear about it elsewhere.

Sean O’Toole  48:53

Oh, interesting. Because we hear about a lot here. Yeah. So yeah, no question. No, that’s great that you’re not..

Scott Shatford  49:00

Cool business models, lots of purpose built building like a lot of people are trying to figure out how to get around regulation at the end of the day when it comes to short term rentals. So a lot of people are building multifamily units with like an attached like think about like adjoining hotel rooms, but that sort of door that sort of connects. And that sort of then qualifies as being a, you know, attached via unit so that like you can get through all of your Denver regulations like it has to be attached dwelling unit or whatever. And so people are building a purpose built that meets the regulatory letter of the law. And but he’s really just built to Airbnb, the property. And so we see lots of people getting creative, to try to figure out how to sort of get around, you know, the silly regulations of all these markets.

Aaron Norris  49:50

Just a funny story really quick. Last time I was in Denver, I stayed an Airbnb. I went to dinner with Josh Dorkin oddly enough of BiggerPockets And I lost my key and I ended up having to stay at a hotel as I was in an apartment building that had a doorman and she was asleep. Do you see any opportunity because of COVID-19 the conversation about commercial and different property types really struggling as small businesses go under you see the interesting opportunity there to go after maybe small hotels or anything like that?

Scott Shatford  50:28

Interesting. you know, I don’t know the hotel market entirely well, but I was talking to my my banker friends ever, you know, Bank of America who saw this pretty well and I was like, when are they gonna go to business? Where are they gonna like you know, start boarding up their windows and like, yes, that’s not gonna happen for a while like there’s still there’s this is gonna come back and kill that too much invest in these properties to run away from them or think about converting it. What are you going to convert it to right now? You know, office space, are we retail space and so like there’s just not really a whole lot of optionality on it. So I all I really know is the the hospitality logic space. Yeah, nothing really like clevers coming to mind at the moment about what’s going to be the new usage of commercial real estate. I’ve seen scared a lot of people away from Master lease models, and, you know, nobody’s really going to take on that risk anymore. And, you know, doing what I was doing, but times 1000 you can nobody can predict a black swan event, right. And that’s really what it is for lodging. You know, no matter how good your, your, your business strategy was, you know, it was just random luck with your exposure to what COVID sort of presented. But, you know, with hotel occupancy being so bad with so many hotels being built, and when you know, nobody really wants to get into the, you know, studio apartment and whatever, call it downtown Chicago. There’s enough of that right and the beauty about the long term Yeah, the short term rental market is you can convert that to long term, you can get a tenant in there, it might be under market value, but if not sitting there vacant, you can’t convert hotels too much like it is expensive to convert a hotel room. And so they’re sort of stuck with that, for better or worse, unless they’re just going to demolish it and start from from ground zero. So…

Sean O’Toole  52:19

How about conversion of RV parks where you take the empty spaces and you put a tiny home on it, and or a park model is what they’re called. Right? And are you are you guys seeing, seeing some of that or any other, you know, interesting conversions of property and do it into the, you know, short term rental space.

Scott Shatford  52:43

There’s lots of creative stuff out there. I don’t know. It’s nothing that is really coming to mind right now. I think we talked about a little bit earlier, but I’m not really seeing this conversion of space really. I just made me seem to listen a little bit harder, you know more intently to that. But, uh, trying to think? No, not not really, I think yeah, it’s just not, there’s like there’s just not enough short term rentals, especially in urban environments where that’s where conversion happens. I guess there’s nothing exciting about having a, you know, a smaller short term rental in an urban environment right now. So maybe some of that creativity will come like once it’s sort of known, like, Where, where are prices for retail for office or whatever, and, like, you know, how does the short term rental concept work, but I think it’s just too early in the cycle to figure what’s going to make sense move forward.

Sean O’Toole  53:35

This is going to be stuff on sale, right as a result of COVID there’s gonna be some commercial there’s gonna be some types of properties that are gonna be on sale and if you can get those cheap and convert them like for our you know, our audience, right, that’s, that’s the, the million dollar question. Where is the opportunity in this market, to buy something that’s out of favor and turn it into something that’s in favor?

Scott Shatford  54:00

Yep, no, I mean, I think I spend most of my time on the rice resin residential side. And this is one of the biggest shifts that we’ve seen as well, there’s a couple of things, which is, you know, what was very seasonal markets are becoming less seasonal. And then maybe Palm Springs is a good example. They’re putting up the most ridiculous numbers I’ve ever seen in August, August, July are the best months of the last 12 months for for that market. And if you ever been to Palm Springs in August, it’s like just walking.

Aaron Norris  54:30

I live very close by it’s like 120 degrees right now.

Scott Shatford  54:32

Right? And so it’s doing some of these things like just extending sort of seasonality. It’s extending where people are living and working from and so a lot of the metrics that may didn’t allow the market maybe didn’t make sense a while ago is because there are two seasonal or you know, Hamptons, you know, they they were up 800% in April and May in the Hamptons, because everybody was just getting out of New York and it’s like all they knew the Hamptons apparently. It’s the only place they want to go.

Aaron Norris  55:02

So New Jersey is off the table?

Scott Shatford  55:04

Right? Yeah, I don’t know. So there’s a lot of these kind of cool up and coming markets that are sort of just outside of the city center that are smaller markets like less than like 50 Vacation Rentals that are all these sort of like new thriving, interesting opportunities. So I think there are a lot of like fundamental changes in like, what’s earning money, what’s not earning money, right now. So what how can I be more specific about that opportunity? It’s about you know, buying the properties. You know, the thing is, most real estate agents don’t know any of this stuff. Like if you ask a real estate agent in any of them like how much these property Kickers, a short term mentor, like how do you think the market sort of moving here they know nothing, right. So if you just know a little bit that like the short term rental market is, is making 20% more here over the last, you know, 12 months, you know, you can sort of figure out what property prices are going to move because I do believe they move In these markets, because I have a lot of friends buying properties using my data, a lot of people getting into certain markets like Galveston, Texas is a good example or Pigeon Forge, Tennessee or Destin, Florida. A lot of these markets I’d never really heard of before, that are probably 20-30% investor owned at this point in time, just because that is the returns on short term rentals are so great.

Sean O’Toole  56:25

You have a lot of Realtor customers who just I’ll just take a second to say, if you didn’t understand what he just said, it’s go sign up for AirDNA. Get an understanding of what’s happening with short term rentals in your market understand what they rent for and, and what the trends are and all there so that you can be smarter than your competitor and close those deals.

Scott Shatford  56:47

So thank you. Appreciate that. Yeah, it’s like, yeah, I think it’s all about differentiation in this market. Right. There’s a lot of investors a lot of second home owners coming out. I try to teach these teach these agents I have not really but I go to Inman in the special events say, hey differentiations, but it’s all about how are you going to become the expert on short term rentals in your market? Did you know that there’s, you know, 4800 properties in your backyard that are Vacation Rentals? You know, how do you upsell people that are looking to spend $300,000 were like, Hey, this is a profit center property. If you buy Lakeside spend $700,000, you can qualify for it and you’re not going to pay $1 for this property, you might make money on that property. So you know, how do you just sort of facilitate more transactions get a higher value transactions with knowing this data? I just it’s always fascinating to me, but maybe I’ve just been at it for so long. I’m like, yeah, how come you aren’t doing this? It’s like, it’s just still this is still new takes time. Like it’s, it’s been 11 years since Airbnb started. I can’t wait another 11 years.

Aaron Norris  57:51

What some of the technology you’ve been excited about in the space that helps with things like noise control or whatnot. Is there anything you’re about?

Scott Shatford  58:02

Now all that home automation stuff is awesome. I just I mean, I just picked up my Tesla yesterday I’ve never driven way until yesterday and I’m like, this is how like the home experience should be right? You get in it like knows your name it says hi unlocks things it gets your refrigerator all ready to go. Like, you know, it was the thermostat, the right place that heats up your pool, like all that sort of home automation stuff is is super cool. Like just having your entertainment system ready to go. I just that whole experience I think has become easier. Do you ever walk into a vacation rental with like seven remotes and you’re just like, I’m not even gonna attempt that experience. I’m not even gonna try that. So just like some of those basics, just making it really flawless. You know, Amazon echoes and that sort of just whole ease of walking into a home knowing the technology i think is always interesting to me. But, you know, sort of just a techie techie nerd.

Sean O’Toole  58:54

Three to four times I get to use Netflix on the previous stayers.  Oh I don’t know what’s wrong with that. You know that I mean, I had my Netflix account on all 10 of my properties. I think they may be limited at some point in time, but like, yeah, who cares make it easy on people who even remembers their Netflix password? It’s always such a pain in the ass. It’s so stressful. And the kids are yelling at you like, Where’s my show? You’re like, I don’t know my password. I can’t do it. So yeah, just making things easy in the home. Automation is good. What else exciting. I guess it Noiseaware stuff is cool. I mean, I know those guys really well. I mean, I think that’s interesting. Yeah, I’m not actually monitors sound levels, or is it I know there’s I met a gal who has a Wi Fi and she looks for how many Wi Fi connections like to see if it’s above the occupancy limit. And I’m gonna forget the name of her company and I feel bad for not plugging her But yeah,

Scott Shatford  59:49

I know you’re talking about I should know it too. I’m sorry.

Aaron Norris  59:54

Maybe on the show notes.

Sean O’Toole  59:56

Is the NoiseAware where one has sound? It’s listening?

Scott Shatford  1:00:00

Yeah, so it’s sort of a you plug it into, you know, an outlet and it’s sort of just measuring decibel levels. And so if you get above sort of a sustained, sustained decibel level, it will send you like a text alert or notify you in some way, shape or form, you know, then it’s then it’s like then what right then you’ve got to like yell at your guests at 1:30 in the morning, and yeah, that’s a whole nother down day, but at least it’s good to know.

Sean O’Toole  1:00:23

Oh, Wow.

Scott Shatford  1:00:28

I think the technology is cool. And I think it’s even more powerful, I think at the regulatory level to just talk about all the sophistication you have how you have your, your party squasher is it called Party Squasher? It might be that yeah. Yeah, and are NoiseAware. So it’s like, Hey, we have ways to monitor we have ways to sort of make sure this is not bothering neighbors. And that’s really their sort of strategy is just giving a, you know, local city some more comfort, you have some, some technology to control that component. I don’t know ya know, there’s there’s not a whole lot you can do for getting a home like once you get in the home, you know that that’s sort of the biggest problem was just automation of getting in homes you know locks, you know keys and the most awaited thing on the planet and so anything you do to get away from keys and get into digital locks I mean that’s the first step you got to take the short term rental space.

Sean O’Toole  1:01:21

Have a favorite digital lock now

Scott Shatford  1:01:24

Don’t ask me I’ll get in trouble because they are. They are they are like, like to try to talk me into promotion. There’s one here Remote Lock is a local one, but they’re more of a big property managers at scale. There’s so many of them. I don’t really I can’t really tell you that there’s August Locks, Schlage locks, are all good. I don’t know I don’t know. Really whatever taps into your PMS. So like look at like gas tea or whatever you’re using and just sort of see what integrates because you want that all to be connected custom codes going out to each new gasps Without you thinking about it, all that things sort of interconnected.

Sean O’Toole  1:02:03

Now in the revenue optimization side are you integrating with some of these platforms? Is that a business for you guys where you’re giving them the, you know, these the guest or the PMS system? They PMS is the right word, right?

Scott Shatford  1:02:18

It is. Yep.

Sean O’Toole  1:02:19

Yeah. Are you you supplying them data so that they can like automatically set rates and that kind of thing?

Scott Shatford  1:02:25

We are, yeah. We have a couple of partnerships like that, where we’ll provide all the pricing for the properties on our platform. One of the bigger ones is with BookingSync. They’re out of LA and they use our pricing algorithm to like you know, display rates, change rates and push those out. accordingly. We’re, you know, it’s a big part of our strategy is thinking through how we want to approach it. It’s just sort of a, you know, there’s there’s 70 players that are like PMS is with properties at scale. They’re all different places and sophistication and ways of pushing and it’s sort of just a rat’s nest of connectivity in the vacation rental space. So we’ve been sort of like waiting for the dust to settle on some real sort of clear standards and like, you know, what is a rate? And do you push pricing? And what about the minimum stay? And, you know, I didn’t really want to lead that whole charge. But yeah, we have some partnerships and revenue management. Pricing is the single biggest decision people should be making on a not a daily basis, maybe, but on a weekly basis, you should be really thinking about, what’s it looking like, what’s your occupancy over the next couple weeks? couple months? What’s the competition doing? And that’s sort of a headache, right? Like a lot of people don’t want to do that across 10 properties. And so we have enough data, we have enough information to be able to do that automatically for people. I definitely see that as a big place. We’re investing time we already have it and market minder, you can see recommended rates are but you can’t go into autopilot mode and just sort of like push it wherever. So that’s definitely a big thing we’re working on,

Aaron Norris  1:03:57

Especially now with everybody waiting till the very last minute to book, it’s a lot of stress.

Scott Shatford  1:04:03

It is a lot of stress. Right? And the hotels have a really good because they’ve got it, you know, 100 rooms to get it wrong on. They don’t have to get it right. You know with a vacation rental. It’s like, either you’re booked or not you screwed it up or you got it perfect, right? There’s only one opportunity to get it right. And so it is pretty stressful and you want to not be too big of a weenie. I remember being very concerned. You know, we gotta got to get booked. I’m going to go to $99 night, and then I got booked in like five minutes. I’m like, No, I underpriced it. I should have felt strong. Like, why why am I such a weakling? Just no confidence. So yeah, it’s super hard because you can’t Yeah, you can’t really? I don’t know. It’s just it’s binary. It’s either booked or not. You don’t have a chance to adjust. You know.

Sean O’Toole  1:04:46

I got one more. I don’t know where we are…

Aaron Norris  1:04:51

We are at that mark. So go for it. And I’ve got one last one too. If it if it’s not you that’s asking it so go ahead.

Sean O’Toole  1:04:57

Okay, so um, No big one everybody’s talking about right now is Airbnb filed their S1 to go public you know as these companies go public there typically tends to be even more opportunity even more stuff that happens any you know anything there that you’re seeing Did you get friends and family shares you know

Scott Shatford  1:05:21

I wish.

Sean O’Toole  1:05:23

Any any comment on that event and what you think and what you think their prospects are should we all go out and buy stock?

Scott Shatford  1:05:32

I mean, I like it but you know, I’m Airbnb’s biggest poster boy right. I started there I made money there I created a business off the backs of their business and, you know, so maybe you should find somebody with like a more like tempered view or a more like, you know, unbiased view of them, but I mean, I love it. I mean, obviously, Airbnb was crushed in this in this COVID environment, they had to go raise a bunch of money $2 billion at terrible terms, which I do think is forcing their hands in some ways to go public maybe before it’s perfect. But yeah, have you looked at the NASDAQ it’s not a bad time to go public I mean the numbers are pretty ridiculous at the moment. So I don’t you know, I think they were trying to go in March unfortunate there, you know, a couple months too late to do that. I see big things for Airbnb The brand is, is phenomenal around the world, going public, you know, gets a lot more of your host as shareholders as people are more invested in your business. I think it’s such a good consumer brand right now. People are loving the consumer brands like you looked at like the Tesla stock lately. Like it doesn’t make any sense. And like, Airbnb is any one of these things. And people with millennials with stock portfolios now is through the roof. They got no football to gamble on I can’t gamble on the NBA Finals or whatever. And so they go, they’re all getting stock portfolios now. And when are they going to go invest in the one thing that they know is Airbnb. So I really do feel like there’s going to be you know, it’s a great consumer brands, a lot of young people are gonna be investing in it, you’re gonna have all these stakeholders that feel like they’re, they’re responsible for the bottom line these hosts that are gonna come in and pile into the IPO or, you know, post IPO price. So I think I think I’m pretty bullish, but you know, take it with a grain of salt.

Sean O’Toole  1:07:17

And, you know, just on the opportunity pieces there. I mean, ecosystems been around for a while now, is there any spot in the ecosystem obviously, that, you know, there may be something you’re working on that you want to keep to yourself, but something that you think, God, I wish somebody would come in and do this because there’s an opportunity here?

Scott Shatford  1:07:38

Good question. Good question. I think you know, with all of these companies, you know, Airbnb, really, what is it at the end of the day, it’s just a brand. It’s just, it’s just a place to go book, a vacation rental, and you don’t have to go into Airbnb. It’s just all about our distribution network. There’s always room for disruption, right? Like you look Get Expedia, booking.com is you know 10s of billions of dollars a company’s basically just because they’re smarter paying for ads and like getting on the first page of Google search results so there’s always a huge opportunity and being able to disintermediate that stuff consolidate supply across three platforms create a new place to see and view and book properties that are offered these main brands and so and you can always charge really good commission’s on that if you can get it done right. So that’s, that’s what the big opportunities are is there’s no reason this is a three horse race. It’s just because why why is Airbnb unique? This supply is not exclusive to them. It’s not that you can’t go find that same property and verbo or book it directly to go to the kasa.com and so I’ll leave it there but like yeah, marketing distribution, everybody’s trying to get away from having to be reliant on Airbnb or be reliant on VRBO every is looking for independence just like the hotels. Don’t want to pay 20% of booking.com for a booking, there always be opportunities if you can sell distribute properties at cheaper price…

Sean O’Toole  1:09:09

Any niches to like waterfront properties or, you know, mountain properties or stream properties or ski in ski out does that

Aaron Norris  1:09:18

Mud huts

Sean O’Toole  1:09:20

Mut huts.

Scott Shatford  1:09:22

I sort of like the whole connected trip thing that’s something that Airbnb coined is you know, for, it’s called for the, you know, executive like, you know, what’s your private plane to your Aston Villa and your experience and your chauffeur and your butler and all that then I think there’s still a lot of opportunity maybe not at that like extreme of like, find your private island level but a sort of the whole thing booked for you, right your experience. Now, everything is sort of a package deal without the travel agent both.

Aaron Norris  1:09:53

It’s interesting said that the lady that I stayed with at Denver, she moonlighted on the side doing marijuana experiences. With an Airbnb and she also had 50 jeeps that she rented out as part of the experience with some of her properties. So she had sort of expanded on that concept. So I could see that.

Sean O’Toole  1:10:09

get them high and put them in a Jeep sounds like a great plan.

Aaron Norris  1:10:13

Not the same vacation package. But what’s a last question? What’s next for AirDNA? What are you guys working on?

Scott Shatford  1:10:22

We’re looking at crawling out of this COVID hole that we found ourselves in as a lot of us are. We got a lot going on. I think it’s all about getting data from people. It’s all boring stuff, to be honest with you, it’s gonna bore the hell out of your listeners. But you know, there’s there’s 11 million properties, we only have access to less than a million of them in terms of source data. So for us, it’s all about data is king and environment. Accuracy is the name of the game. And so just continue to think about how we compel people to give us data. So we can sort of always be that record, like data. Yeah. Source of record from the industry. You know, beyond that, I’m going to be looking at you know, there’s good tech challenges, pricing is always going to be one of them. And really real estate real estate, real estate is where we think that the final frontier is for us is, is, you know, why isn’t every piece of property even thought about or valued in terms like what the short term rental value is? So we talked about with residential real estate, you know, properties, values never traded on like a cap rater would be with commercial real estate. But why not? Why isn’t this sort of the way that vacation rentals are changing hands? Because that’s what it should be. It’s a business. It’s predictable revenue, like you’d have five years of rent roll. And so like, why isn’t that sort of a clear or like, why isn’t that part of the buying process, especially for vacation rental properties? I can sort of go on and on and on. But would you think that when people are building real estate purpose built with short term rentals in mind or converting or whatever it is, there should always be this component of, you know, what is the one floor ,two floors of short term rentals, we should be building on terms you know, below the condos but above the retail and like that, that will be a conversation that’s happening with sort of every new piece of you know, high rise real estate is like you know, what is actually detrimental component.Anyways

Sean O’Toole  1:12:17

I’ll bring this back to our our listeners, right so real estate investors hopefully took away from this that you should be paying attention to the short term rental market, right? If you’re not looking at that as one avenue of exit on a flip, right, you may be leaving dollars on the table. Realtors, same thing like understand what’s going on in your market, you’ll be able to better serve customers coming in and market help them make better decisions. And I would say for our home services companies to you right, like, think about the value ads you can bring. You just heard Scott talked about the fact that you know, pools, spas, firepits, outdoor barbecues, right, all those things out value, those are pretty nice sales for you in the Home Services space, right? So to be going and finding these folks on the short term rental side and reaching out to them and explaining it to them in terms of what it will do for their income, right, so you can look at Scott site, look at the difference in income that adding that thing will be and you can then you can now say, Hey, I’m gonna sell you an outdoor barbecue, it’s gonna cost x, but you’re gonna make why that’s a whole different pitch, then gonna buy barbecue. So anyways, lots of good stuff. Definitely. Good. Pretty good service and very cool. Very cool business. So thanks, Scott, for being with us.

Scott Shatford  1:13:44

Thanks for having me. Good to see you again, Sean That’s another five years into Alexa.

Aaron Norris  1:13:48

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.

The post The Data Driven Real Estate Podcast #10 – Vacation Short Term Rentals with Scott Shatford, AirDNA appeared first on PropertyRadar.

Not all off-market properties are positioned to be a good buy, so selecting your next investment or listing prospect is about finding the property that makes the most financial sense and finding the owner who’s ready to make a move.

If you’re motivated to find off-market real estate opportunities and curious about how to turn them into deals, keep reading. This is a guide about how to find off-market properties with actionable insights on how to use data to turn them into off-market deals based on time-tested strategies the professionals use.

We’ll cover:

1. A few different methods for finding these properties in your area of interest
2. How to evaluate whether a particular property will be a sound investment for you or your client
3. Pro tips on how to go make the deal work in your favor

What Are Off-market Properties?

Before we start describing how to find off-market properties, it’s important to be clear about what these properties are and how they are different from traditional real estate listings. Put simply, the term “off-market property” can refer to any property that is not currently listed for sale.

Therefore, you find these properties listed on typical real estate listing platforms like the MLS. Nor are the owners advertising them in alternative venues like newspapers, magazines, Craiglist, Zillow, or Facebook. In fact, while the sellers of off-market properties are usually willing to sell their homes if the right deal comes along, they’re different from traditional sellers in that they are not actively attempting to market and sell their properties.

Benefits of Pursuing Off-market Properties

Given that off-market properties aren’t actively marketed for sale, some may wonder why savvy investors might bother with them at all. The truth is there are many benefits to focusing your investment strategy around off-market homes. And if you’re a motivated professional, you’ll discover incredible deals that others missed because they weren’t willing to leverage data.

Below, we’ve laid out the biggest benefits when choosing to pursue off-market properties. This will give you a sense of whether or not this strategy is the right fit for you or not.

Supply is unlimited

The biggest benefit of searching for off-market properties is that the supply is virtually unlimited. While your local MLS service might only have a few hundred properties listed at a time and only a small subsection of those properties might fit your criteria, there is no such limit when you’re searching off-market. For example, PropertyRadar has data on every property, which means you get insight into millions of off-market properties.

And while some property data sites may limit you to searching for only one type of property, like off-market commercial real estate or off-market mobile home parks, PropertyRadar gives you the flexibility to find the property that’s right for you. Whether you’re looking for off-market residential, commercial, land, industrial, mixed-use, or other types of property, you’ll find it in PropertyRadar.

Even investors with a particular focus area know that the best off-market deals can sometimes be found when you use data to look a little deeper and think outside of the box.

Less competition

These days, market listings are swamped with competition. In most markets, inventory is very low and it seems like every other listing is ending up in a bidding war with multiple offers. By focusing your search on off-market properties, you’re virtually guaranteeing that there won’t be any other competition for the property.

Since the supply of off-market homes is so much greater than the demand, there’s only a minuscule chance that another investor will be interested in the same property at the same time as you. Instead, it’s far more likely that it will only be you negotiating with the sellers.

Save time and money

Lastly, you can save time and money by looking at off-market properties. For example, rather than only looking at listed properties, being represented by someone getting paid a commission, for your next investment, PropertyRadar allows you to connect directly with the owner of the property. Now you can work together to develop with an arrangement that is mutually beneficial to you both, while saving those commission costs.

How To Find Off-market Properties – The Traditional Way

Fortunately, there are several ways to find off-market properties to add to your portfolio. And while some are better than others, it’s important to understand your options. Some are free but can either be time-suckers or require a whole lot of waiting around and patience. Others might cost a little but can ultimately end up saving you a ton of money and lots of time.

Hire a Real Estate Agent

Even though real estate agents are used to utilizing their local MLS system to find available properties, most agents have connections in the industry and may have insider knowledge about interesting properties that are about to come on the market. Agents may also have insights on properties lingering on the market due to potential situations with owners or issues with the property itself. And a highly motivated agent may be willing to reach out to off-mark owners on your behalf. It’s a great opportunity for them because even if you decide not to buy the property, they can often take the listing and sell it to someone else.

As previously mentioned, if you do decide to go this route, you will have to pay your agent in exchange for their time and efforts. And patience will be in order as you’re at the mercy of the agent’s schedule and efforts.

Connect with Wholesalers

In real estate, wholesalers contract with interested sellers to buy properties. Then, the wholesaler finds a buyer to purchase the property from them at a slightly higher rate and keep the difference between the two purchase prices as profit. Often, the properties that they purchase from the sellers are off-market deals as a result of persistent direct mail marketing, driving for dollars, door knocking, cold calling, and other hyperlocal marketing outreach efforts.

That said, it’s important to note that, as an investor, you would be the buyer in the above scenario, meaning that you would pay slightly more than the wholesaler paid for the off-market property. Sometimes you’ll purchase the property after the wholesaler closes the initial purchase. Other times, the wholesaler will assign the contract to you while in process. The finder’s fee or assignment fee can be a small percentage of the contract or a very hefty sum depending on the strength of the negotiated deal. Using public records to find off-market properties allows you to keep that spread yourself.

Talk to Local Builders/Contractors/Inspectors

As with real estate agents, builders, contractors and inspectors will run into projects that may be challenging for the owner to sell, perhaps because they don’t have the money to pay for the work that needs to be done. Letting these folks in the field know that you’ll pay them for a good lead, gives them another opportunity on deals that fall through. If you have a fix-and-flip investing strategy, networking with builders, contractors, and inspectors could be a solid option for you.

Go Driving for Dollars

Driving for dollars is another option when searching for off-market real estate. This method is as it sounds, driving around and looking for houses that match your criteria. Boarded up homes, homes in disrepair, hoarder homes, and similar can be great for those doing fix and flips. Commercial and multi-family with obvious vacancies that you believe you can fill. Or maybe just a property that better matches your client’s dreams compared to what is currently listed. Whatever the property, it’s off the market and it’s the perfect match for you.

Once you spot a property, you’ll need to find the owner of that property. You can do this by visiting your local assessor’s office and getting the owner’s name and mailing address. If you want to contact them sooner than by mail, you’ll need to skip trace their phone and email. OR while you are right out front of the property you can use a tool like PropertyRadar to have all of that critical info right at your fingertips.

With comprehensive information about the property, mortgage status, owner, and more, you’ll have a better understanding of the owner’s and their situation and can make a more informed, tailored sales pitch to improve your chances of landing the deal.

If you’re a professional and you’d rather not spend your time at the county clerk’s office searching through public records, relying on others to finally bring you a potential deal, or spend your time driving around, then using a comprehensive property data and owner information platform like PropertyRadar will likely make the most sense for you. You control your pipeline of highly tailored deals.

Search Public Records

Public records can not only be a great way to find the owners of off-market properties, but they are also a great source for distressed properties like foreclosures. In either case, you’ll want to use the information that you pull through your public records search to contact the seller directly.

While surveying public records is a free option for finding off-market real estate, it’s important to understand that they can be very messy. With so much information to sort and search through, finding what you need through public records is usually challenging and time-consuming – to put it nicely. That’s because the rules that govern public records safekeeping were created long before computers were around. So a little mistake like a ‘typo’ can lead to a lot of wasted time, effort, and generally end with undesirable outcomes.

How To Find Off-market Properties With PropertyRadar

Using PropertyRadar to help you find your next off-market property as an investment or for a customer can save you time, money, and help you discover otherwise difficult to find off-market properties.

But with so much data, where do you start? The first thing you want to do is limit your search to the market you’re interested in. So let’s start there.

Search off-market properties by location

To do this, you’ll simply log in, and then as shown below, you’ll 1) select the ‘Discover’ option from the hamburger menu icon, 2) select ‘Criteria’, 3) select ‘Location (Start Here)’, and then 4) select ‘Address’:

Here you will find a number of ways to filter locations to discover off-market properties. You can limit by county, city, zip code and more. But in this case, we’ll use the polygon drawing tool to precisely define an area we’re interested in.

In this case, let’s suppose we’re interested in any off-market properties surrounding Eagle Rock High School in Los Angeles, California. Using the polygon tool, we draw a perimeter following the land marks, highways, and streets we want to use to create our shape of interest.

Once you’ve set your area of interest, you’ll end up with a large number of the properties located within that shape at the top of your search/criteria bar. Additionally, that large number of properties will be broken into smaller numbers and plotted out by geographic location within the shape you’ve created.

Your customized market of properties will look something like this:

From this point, turning this broad search into a list is easy. Simply click the big green button ‘Make List’ next to the total number of properties at the top of the screen and you’re done. However, any data-driven professional knows such a broad, undefined list won’t garner the results you’re looking for from your direct mail marketing campaign. You’ll want to refine your list of properties with specific attributes and characteristics so that it’s more targeted.

It’s time to refine your off-market property list by adding criteria. With over 200 criteria to filter your list through, you can turn a broad list of 5,969 into a refined, detailed list of just a few hundred, highly specific off-market properties that you’re most interested in. Heck, if you’re smart, you’ll create multiple lists with each list containing one uniquely defining criteria to better understand that list of properties and their owners.

Your list-building opportunities are endless.

Use 200+ Criteria to Discover Your Ideal Properties

As a professional, you likely have a specific type of property you’re interested in, so it doesn’t make sense to cast a wide net to see what you can catch.

After all, it costs time and money to reach out to property owners. The more defined and tailored your mailing lists are the more defined and tailored your marketing messaging will be, which means you’re pitch is more likely to resonate with the owners and increase your odds of a better ROI.

With PropertyRadar, you can mix and match over 200 criteria to tailor and customize your lists to exactly what you want. Filter through millions of properties to discover a list of only the properties that make sense for you or your client to pursue.

With that in mind, filter by the attributes of the property itself first.

There are 3 main categories of property attributes to start your filtering process. They are:

1. Property Type
2. Property Characteristics
3. Property Status

Let’s take a look at the various criteria you can use within these three categories when building your hyperlocal lists of off-market properties.

1. Search by Property Types

This is an obvious place to start. You likely have interest in a very specific type of property. Maybe you’re an investor wanting to move up from single-family or multifamily homes and you’re now looking for off-market commercial real estate, off-market hotels, off-market land, or even off-market industrial properties, you can easily add that criteria to start your search.

With PropertyRadar, you have two categories to start narrowing your search, a ‘Basic Type’ of property category and an ‘Advanced Type’ of property category. You can see that you can get very selective with the different types of properties in the ‘Advanced Type’ of properties:

Once you’ve selected the type of property you’re in search of, it’s time to start adding additional criteria.

2. Search by Property Characteristics

With the type of property selected, you can now start adding ‘Characteristics’ you want your property to have. These include things like the number of beds and baths, square footage, lot size, year built, pool, fireplace, and more:

3. Search By Status

The status of the property can tell you a lot about whether the owner might be more motivated to sell or not – a sure advantage when you’re looking to buy off-market properties. The status category is where you can select your criteria for properties that are Owner Occupied, aka: Absentee Owners, or not. And you can filter properties by whether they are Vacant or not.

In addition to these three categories, here are a few of the more common criteria professionals use to limit their results to properties that makes sense for their goals and objectives.

Search by Value & Equity

Perhaps one of the most powerful criteria you can add to your list is that of the ‘Value & Equity’ of the property. If for instance, you wanted to search for properties with equity of at least 70%, you would first click ‘Value & Equity’, then click ‘Est. Equity %’ and then enter ‘70’ in the Minimum equity field as shown below:

Similarly, another important criteria for professionals is the ‘Value’ of the property. However, there are a number of ways to assess the value of a property. Fortunately, PropertyRadar gives you the versatility of selecting from key property values based on ‘Average Valuation Model’, value by square foot, assessed value and more as seen below:

Search by Opportunity Zones

You might be interested in buying and investing in properties located in Opportunity Zones for their significant tax benefits. If Opportunity Zones are your area of interest, or even expertise, you can add this criteria in PropertyRadar by navigating to ‘Location’, click ‘Other’, and then click ‘Census Tract.’

Eliminate Listings to Find Off-market Properties

It goes without saying that we want to make sure that any properties within our shape are actually off-market properties and that none of them are on the market, ie listed for sale. To do that, you’ll simply navigate to ‘Criteria’, click ‘Listing’, click ‘For Sale’ and then select the ‘No’ option in the dropdown menu, as shown here:

Building Your Marketing List of Properties

Once you’ve defined your list with all the specific criteria you’re looking for, it’s time to build your marketing list. As mentioned early on, it’s simply a matter of clicking the big green button that says, ‘Make List.’

Let’s see what it looks like when we create a list with the following criteria:

• 4+ bedrooms
• 2+ bathrooms
• Owner age is 60+ years old
• House is 2,000+ sq/ft
• At least 50% equity
• NOT listed for sale

This list of off-market properties became highly targeted by adding criteria, taking it from a broad search of almost 6,000 properties to 110 properties. More importantly, I have a list of an older demographic who live in a larger house, that has decent equity, and with an owner who might be motivated to sell their home to downsize into something smaller.

One of PropertyRadar’s most powerful features is the ability to build Dynamic Lists. Unlike typical lists you buy from traditional list builders or list brokers, Dynamic Lists automatically update themselves when a new lead or opportunity matches your criteria for a particular list. This has numerous benefits for you.

For example, if you’re a professional, you’re likely using a CRM to track your leads, deals, and customers. By integrating PropertyRadar with your CRM you can keep your CRM persistently filled with new leads and opportunities. In this case, any new leads that match your off-market properties list would automatically populate your CRM.

Additionally, PropertyRadar integrates with over 2,000 apps and services. So you can set-and-forget your marketing outreach efforts by having a direct mail postcard sent the second a new lead hits your list.

When your competition is busy and can’t get a postcard or letter out to a new lead until after they’re done doing whatever they’re doing, you’re marketing asset will already be on its way. You’ll be the first to make a great first impression – and you didn’t have to do virtually anything.

Differences Between Off-market Properties and Off-market Deals

To be clear, virtually any property can become an off-market purchase if you are willing to pay the owner the price they want. However, the goal is to ultimately find off-market properties that can lead to an off-market deal. That deal will largely depend on your investment strategy or what the goal is of your client.

Fortunately, as just described, PropertyRadar can help any data-driven professional find the properties that match their very specific and very personal criteria, no matter what they are.

Let’s take a look at a few scenarios depending on the type of investment strategy you have or if you’re an agent looking for a client:

• Fix & Flip Investor: Ideally, a fix & flip investor is usually looking for a property that they can buy below market value because it is in a distressed condition and needs renovations. For example, in this case, it might be a good idea to use PropertyRadar’s sale history data to determine if the neighborhood valuation is up-and-coming. If that’s the case, it may be worth overpaying for an oversized 2/1 home, if you know you’ve got the construction skills to turn it into a 3/2 property once it’s in your portfolio.
• Buy & Hold Investor:A buy & hold investor might want to look for properties that are more or less turnkey in areas that appeal to tenants, or even perhaps already have tenants. Look for desirable rental features like walkable neighborhoods, good school districts, etc. Here, you can use PropertyRadar’s heat maps to help you focus in on the neighborhoods that would appeal to tenants the most.
• Commercial Investor: As a commercial investor, you’ll undoubtedly benefit from using PropertyRadar’s property type feature. This will allow you to limit your search results to only the relevant properties in the area.

PRO TIP: Some property that is currently used for residential, may have commercial zoning. Here, you have an opportunity to make an offer too good to be refused, knowing you can turn the residential property into commercial use.

• Realtors®: If you have a younger couple looking for their forever home, they may be willing to overpay knowing that they’ll be spending the next 30, 40, or 50 years in a house. In which case, you can make an offer to the current owners they’d be all too happy to accept.

How To Turn An Off-market Property Into An Off-market Deal

Once you’ve curated a list of potential properties that meet your needs, the next step is to turn one of, or many of, these off-market properties into an off-market deal. Here’s how to give yourself the best chance of turning your list of leads into a list of closed deals.

• • • Know your list: Before you reach out to potential sellers, it’s crucial to be in touch with their wants and needs. That way, you can target your message in a way that serves the seller. Fortunately, PropertyRadar provides unique insights into your marketing lists as a whole:

• • • Focus on how you can help: Instead of focusing on what you can get out of doing an off-market deal with the property owner, focus on how you can help them. The more specific you can make your offer, the more likely it is to be well-received. This is where digging into each property on your list will make a world of difference when wanting to better understand each individual person, property, and mortgage status. 

In the example below, under the ‘Contacts’ tab, you can see that Albert is a 90-year-old single man, his property is in a trust, he owns multiple properties, and his phone numbers are listed along with his social media profiles:

Under the ‘Property’ tab, you’ll find a comprehensive list of additional insights into the property itself like:

• • • APN
    • Lot Size
    • All property details (A/C, Pool, Fireplace, etc.)
    • Property Value
    • Comparable
    • Property Taxes
    • Transactions/Title Transfers
    • Investment Analysis

Under the ‘Neighborhood’ tab, you’ll find in-depth insight and information about the neighborhood like: Demographics, Education Level, Income, Housing Risk, and more:

Improving your direct marketing success

• • • Follow up, follow up, follow up– One outbound message simply isn’t enough, especially with off-market property owners who aren’t necessarily motivated to sell. The most successful businesses are excellent at follow up. PropertyRadar can provide you with incredible insights and data, but you’ll end up losing to your competitors who just don’t give up. Automating your outreach (described below) can make follow up easier to achieve.
    • Track your progress– You also need to be tracking your progress with individual prospects. Inside of PropertyRadar, you can do this through custom lead statuses. Using our Zapier integration, you can send all of your PropertyRadar leads into your CRM and track them using your processes. With our Zapier integration, we seamlessly connect with popular CRMs like Pipedrive, Zoho, LionDesk, and many others.
    • Use automation– Automating your direct mail and other forms of marketing is absolutely essential. Otherwise, you’re at the mercy of getting too busy to market your business to property owners. To win, you need to build highly targeted lists of prospects inside of PropertyRadar, and use Zapier automations to trigger actions whenever new leads get added to your list. For example, whenever a new lead meets your criteria, they receive a postcard from you and then get a follow up postcard one month later, and a month after that.
    • Take a multichannel approach – Your follow up shouldn’t be in one channel, meaning you shouldn’t only send postcards or only cold call. The best direct marketing campaigns reach out to target audiences across multiple channels. With our PRINTGenie integration, you can use their multichannel outreach templates to reach out to targeted lists of leads.

Key takeaways to finding off-market properties into off-market deals

Finding off-market properties isn’t as challenging as you might think. The real challenge is using data to find the properties that are right for you based on your specific criteria and outcome objective. With PropertyRadar you can:

• • 1. Use 200+ criteria to find only the off-market properties that meet your needs and present a potentially great deal for all parties involved.
    2. Build unlimited Dynamic Lists of specific types of off-market properties that will auto-update when new leads match your specific criteria; and, trigger marketing campaigns to help you beat your potential competitors for the same properties.
    3. Better understand your list as a whole and even each individual person so you can create powerful, personalized marketing messaging that resonates with your audience in order to help you turn those leads into deals.

If you’re a professional real estate investor or Realtor® and you’re looking to uncover off-market properties that no one else knows about (yet), the PropertyRadar is property data and owner information platform you need. Start your free 3-day trial today and discover the power of PropertyRadar.

The post How To Find Off Market Properties & Turn Them Into Off Market Deals appeared first on PropertyRadar.

Have questions or feedback? Each show is posted on the Data Driven Real Estate Podcast #9 in our community. Catch pre-show research and continue the dialogue online after the show.

Connect, subscribe and like on: YouTube, iTunes, Spotify, Stitcher, TuneIn, Google Podcast

Show Topics

• 00:00 Welcome Bill Allen of 7 Figure Flipping with Bill Allen
• 01:06 Mechanical engineering to navy to real estate flipper and entrepreneur
• 02:48 The current real estate market Bill Allen is flipping in
• 06:05 Why starting in a secondary market for wholesaling and flipping was so critical
• 07:35 How moving into larger cities greatly increase assignment fees for wholesale deals but what it took to get there
• 10:19 What is a real estate wholesaler?
• 11:03 What most people don’t understand about professional real estate wholesaling and the costs involved
• 12:38 Why most real estate wholesalers have a bad reputation
• 13:31 Building value as a legitimate wholesaler in the market where 90% are bad
• 14:48 The reputation of real estate wholesalers looking for the next sucker
• 15:27 The reason not to include after repair value estimates in wholesale deals
• 19:50 How did Bill scale his real estate wholesaling business so quickly?
• 24:18 Why learning marketing was so critical to scaling his real estate business
• 24:41 How important it is to track marketing KPIs and channel success
• 26:17 What marketing channels in real estate are working well in 2020?
• 26:33 Using data to drive efficiency and identifying weak performers
• 28:00 Dropping direct mail marketing expense by 40% by hyperlocal targeting
• 28:20 Facebook Ads, @Google Pay Per Click and SEO percentage of deal flow
• 28:54 The importance of understanding local laws on things like ringless voicemail
• 29:35 Why to continue to paying marketing phone after you stop direct mail campaigns
• 30:54 The one huge marketing mistake real estate investors make
• 32:26 Why Bill loves postcards for marketing
• 34:05 Is it more important to build a real estate brand as an investor or present marketing that looks completely different each time?
• 35:25 Hypothesize, test and pivot – the key strategy to get branding and marketing correct in your local market
• 38:57 Should you include pictures of your team in your marketing?
• 40:23 Why are ibuyers so awesome for real estate investors and why Bill loves them?
• 42:44 The $5,000 giveaway and the ibuyer that didn’t come through
• 44:01 How real estate investors can leverage ibuyers in their business
• 45:26 Tips to identifying new real estate markets for flipping and wholesaling
• 48:51 What role does a mastermind play in the life of an entrepreneur?
• 49:24 The difference between local real estate investment clubs (REIAs) and mastermind groups
• 54:07 The biggest difference between guru training, real estate coaching, and mastermind groups
• 59:10 What volume real estate pros won’t tell at local levels that they may share in a mastermind
• 59:36 What are the biggest impacts for Covid-19 for volume flippers and wholesalers?
• 1:00:00 The one big takeaway that real estate investors should take away from Wall Street lending partners and hard money?
• 1:05:02 Flip Hacking Live details and how it’s changed in 2020 due to Covid-19

Show Transcript

Aaron Norris  00:01

Hey everybody, welcome back to this week’s episode of the Data Driven Real Estate Podcast. This week we have Bill Allen – he is the CEO of Blackjack Real Estate, and also the CEO of the 7 Figure Flipping Mastermind. This week we talked about how we went from mechanical engineer in the Navy, all the way to a real estate investor who flips over 100 via flipping and wholesaling. Every year. We talk about ibuyers in the market and why he’s actually excited to be there. We talk about inside baseball of wholesaling, sometimes it can seem like a little bit of a dirty word. And most importantly, of course, we cover the data that he uses day to day in business, which strategies and channels are driving the majority of his business, and even how he approaches new markets that much more on this week’s episode, everybody, welcome to the Data Driven Real Estate Podcast, the podcast for real estate professionals dedicated to driving business success using data. I’m really excited to have Bill Allen. I only met you earlier this year. You’ve been very busy with 7 Figure Flipping. So who is Bill Allen?

Bill Allen  01:01

Then, that could be a lot. It could be the whole podcast right there. Right? You know. So I love that kind of concept of this data-driven real estate investing data- driven items, right. So like I’m a flipper and wholesaler. But before that I was a mechanical engineering undergrad at Georgia Tech. So I’m a numbers like science and math are everything to me. I was not good at English and writing and oh, it’s just horrible, all that stuff. And I actually joined the Navy right after college. So I got a mechanical engineering undergrad degree, got commissioned into the Navy as a pilot. And then I went to I got a master’s degree in aeronautical engineering, which was more science and math and things like that. And so right after that, I went down to flight school, and for 15 years, I was active duty Navy pilot, and I still am in the reserves. But during that time, I was trying to figure out my finances and becoming financially free and at some point along that journey, about seven or eight years ago, I found real estate and that’s kind of what you know, drove me into trying to understand rentals and Then I started I did a flip and I made a ton of money and I said, This is exciting, can I do this again? And then I started repeating that and then you know, I wanted to build a business so I went from you know, college graduate engineer, pilot and thinking I know everything to flipping a house and then figuring out I don’t know everything and getting beat up a little bit in the real estate world and then trying to scale a business because it was frustrating only doing one deal a year I wanted to figure out how to do more than that. And so we’ve done you know, and in the, in the tune of 150 to 175 are the most that we did in a year was 187 was about three years ago kind of flips and wholesales and that’s primarily what I do now is is flipping wholesale in my real estate business and then run that other mastermind group so I’m figure flipping is where I spend a lot of my time now so that’s kind of like background on me, I guess.

Aaron Norris  02:48

Yeah no, what, what markets are you in right now?

Bill Allen  02:51

So we started in Pensacola, Florida, so around he panhandle and so Escambia and Santa Rosa County, and then I moved to Nashville because we had our middle son had a heart condition and needed open heart surgery after he was born. So we decided to move like leave Pensacola and that’s about the time I got out of active duty in the Navy. I wasn’t ready to go deploy again. And then we moved to Chattanooga, Tennessee like our we went into a second market of Chattanooga, so I lived in Nashville, but I didn’t think that I could afford it. And we can talk about that a little bit because that’s the data-driven approach of what is it going to take to start investing in a big city versus a smaller city like Pensacola? So I went to Chattanooga, so that was a second market and then we went to Nashville after that. And now we do a little bit of business in Huntsville. We do some business in Kentucky pretty much anywhere in the southeast. We’ve done some deals in Atlanta, we’ve done some deals in Indiana. If some stuff pops up, we’ll do it. We’re also moved into New Jersey, we actually happen to have another investor who was ready to get out of the single-family business and move into the multifamily business. So we kind of bought their company we decided to find a way to partner with them in the beginning, understand the market a little bit and you know, they had a great buyer’s list. They had a great business there. So we just started kind of took over their business, basically, because we had the operational side, and they wanted to move over the multifamily and still cash flow a little bit from that business. So that was a cool venture that we did. So pretty much we’re trying to figure out how to do deals anywhere where it makes sense that we get the return that we can on more of a virtual kind of wholesaling model in the southeast.

Aaron Norris  04:19

Okay well, mechanical engineering seems out the window at this point.

Bill Allen  04:25

Yeah, yeah. I you know, it’s funny because the whole engineering side of things I look at, so I was a I got a, you know, a bachelor’s degree in mechanical engineering, a master’s in aeronautical engineering. I only knew anybody that made like $200,000 a year I thought it was like a cap that a human being could make I thought rich people were like, over there like people, nobody makes a million dollars a year and that kind of stuff and then becoming a pilot. It was just kind of like showing up punching the clock doing my job. I really enjoyed doing what I was doing, and I still do it part-time. But there’s something kind of missing And that was pulling me towards real estate. And it was kind of fun. And now this entrepreneurial side it was was like hiding inside me for so long. And what happened with this whole real estate thing is it just let out this, this entrepreneur that I that when I look back, the story is told when I was you know, 6-7-8 years old, I was always trying to turn $1 into $2, I was always hustling, and it was just kind of hidden, and then when it came out, it’s like, you can’t put that you can’t put that back in the box once it comes out. And so I’m never gonna go back to work for somebody again, engineering is not the most interesting thing, although I would, I would be interested in jumping into a business like that and figure out how to how to turn the dials and make it more efficient because that’s what I think’s really cool about what we do but I don’t need to like markup drawings and do CAD or anything like that.

Aaron Norris  05:46

Or say a natural fit for that as you know, you get into adding square footage building construction, but that’s not where you’ve landed yet. So well let’s let’s backwards engineer like how you ended up in Tennessee started with the affordability question so yeah, that tell me how you ended up there.

Bill Allen  06:05

Yeah, so the, you know, when I when I moved it, so I was in the small market of Pensacola, it’s about 350,000 people. And it was looking back, it was kind of like shooting fish in the barrel at the time. I didn’t think so because I was kind of growing the business. But I mean, I was getting a deal for like $700 bucks. So we’re getting, like, most people that are in the mastermind group that I was in my network, they were talking $2,500, $3,000, we were under $1,000 of kind of cost per contract for wholesale deals. And there just wasn’t a lot of competition in that area. Not a lot of sophisticated like bigger time investors that were scaling and growing. And so when I went to Nashville, I said, I don’t know if I have the amount of money or the skill set or the understanding to go into a major market, you know, a couple million people. And so I had the decision to make of where am I going to go I was moving to Nashville, and I had my team When my team was built out and I was going to be virtually running my team in Pensacola there, I said, Why can’t I do this everywhere I have the infrastructure, I have all the systems and processes, all I need to do is actually put somebody on the ground in a new city, one person, and use all my whole infrastructure of the company. And so what I saw then was my net profit is going to go up, like the money that goes into the owner’s pocket in the business makes more money that way. So the next question was, where do I go? Do I go to a major market or another submarket that I know the difficulty that I had with my submarket was I could get deals cheaper, but the buyers were a little bit hard to find and my assignment fees weren’t that high. So I was averaging about $8,000 on the assignment at the time, where I saw some of the other people that were in like Dallas or Salt Lake City or San Diego, some of the bigger cities, they were seeing assignment fees of $20,000. So and their deals would sell really fast when they found one it would sell really fast and we’d have to work a lot harder to sell that contract. And or to do that flip or to you know, find that end buyer for what we were doing on the wholesale side. So there’s pros and cons to both of them. And what I said was, I already know this, like I have this thing wired this 350,000 person population, we’ve got it figured out, we have it wired, we’re starting to get the assignment fees up. We’re starting to build a buyer’s list, we’re starting to understand the pros and cons of being there and leaning into it. So instead of reinventing the wheel and going to Nashville right away, which probably could have hurt me if I didn’t go in and have success right away, because it was more expensive. And there are bigger players in there and more sophisticated investors that I was gonna have to compete with. I said, Why don’t we go to another place? That is that has a look alike audience to where I already am. And that’s why we chose Chattanooga. The other thing about Chattanooga that I thought was interesting, from a data side is an hour and a half away in Nashville, and all these buyers that I was watching in Nashville at the Ria meetings and the Facebook pages and all the meetups. They were complaining about not finding deals in Nashville anymore, but they hadn’t gone over to look at Chattanooga yet. It’s so close. I was like Oh, I could just network and meet with buyers and build my list here in Nashville, but push them over to Chattanooga where the returns are a lot better and start building my buyers list with Nashville buyers that could flip or buy rentals in Chattanooga, and just kind of educate the market a little bit here. And so that’s what I decided to do. And it turned out really, really well. I mean, I remember we didn’t have a great sales rep. He was, I mean, he’s a great guy. I love him. We just weren’t, we just weren’t hitting home runs all the time. Like he’s kind of all over the place. And now we know what our acquisitions rep should look like. We got it really dialed in. But we were we just came out of the gate really strong. Like there wasn’t a lot of competition there. We were dropping contracts, I was able to sell them to Nashville buyers and be the person here in Nashville that was kind of helping to move the contracts in Chattanooga push people over there. And we built our buyers list really, really fast and kind of took off and kind of own that market for a while before people started getting a whiff of it and kind of came over. So that’s one thing that I think really helped the profitability of my company in the beginning and the number of deals and we were able to do because we can almost double our deal size and volume with just adding one more person to the business. And it was cool. It was cool to see.

Aaron Norris  10:08

So you started a sort of became an expert in a secondary market and then worked your way after building the reputation. That’s, that’s good to know. Looking at the data, knowing that that’s the journey. Now you say the word wholesale. And if you say that word, if you’re new and you show up, club owners will say to you, they’re like, Oh, really, you’re a wholesaler Good, good for you. It’s typically the word that means I don’t have any money and any experience. I’m just looking for a way in. So what does a wholesaler look like for you?

Bill Allen  10:43

Yeah, you know, that’s an interesting thing. Because what’s in what the way that I look at it is you have so many people are teaching the fact that you can start as a wholesaler you don’t need any money. You don’t need to know anything. Just go in make an offer, get it under contract, so I saw the contract. You don’t really need to know the number have money, all that stuff. I don’t really love that. I definitely like it’s a it’s a decent place to start. But it doesn’t have to be where you start, like you can start as a flipper. And in fact, I think starting as a flipper, it actually reduces your risk people think they’re like wholesaling is very easy. It doesn’t mean you don’t have a lot of risk, you can just cancel a contract. Well, I mean, we spend, we spent $45,000 a month on marketing before we even get a deal. So like, that is money that I put out as a company upfront, to go out looking for things. As a flipper, when you buy a property, you actually have equity into this property that you’re purchasing. When you buy it and you have an asset that’s tied to it when you put your money on the table. I put my money on the table ahead of time. So people talk about risk a lot and they think that wholesales not a lot of risk. Well if you’re putting like number one, how do you value your time? So it’s either time or money that you’re putting into market to go find properties. So for me, I really I love I thought the same thing when I started like wholesalers were like sleazy and they were scammy. And they like fast talker sign on the hood of the car kind of people. And that’s that’s just what was portrayed in the almost like the real estate media, if you will at that time for me like REIA meetings and free forums and stuff like that. But when I started meeting like, like, really ethical, awesome wholesalers that were running a business, not just like a side hustle where they do a deal here and there and make some money and fall backwards into it, it changed everything for me, because I did start as a flipper. And during that time, I identified myself as that and I kind of pushed those other people I was like, I don’t want to be associated with these other folks like that. I don’t trust them. I don’t believe what they’re saying they’re trying to sell me this high ARV or these, like low repair costs and all that stuff. And so what I decided to do was like just kind of piggyback off of some of my mentors. And I think you know, Andy MacFarlane. So Andy was a huge mentor of mine. When I saw his business I was like, wow, like, this is somebody who I trust. He’s amazing. He, he treats his his his business like a business. He treats his team with respect, just come very admirable and coming from a military background like honor, honor, courage and commitment are our core values in the military. And coming from that, it’s like, I just, I was picking up a lot of great, you know, vibes from him. And for me, like I wanted to emulate that in a business. And so then I said, Well, what, you know, why, why do we have such a bad reputation out there? And how can we change that? So like, the way that I look at it now is we, we provide valuable, valuable items to the marketplace like if I go to a grocery store, there’s wholesalers that bring the food to the grocery store, like in any business, there’s a wholesaler that is making money by adding value to that customer, someone way or another. They’re adding value to the grocery store. They’re bringing the lettuce, they’re adding value to the farmer, they’re actually moving more product and things like that. So as long as we can show up in the marketplace and add value, then I don’t think that the word wholesaling has to be a bad word. It just seems like in real estate, you know, I hold, I hold a real estate license in Florida too. So, you know, there’s, there’s just some of it is a little bit of education and just understanding that there are good people out there. And I don’t know, it’s like the top 10% of any industry, there’s like really great people. And there’s the other 90% that give us a bad name, in whatever we do. So it’s a challenge, I think,

Aaron Norris  14:24

I think here in California, some of the more professionally organized wholesalers, their their game was to find the next sucker that would overpay for something and bury them, but maybe it wasn’t burying them, maybe their target buyer with somebody who’s going to hold the property and not flip it. So there wasn’t enough juice left in the deal to really make it make sense as a flip. But it was really that one and done strategy. So I don’t, I personally don’t know a ton of wholesalers in the California market, that leave enough juice in the deal to where somebody can successfully flip it. It’s just gotten harder. So…

Bill Allen  15:01

Yeah…talk to that a little bit, I think you get to a point where like I we don’t put ARV and repair estimates on our marketing material anymore. What I found was, nobody told me that my ARV was too low ever. And nobody told me that my repair costs were like, we were right. They were always like, Oh, no, it’s gonna take way more money than that, and your ARV is so high. So I just said, You know what, look, you figure it out. And you tell us if this is a deal for you, because we run the numbers, we get the contract, we’re adding value if we can’t add value to somebody’s business, and it’s a relationship business, like, our name is important to me. And we got to do right by these folks. And we have people that come back and will buy contracts from us over and over and over again, and they’re looking for deals. So you know, I and I have trouble with that. There’s a lot of wholesalers around here that are definitely like you said, looking for the next sucker and then they’re just going to burn that relationship and go look for the next person again. And that’s just not the way to do business in any business. Like whatever you’re talking about. It’s about the people. And if you take care of the people in the business, you’re going to be successful. And if not, your success is going to run out really, really fast. Like we’ve basically doubled every year for the past five years. And to see that happen and the team and their satisfaction that they get, it’s really cool to see. And it’s all because we are doing the best that we can. I mean, there are times where we contract a property to high, we have to go back and we have to say, look, we missed this or we missed that. And there’s plenty of people, I’m sure that are on our buyers list going how are people buying these deals, but some of them are landlords, we had we’ve had people who will buy a deal because they just want to keep their crews busy, they know they’re going to break even, but the next day, they know they don’t let their crews work, they don’t have a deal right now they’re going to go find work somewhere else, they’re not gonna be able to get them back. So it’s just interesting to see how different type of investors look at the other side a little bit. So what I tell people when they get a wholesale deal from any wholesaler is to make an offer like you might be the only one that makes an offer if you take the time to look at the property to run the numbers and your offer is going to be below our price that we sent out like marketed the contract for just make an offer, you might be the only one who did. So we have to go renegotiate, we have an offer from somebody. And we can say, Hey, we found this, this, this and this and we really need to get to a certain price. Because I just don’t write off a wholesaler because they’re sending stuff out too high. The big thing is if you can educate them, if you can work with them, they they might bring you deals just you like they might be new. I see people like put them aside, send them to spam, delete their emails, biggest piece of advice I can give from the insider inside world of a wholesaler is build a relationship with them and try to start educating them. I always try to find new wholesalers if I can help them, and they might bring me that deal. Like I’m still a flipper, too, right. So they might if they might say, Hey, I got this house. I’m not sure about the ARV. If I can run the numbers and I can look at the repairs. I look at the pictures, give them a number say get it for this. I’ll buy it for this. I might be the only person they talked to like how valuable would that be. If you got somebody out there that’s bird-dogging just for you in the beginning. They’ll eventually outgrow that, but you might get three or four deals off in the very beginning.

Aaron Norris  18:00

Yeah, I think an example of what I was talking about is I know one particular wholesaler that has all the potential buyers show up. And it’s sort of like a highest and best moment where they’re getting pitted against each other. And that never feels very good. So you know, they make more, but will that person come back for more? I don’t know.

Bill Allen  18:19

Well the other thing with that is, if you think about it, like we’re all in business to make money, right, so like, our teams have to make money. So there is definitely a, there’s definitely a way to treat everybody. But also, if you think about that, from the wholesaler side, you might want to give everybody the opportunity to buy the deal instead of sending it to his best friend. So that’s what I talked about. It’s like nobody has priority access into our company. If you’re new, and you can pay a little bit more because you do the work, then you’re probably going to get the deal if you are using GC’s and you got to spend a lot more money so I can see it from both sides. Like I’m always trying to defend the wholesalers because we definitely get a bad rap. We do some of that too. Like we but look, it’s my it’s my required for myself. company like, we I got to make my team and my staff as much money as possible, I got to keep the lights on, keep the doors open, keep the marketing going. So if I can run a like kind of open house, bring all the buyers in, I’m definitely not trying to like create an auction there. But there is a little bit of salesmanship in the business to business sales there, right? So you see the other person that you’re competing with, and you’re like, I’m going 5,000 higher just to beat him out or her out. And for us, like, I know, it’s gonna it’s gonna turn some people off. But I think as a wholesaler like it’s, it’s our duty to make as much money as we can just like the flipper wants to make as much money as they can. It’s got to be a win win, though. Like if we’re if we’re forcing somebody into a deal, we’ll never do that. I’ll never force anybody to make a decision that they don’t want to make, and we don’t fast talk or anything, but I’m gonna, of course, I’m gonna use every skill that I have to make a couple extra bucks, because that just goes back to funding the operation and finding the next deal. So….

Aaron Norris  19:50

You really scaled pretty quickly. I mean, you’ve been in the business a little bit less than than a decade and then to be talking about that kind of volume at what point did you go from flipper to a wholesaler.

Bill Allen  20:03

So I was active duty pilot at in Maryland, I went to Test Pilot School in England and I moved back to Maryland and I was a test pilot at PAX River. And when I was doing that job, you want to talk about data that school was to data driven, flying, we couldn’t be off by more than 10 knots 10 feet, or like one degree of heading a lot of times and sometimes like one knot like right there on condition to get our data for that school and going flying again after that. But when I was there, I flipped my first house. And that was like 2014 – 2015 I did one more, maybe 2013, probably 2013 and then 2014. I flipped my second one. But after that, I said I I’m going to the property I’m the contractors aren’t showing up taking me six months to even find a deal than other six months to work on it. There’s got to be the solution of kind of growing and scaling. So that’s what I joined a mastermind group and Met Andy and Justin. And at that point, I said, Okay, these guys are doing 100 plus deals a year, all I want to do is 12. Like, I can probably do 12 right. And they’re doing hundreds and I’m seeing it like they’re sitting there not working and I’m getting emails like I’m at a meeting Andy sitting on the counter and I’m getting an email from his from him saying that he’s got a contract for sale. I’m like, he didn’t touch his phone or his email or anything. And these are going out. And so that’s that’s what scale to me looked like was kind of replacing yourself like removing yourself from the business and being able to do what you want. And so what I found for like to transition from flipping to wholesaling as I started marketing for my own flips, and when I did that what was happening was, I look at it like a big lake, you got a big lake and a bunch of fish in the lake and I love to go fishing. So there’s like to in order to if you threw a net on that whole lake and you’re fishing for bass, for example. You’re going to get a whole lot of like Sunfish and different types of fish in that net, and you’re going to want to throw them all back. Well, I was I wasn’t finding a lot of deals for me. And I was throwing back a lot of leads that I was spending money on, that just didn’t fit my model. And I also at the same time heard so many flippers complaining about how they’re getting outbid, and just they can’t find deals and people are overpaying like crazy. And so when I put those two together, I said, Wait a second, like there’s a need in the marketplace here for somebody that’s providing good deals, and can be a marketer and can find properties. But I still had that like nasty wholesaling taste in my mouth almost. But I kind of look to Andy and I said, I can do this, like, if you can do it, I can do it. So that’s when I kind of transitioned from I went like half flipping and half wholesaling at that time, because I just would throwback all the rental properties I was, if it was it wasn’t in my in my target area. I wouldn’t buy it, but lots of people were buying in those areas. So I said well, I can probably make some money off of these leads. And let me let me see if I can so That’s when that wholesaling started, I started to kind of like I did what everybody else does, you get that first deal and you like text your buddy, Hey, would you flip this one? I got this, I got this property, can you go look at it, and I made like $10,000 It wasn’t that easy. It took me like four months to get my first deal four and a half months. But I mean, if we find one, negotiate it go through the process. And then that’s how I kind of how I sold in the beginning. And after a couple of those, I realized I should build a buyer’s list and start actually saying like standing up in the room and saying, Hey, I’m a wholesaler. We have some deals if you want to get on my list. So it was probably about, you know, six months into my decision to try to scale a flipping business where as I was doing that, and marketing for it, I just realized that there was a lot of lost opportunity cost that I was missing out on that I wanted to capture.

Aaron Norris  23:46

I watched the I’m watching the ibuyers do that right now. It’s clear you’ve got Opendoor. I think one of the investors in Sacramento interviewed one of the employees that they had let go and I think that the number was $100 thousand dollars that they were spending in direct mail and advertising in the Greater Sacramento market. So Sacramento, Yolo, and I think there’s another county, but holy cow. So when to your point, when you’re going fishing and you’re throwing out all the fishes, the ones that don’t fit your buy box, there might be somebody else who might raise their hand. So it’s so you become a marketing company?

Bill Allen  24:22

Yeah, absolutely marketing sales. I look at every company, I figure marketing, sales and operations, and that operations department looks different depending on where you are. And so for us, we became a marketing company, I had to learn marketing, I had to understand it I had to look at, but I’ve always been a data driven marketer, like let me look at the performance. Let me look at the numbers, the KPIs, and that data will drive my decision making not necessarily like how it feels. And every channel has a different phone number, every there’s tracking, there’s like, what’s our response rate? What does the funnel look like? Everything’s got a place in what we do, and it’s all it’s all driven by the numbers. In the data. So that’s I think that’s, that’s a lot of things that newer folks Miss. And I could miss that. Like in the beginning, when I got started, all I knew was number one number. For every dollar I spent on marketing, how much money did I make in each channel, that’s the only number that I looked at and tracked. And it took me like a year to really dial in all of that data to figure out what I should be looking at. Because honestly, at the time, one of my channels was making 15 to one. So when I spent $1, I made $15, in return, and the other one was $7. So I knew at that point that my company was massively profitable. That was just me and a couple other people. And so I didn’t have a lot of overhead and a lot of expenses and have to look at this, I was making really good money. But I was working hard. I was spending a lot of my time involved in that. So when I started pulling myself out, and I started adding more people in the human capital, the cost of human beings and people inside of your business are there like 50% of our cost right now, in my company. So when that starts, that starts squeezing out the profit margin, then you really have to dial in your numbers. So that’s what I really realized after about a year was I had to get really crystal clear on my numbers and start looking at more numbers than just that, you know, 15 to one or seven to one cuz it was starting to go down to five to one and then four to one. And then when I got to like three to one, that’s when I started getting like, feeling like I wasn’t making very much money as a company had it just jump in and start dialing in it.

Aaron Norris  26:17

Okay, what are some of the metrics now that gets you excited? Or the channels?

Bill Allen  26:23

Oh, marketing channels. So we still do direct mail, I’d say about 50% of our deals come from direct mail. We’re trying to get way more targeted on that stuff. So what we’re doing is we’re using like past data of different zip codes and different types of properties and types of sellers to try to really find our seller Avatar and dial that in we over the past two years we got rid of a lot of zip codes in our area because I’ll use one as an example down in Pensacola, Pensacola beach and Gulf Breeze. These are like in Pensacola, their higher-end type properties and you will make a lot of money if you get a deal there. But what I found was when you’re when you do business, you remember the last deal that you did, right? You go, Oh, yeah, but we did that deal in Gulf Breeze where he made like $23,000. Like, we got to keep marketing to Gulf Breeze because it produces really great deals. And it would be like one every six months. And so when I ran the numbers, what I found was I was actually spending more on marketing throughout the year than we were actually bringing in and that zip code, I said, why are we doing that if we can actually just shut that off? If we lose one deal, we’re actually becoming more of a profitable company, it raises the numbers up in the rest of the stuff that we do, like our return on marketing spend in the other zip codes will actually go up, because we’re dropping that dead weight of those two zip codes. And then we also have, we use Google AdWords, so a lot of pay per click advertising. So I know that if somebody in Gulf Breeze Google’s like I want to sell my house fast and Gulf Breeze, they’re probably going to click on our PPC campaign, so we’re number one, so we might still be able to capture that lead or that what a couple of those deals through some of our other marketing channels and be able to turn off the direct mail side of it. So we’ve gotten we’ve really tried to do, we’ve dropped our direct mail spend by like 30 or 40% in the past couple years, and still been able to produce about the same amount of income with spending less money, because it’s been way more targeted. So that’s, that’s what we focused on for direct mail. So it still produces about half of our deals. The other half pretty much come from Digital sources of somehow, whether it’s Facebook ads, Google Pay Per Click ads, or like SEO from our websites. And so those are the those are the primary ways that we get deals we don’t do, we were watching a couple of like text campaigns and things like that. And so we do some of that, but we pretty much do that in a sequence with mail. So we actually do a lot more texting to our database, we kind of like bring them in through mail and pay per click, and then we’ll kind of sequence them in with text messaging and kind of ringless voicemails once they’ve already come into our world and opted in. So Florida’s got a couple laws with ringless, voicemail and stuff like that a lot of states do now. So we’re just kept careful of how we navigate some of that stuff. But that’s, those are the primary ways that we’re doing business now.

Aaron Norris  29:07

That’s great. So you’re getting down to the zip code level and sort of seeing if you get any sort of leads. And what’s funny about direct mail. I just had dinner with an investor about a month ago at this point, and somebody called them off with direct mail that they sent. I think it was in 2014. So six years later, so Pensacola still might be in play. You just never know when that direct mail is gonna get picked up and go. Oh, yeah.

Bill Allen  29:31

Oh yeah for sure. I’ll tell you. We never changed those phone numbers. Like we never cut those phone numbers out because and it’s hard because we have so many phone numbers that I’m like, man, we got to keep it active. And so we’re paying for number but you never know when that it’s, it’s interesting. Maybe a little tip for anybody who’s doing it. There’s a little note a lot of times that we’ll put at the bottom of our card is like keep this with your important documents. And a lot of our sellers are older sellers that have filing cabinets and things like And they’ll actually put that card, they’ll read it and put their card in there. And then you know, when they pass away, they’re the heirs will actually find that card in their thing and call us. So you know, when you start doing business for five years, 10 years, like you’re building, what I always say about direct mail is like, I want to be the guy that they look at that card every time and like curse, the name of this person that sends it to them throws it in the trash to the recycling bin, but they know that I can afford every single month to send them that card. So when they actually do hit hard times need to sell their house, maybe it’s right now, during everything that’s happening, then they know that hey, this, this guy has been sending me a card for five years. Like he’s probably it’s not the person who is a fly by night person who just showed up. It’s the guy with a logo that sent me the card for five years that I’ve been cursing for five years that maybe his business is still around, maybe you can actually buy my house right now. So that’s kind of a lot of the concept in theory that I’ve tried to understand the thought of, you know, who’s who’s reading this stuff.

Aaron Norris  30:54

You brought up a one of the things I wanted to talk about follow up. So you’re telling me that you find the right avatar in the right area, and you don’t shut it off.

Bill Allen  31:05

Now, yeah, we never really shut it off. And the only time we would shut it off is that they so if they sell their house, we refresh our list every, you know, six months or so. And we’ll make some adjustments to it. But now we will just keep sending them. And even if they like, call us and politely ask us to be removed or like we try to talk them off the ledge and just say, hey, do you ever think that like one day you might actually need some help? Would it be okay? If we just keep you on the list just in case, because I want the way that I look at this, especially with direct mail is when that’s when that person like when the person feels great, they go to their mailbox, that’s an a rip up your card and throw on the recycling bin, right? And that it’s just how they feel that day. The human element like when you talk about data, and you talk about like science, right? You have, you have variables and you have these like controls in an experiment and you don’t vary a whole lot of stuff. When you do experiments because you want to like figure out what the changes and what’s what’s causing things to happen well with the human-like emotional psyche and who we are like, there’s so many variables that come into play that the color of your card, the message on there, those kind of things from a marketing aspect, you think that they’re really important. But ultimately, it’s like, how does the person feel when they open their mailbox and look at your thing? And are they even going to look at it, like, give us a letter, they don’t even have to open it, they can just throw in the trash because it’s clear. So what I love about like postcards, like cheap small postcards, with a very specific message on it short message with a big phone number, a big call to action, is that they actually have to like look at it to throw it away to see what it is. And so they immediately see my logo, or they see a card that looks the same that they get over and over and over again. And that’s what I say like they’re always cursing me probably, or my company when they throw it in the trash, they’re cycling. So I wanted to I don’t want to vary it too much. I don’t want it I want it to be very clear that this is us. And that’s just my theory and concept on branding these things. And a lot of people will I used to switch my card from like Bill’s gonna buy your house, and then Blackjack Real Estate and then bill and they don’t three times they’d get Bill throughout the year and three times they get the company, they wouldn’t know who’s sending it. So I want to be consistent with my message. And then also, I want to continue to hit that person as much as I can afford to put it in front of them, because you don’t know how they’re gonna feel a week from them. And when your competitors card is in there in a week, and they’re feeling bad, and they didn’t, they just missed their payment, or somebody just knocked on their door the day before, or they just got a huge medical bill, or, you know, somebody passed away like whatever it is their renter just, like, trashed the place. And now they’re having to do the eviction. Like that’s how they feel when they open the mailbox. And I want my card to be there in a some time around how they feel like that, and not where they’re feeling really good, because we live in the distress world. So that’s kind of some of my theory on like, how can I get in front of them as many times as possible, where it’s also cost-effective for me to do it. And that’s the that’s like the perfect balance that you have to kind of experiment to find Because you can’t control the human that’s going to the box.

Aaron Norris  34:02

We wish…not yet. You brought up a really good concept on the branding side. And I’ve heard both schools of thought, I’m going to deliver seven pieces of mail to this house. And every single one is going to take a different format, whether it be something that looks like a birthday card, zip form, a yellow letter, handwritten card, and then I have the people that hey, I’m building a brand. I want somebody to touch my brand, feel my brand over and over and over. So it’s more about the company. So do you have a thought on that? Have you switched one way or the other over the last seven years?

Bill Allen  34:38

I have. So I’ve gone like pure branding. I just I want to be the guy who they know that is going to be in business. Same thing over and I want, I want them to make my logo and company names synonymous with I want to buy your house when you need it. And the and I’ve had these discussions too, like I’ve argued with other people. What I think is cool about marketing. And it is, at some point you get an opinion. And in the beginning, you’re not sure like you’re trying to figure out what’s working, find your way run numbers start to like, listen to other people, and you’re very, you’re very, like, easily swayed from one thing to another, like somebody tells you something and they have some credibility or like, somebody might be listening this right now and be like, oh, Bill said that I should brand my stuff, I’m gonna go brand my stuff. Like, what I love is those investors that actually, like, test and adjust and run experiments and determine what’s best for them in their market. Because what works for me might not work in San Francisco or San Diego or Washington, DC or New York, right? And so what I’ve had to do in any new market that we go into is test like, hypothesize, test and pivot. Like, these are these three things I haven’t written all over my boards. I don’t know who told it to me. Somebody said at one time and I was like, This is gold. I’m putting it everywhere in my office, hypothesize, test, pivot, everything that we do. We come up with a plan of what we think is going to work. We test it out. And then we make adjustments and fine-tune it. And we run and recycle back through that process. And so, for me, I just kind of landed on this side now of, we’ve got to have our, we’ve got to have this bulk mail that we do that they get the same thing over and over and over again, we might change the color or something like that, to try to bring something out the different emotion in them. And if maybe if it’s a owner-occupied versus an absentee owner, we might use different colors and try different things out and test it. But ultimately, I’m, I want I’d rather get in front of them more often with the same message and the same logo and things like that. But they know that we own the marketplace like we are the people that they can go to. And we’re not going like big media like radio ads, TV ads, billboards, stuff like that. But in the area that we are like, I just want to be the person that I was on a webinar last night to teach at another Ria. And in there I was talking I showed a video of what we’ve done recently, like running building a house and giving it away. And I show my logo there. And in the comments to chat, I was like, you send me a postcard once a month, you send me a postcard all the time, like I get your postcards, and it was just so cool to watch that and say like, Okay, see, they saw the logo, they didn’t even know who I was. But they know the company. And, you know, it’s that that company becomes has a life of its own at some point. And that’s what allows you to remove yourself from the business. And I was able to do that. So. So yeah, I’m pretty big on branding. Just to get back to the thing. Like, when you have an opinion, that’s I feel like where you’ve gotten to a place where you’re comfortable debating somebody else about what you think works and what doesn’t work and why. And I’ve had debates with other really good friends of mine, and I can see their side like I can, I can totally see why they want to send like five different cards and a letter in a zip form and like they have a sequence and stuff and it works for them. And I’m like, that’s great, but here’s why I want to do this and here’s why I think it works better. And like when you could argue like that, that’s when you actually have become like really good at what you do. And you, I don’t know, it’s like you earn this opinion at some point. Because I remember when I was a new investor, like, I was just kind of like listening to what everybody I’d listen to podcasts be like, I’m gonna go do that I’m gonna go do that I’m all over the place. Yeah, when you get focused and you create an opinion, it’s like it, that’s when you’ve kind of elevated your game a little bit you have. And like you said, I’ve been doing this for less than a decade. So I by no means do I think that I know everything, or I’m an expert at any of it. And I haven’t even seen a downturn in the marketplace, really. So you know, you can see that. But I’m confident that I can adjust and pivot and make changes. And I’m very adaptive to what’s going to happen. So I’m confident in what I do. And once you get that confidence, it’s built, built off doing almost 700 deals at this point. And there’s a lot of investors that have been in this business for 20-30 years that may not have seen that many deals come through and have that kind of cycle as fast as we have.

Aaron Norris  38:49

Do you include personal pictures of yourself or your team in your marketing or is it strictly logo driven?

Bill Allen  38:57

Yeah, it’s just logo and text, primarily, we have done some stuff with like my family and my kids. And we have like some ads. And we do send some more specific cards. Like we have some very niche lists and products, we might send like a handwritten card or try to mix it up and really hit them and hammer them with something different, like a different message. Like a probate, for example, is not getting a postcard, and things like that. But it’s so cost-prohibitive to do $1 letter to 150,000 people on a list, whereas I can I could spend a third less money or hit or spend the same amount of money and hit three times the number of people with a card that I have a I have a very specific opinion on postcards that they look at what I send them like they can actually see it. The only way a letter is going to do that is if my logo is in the top left corner and they look at it before they rip it up and throw it away. Like I don’t open a lot of the letters that I get I but I’m in marketing so a lot of them I do open I’m like oh what is this? This is interesting. It’s a zip letter and things so response rate isn’t always the best thing to track. But I do love that they have to look at my postcard to throw it away at least so they’re at least looking at it and probably like, cursing me under their breath. It’s that’s just what I see. I see this like crotchety old guy like going up to the mailbox, seeing all this mail. He’s like, this guy keeps mailing me. He’s got to stop. But he’s looking at it. He’s seeing it. He knows that it’s me.

Aaron Norris  40:23

So to the disruptors, worry you at all sort of the ibuyers are they in your market that you’re buying in right now?

Bill Allen  40:29

Yeah, so they. So it’s interesting the timing that we’re talking about all this right. So what I would say probably like a couple months before COVID, like three months before COVID hit the Opendoor Is it heavy in Nashville, like really heavy. They were they were just they were on the radio every time and if you listen to radio that much, just when I’m driving my wife’s van. And I could hear their ads everywhere. People were talking about them. People were I mean, I even got an offer from them for the house that I was selling. I was like, secretly shopping them, looking at their follow up sequence and everything like that. And, and so yeah, my take on those guys then and still is the fact that I actually love them personally like, I really liked him I took a different approach as a lot of the investors in our mastermind were to kind of like bashing them like, you know what like, open door is. We can’t compete with them. I can’t offer the same mouth. They’re there. They’re busting in the marketplace, taking our deals and stuff. What I really loved they were spending like you said they’re spending, you know, hundreds of thousands of dollars millions of dollars all around. And what they were doing is they were actually legitimizing what we’re doing. So I love the fact that they came into the market because when COVID did hit, and they stopped buying, we used it as leverage to run PPC campaigns against that their keywords. We sent mail pieces directly to say like, hey, these buyers that you thought were great are not buying anymore, but we still are like our messages like we’re still here for you. We’re the mom and pop shop. They’re still here. We’re still around, we’re still buying when other people are canceling their contracts mid, not necessarily beating them up, but like drafting off of that what they were doing. And that’s what I felt like we had is when people when the moms and dads that were at my kids school, were talking about selling their house to Opendoor for cash. What I realized was, they are spending money so we don’t have to they’re educating the marketplace and we can go grab a piece of who they educated and we don’t have to spend all the money educating them that it’s okay to sell. So I feel like the more success that they had, the better we better off we were actually to go into those houses and have those conversations about why we are better option than they are. We actually had one lady. We did a promotion where we had like a $5,000 giveaway. If you sold your house to us in a quarter we put your name in a hat and we drew one out and we gave away $5,000 cash after they sold us their house. And so we went into this lady’s house and we brought this big check and we we made this promo video for it And everything. And I was doing an interview with her. And she said that, you know, I had a contract with, I won’t, I won’t say who the ibuyer was, you can probably put the pieces together. But they, it fell through, they gave me all these problems. And then I called you guys and it was like bam, like right away, you came out, you gave me a great offer very close to what they had, and you closed right away within 10 days. And you even let me stay in my house for a little bit longer move things out. They weren’t going to do that. And she was like, this experience was amazing. So like seeing that and knowing that we do provide a great service. It was really cool to see us beat out an ibuyer right there and she had a different experience. It was kind of saying how we like our service and operational side of our business was better. So I actually don’t mind them. So maybe I’m probably on a different side a lot.

Aaron Norris  43:47

This is this is what I teach to and I actually, I really when I’m at the reason I’m teaching I want them to see at the local level what they’re buying because forget the buy box, the average by state I’m like if you’re not paying attention to the local level. So in my market in Riverside, they want to buy a newer so they’re it’s very rare that they’re buying anything pre. I think it’s late 80s. But in LA, it’s in the 50s. And so it really can change by the market. But I have investors leveraging them, they’re wholesaling to these ibuyers directly, because they are willing to pay more and the investors are going after deals don’t never close because there’s people problems or house problems. So if it’s a hoarder house, I buyers aren’t going to touch it. But as an investor, I can get a great deal de junket, wholesale it to the ibuyer. And they’ll some of the investors were very sad to see them go when COVID first hit because they’re like, oh, you’re such good buyers. For me. The other side benefit is realtors are all of a sudden warming up a little bit to real estate investors. So when I teach them I’m like, well, shame on you. Don’t you don’t have a cash buyer in your back pocket. And it gets them thinking about Wow, I need to either be a buyer it’s the buyer forget the ibuyers. It’s a me buyer. so inspiring the next wave real estate investors that are also realtors. So, I’m most excited about the brands like Keller Williams that are talking about integrating the cash buyer concept. Because I really believe in main street that that local voice when you decide to choose new markets that you don’t live in, how important is that sort of that local brand that? Are you really going into new, more markets building brand there?

Bill Allen  45:26

We’re basically just using the same technique that we always use. So we will send the same card we’ll start building that out. And, you know, it depends, it really depends, like, Are we just testing a market are we already know that that’s where we’re going. So like when sometimes we’ll just go kind of like dip our toe in and, and go fishing a little bit to see what we get and knowing that we’re probably like, we’re gonna spend this money. It’s an expense. It’s a R&D expense for the company. And we’ll see what kind of response rates we get and what it looks like compared to some other places. And we might, we might go target like three or four different areas and it’s just dropped some mail and see what we get in the zip code. And we’ll look, I mean, we really want to dig into it’s like supply and demand we look at so like, what’s the one example is here in Nashville, you got Brentwood, Tennessee, Brentwood, Tennessee is where all the Country Music singers live, the athletes, the predators, those kind of folks. And it’s expensive as I think of it like Beverly Hills, right? And so there’s a lot of cash transactions, if you were to pull all the cash transactions, it looks like it’s a really transactional area for cash deals. And as a wholesaler, that’s kind of what you look for. But when you look at the supply side, there’s not a lot of off-market deals that happen. It’s usually with realtors from the MLS, but people buying with cash. So it can skew the data and the numbers to think that that’s the zip code that you want to hit. So what I do is I look at, like how many cash transactions were done in the last six months or the last year, and that’ll rank out the zip codes as I start, maybe we’ll just gonna go to the top three, or the top 20% of the whole area, that whole city and we might just go start there. So when we do that, we may just send that to like three different cities look and see what the response is because it’s not going to cost us that much. And then determine, hey, this one, we’re actually getting a really good response. There’s people that are open to selling. This looks pretty good on the supply side. So like we and the demand is, how many, how many off-market buyers Do we have, because you can go to a place that has a population of 20,000 people, and a bunch of distressed and dilapidated houses and like landlords that don’t want to be landlords anymore, and you could probably contract a lot of things that look like deals compared to your market, but you might not be able to move them. And then the other is possible to where you have a ton of buyers, but it’s really hard like go to Beverly Hills, you start sending some cards, like everybody knows a Realtor, if anybody is in a has a problem. And they can’t pay their mortgage or they got laid off from their job and they have all these medical bills. They know somebody that can sell their house for him and get top dollar. So it’s really kind of understanding that it’s mostly blue-collar areas, that there’s a lot of distress whether distress people are stressed homes, and then you also have to have the demand where people actually You want to buy there and fix up houses or hold rentals. So you’ve got to have both of those to have a good market. So as far as branding goes, if we’re just dipping our toe in, we might not put our branding on the first round of postcards, because we might not want to be get like our Better Business Bureau hit because people will give us complaints were a better business bureau rated in every city that every major city that we’re in, so we pay for the membership there. And people just say like, these guys sending me postcards, like they give us a one-star like negative reviews or complaints about putting a card in their mailbox. So like you don’t go to Domino’s website for sending you coupons, but they go to us. So we don’t necessarily want that when we go into a new market initially. I don’t mind it once we get some positivity and stuff like that, like we just, I don’t know, I’ve always I always hate when people like bash us because I’m like, we’re just trying to help like, you can get off our list. It’s not hard.

Aaron Norris  48:51

So let’s chat a little bit about the the role of reason masterminds. It sounds like you sort of touched both and there’s different roles that they play, and what’s been your experience with those two different categories of education.

Bill Allen  49:06

So well, in the beginning of my journey, I didn’t even know what a mastermind was. And I just I would go to read I was I was actually really cheap. So I wouldn’t invest in myself at all, like no training. No, I wouldn’t spend money I didn’t even have I had a library card. I would even buy books, like I just go to library, rent books, and read those. So for me, I would I went to some REIA meetings. And what I found was, there’s a couple different people in the REIA groups, you’ve got the people that are doing a lot of business, and they’re successful. And then you’ve got the people who are doing a little bit like they’ve done maybe one deal or they’re educated. And then you got the people that just show up all the time to like punch the card that have the social hour, those kind of things that say they want to do stuff, but they’re really not committed. And so there’s kind of three people. So every REIA that I went to, I would I recognize this after it was probably taking me like six months of going to REIA meetings to understand that there’s there’s like a it’s not neccesarily a class system, but there’s like groups of people there. And I want to be in the group that is doing the most at that REIA. So I would try I realized this and started recognizing it as people that are standing up saying they’ve done this or they’re doing this many deals, like I want to be around there and, and socialize with those people and kind of suck up some information and some knowledge from them. So that worked for a long time. But what I found is there’s there’s there was a whole nother group of people that don’t seem to show up there. And those are the people that are doing like hundreds of deals, and 200 deals like they just like, I’m not going there, because you’ve got these other couple people that like they just pounce on you. So when I when I didn’t even realize that until because at the time, I didn’t know what a mastermind was. So the cap was like 10 or 20 deals a year seemed to be at least in my world of real, like the reason that I was going to their small town like smaller reaches. That’s about where those folks were and so I was like, Okay, I want to get from one deal a year, I was a one deal, your guy was in that middle pack right to 12 deals a year. And then when I started the I was introduced to masterminds when I was listening to podcasts, and people were talking about doing hundreds of deals. And I was like, I’ve never met anybody like this. That’s, and I don’t even know how to find those people or look those people up. And what, what I found was, there’s people from around the country, that are the top people that are going to these meetings, they’re going to a different meeting. That’s like a national type meeting. And so when I realized that that was the case, I was like, Okay, how can I get I, I want to, I want to figure out how to be the dumbest person in every room that I’m in. Like, I want to do the least in every room and I’m still that person, I still am looking for the kind of rooms to get in, that people are doing. Because I don’t really have a cap like I don’t have a limit. And so it’s it’s a it’s a plus and a minus. And I don’t know if we want to go there, but it’s really hard to dial back what I want to do and where I want to go. But when I go into these rooms, I want to To figure out how not to be the person who is doing the most, I want to be the person doing the least. Or maybe just a little bit above that, because you want to be pulling somebody up and you want to be being pulled up. Because being able to pull somebody up and giving some giving something back, that gives you something that that like, for all the givers that are out there, like you need to have that like you need to be able to give, to be able to receive so. So those are that’s my take between the two. I have nothing like I don’t will never bad mouth or Ria meeting or a group like that. Like I just spoke at one last night. That is one where I where I started attending in the beginning in Pensacola, and I’m really partial to them. I mean, I I think they’re amazing. I think there’s a lot of great people there. And then I will I will always anytime I’ve done a pet school and there’s a meeting I go, like I’ll go sit in the back. I try to be like kind of low key and see who see who’s doing what see if there’s somebody there that that might be like an up and coming star, somebody that we can support that can support us too. And I think they’re great. I think they’re, there’s a, you kind of grow and there’s Rios that do a ton that are that are big that are that are phenomenal with, with training. And then there’s, there’s there’s two kind of concepts of rheas. One is like, they’re gonna sell a bunch of stuff and do like Thursday meeting to a weekend seminar and stuff like that, and for profit, and then there’s the ones that just give a ton of value and content and things like that. So the ones that sell a lot of stuff turned me off a little bit, just because I feel like they’re only giving you like a little bit information. And the ones that really like training and teach and coach, I really love that stuff. So I’m, I like it. I think masterminds are there’s a point where you just kind of like, like, move up into the big leagues. And that’s what it did for me. Like I went from doing one deal a year to doing 67 deals the first year by joining and I had paid a bunch of money, like I had to stop being cheap and I had to write a check for $25,000. And when I did that, I said you know what, I just pay $25,000 I’m going to get $100,000 out of this. And it made me work like 10 times harder than I probably would have if I showed up to me for free, so there’s some, there’s some value in all of it. And it’s different for everybody like everybody’s a little bit different of what they need or where they’re at.

Aaron Norris  54:07

Part of why I strategically wanted you after Eric Bee, which is airing before you is that he was part of the Fortune Builder brand. And to be fair, I’ve actually heard decent things about that brand, but you spend the money on, you’re in a room full of people who aren’t doing the business and you sort of rely on the coach concept where a mastermind has a lot of people doing the business. And it’s sort of like the open the kimono moment where you have people willing to share a lot more the things that help you scale, it’s the operational side, when you’re in a mastermind setting. Do you find that it is a lot more about the operations, the soup and nuts of it? Or is it you sort of brought up the three categories? You said operations people, what was the other one?

Bill Allen  54:47

Well, marketing sales and operations.

Aaron Norris  54:48

Sales and operations. Is it a specific mix that you find in the mastermind setting?

Bill Allen  54:55

You know, I think the most powerful thing that I found in being apart and just full disclosure, I own a mastermind, right. So I bought the mastermind that I joined when I paid that $25,000 about a year ago, a little over a year ago, I bought it from the previous owner, so I own one. So, but I want to say like, a lot of times you listen to a podcast, and somebody’s like selling something, so they’re gonna talk about something about how awesome it is. And you don’t know that like, if they’re selling Facebook marketing, they’re telling that one story where they made $100,000 on Facebook marketing, but you don’t know that they actually spent $200,000 to get that hundred thousand dollar deal. So like when we’re on these podcasts and stuff like you can’t sometimes you can’t tell what’s and so maybe this is caution for everybody out there like what’s what’s true and what’s not. But for me, like so full disclosure, I own a mastermind but I bought by no means am I the best salesperson or the best like pitch man out there of the stuff for me. The thing that I get from this group is like the vulnerability and like true honesty that shows up inside of this kind of tribe of people that have similar core values. So people ask all the time Like, the tangibles are obvious, like, okay, you get this these coaching calls that we do you get these accountability group that we set up in small groups, every quarter. There’s these meetings that you can attend. There’s the documents and video training and stuff like that. And there’s a Facebook group where people are always asking questions and answering, and we’re lending money around, we’re kind of just like passing money all over the group and stuff, right? And like ideas and concepts and strategy. But the intangible thing is that you like when you get to a point where you’re running a seven-figure business or even a multiple six-figure business or you’re doing 100 deals a year or whatever it is. There’s this there’s this loneliness that happens in where you are like you’re in an area of Nashville, and there’s not a lot of other people that are doing what you’re doing in Nashville and you feel alone. A lot of times you’re like, man, nobody thinks like me, I go to these parties and people are talking about like, what show they watch on Netflix, and I’m talking about building an eight-figure business and trying to like, like, grow and scale and try to get from 200 houses to 300 and It’s like, it’s just totally different and you get in the room or around people that think like you, they have the same struggles as you do like we have, we have trouble turning it off, I have trouble putting my phone down, I have trouble stop, check my email being actually present with my family, like building the relationship with my spouse. And what I found over the last year of owning this mastermind group is the more like real and not like Facebook, fake and Instagram pictures about our lives that we can share in the human side of things like the relationship side like I’m, I’m working on a lot of that stuff myself personally right now. And I last meeting that we had I opened up and shared a lot of what’s going on in my life. And it encouraged a lot of other people to talk about some addiction, and some different things that has happened in their life. And we just dropped the real estate and talked about life and it for like two and a half hours. One night we did a late night session. And it was really just about being like open and honest and vulnerable with each other. And because that’s where we build the foundation like we think that all the training and coaching and stuff is what we need. But ultimately, like the mindset, and the foundation that our business and our life is built on, whether it’s founded on the rock, or it’s founded on the sand if you if you read the Bible and like, follow Matthew. So like, there’s, there’s a whole concept there of building out that foundation first. And I think that’s what it did for me. Like it got me around people who are my people. And I don’t feel lonely because I have somebody to reach out to. I have a support network. I think about it, like I was in a fraternity at Georgia Tech. And it’s like, you’re paying for your friends in the fraternity. So a lot of people will joke around like, Oh, you just by your friends. And yeah, we had to pay to be in the fraternity and stuff. Those are like friends of mine for life that we went through this, these five for me five years of college together. And it’s kind of like that, like I really feel like these are people that are the closest people in my world. They understand the problems and the struggles that I go through. And I never really feel alone because I can reach out to them. So there’s something really intense About surrounding yourself with people like that. And we’re all lending a hand and helping each other grow. And we’re all kind of going in the same direction with the same, same end goal.

Aaron Norris  59:09

I know several people just so you know, that have been either are or have been part of the 7 Figure Flip when it was Flipping HQ with Justin and you’ve taken over and a lot of people that I respect that have been doing a lot of volume, and they’re nationwide. I think that’s another unique thing about the national mastermind concept is that at the local level at the REIA is you have some people that don’t want to share because they want to be the number one in their game. Looking nationwide at COVID-19 and a lot of the members are in your group are doing volume, Opportunities? Worries?

Bill Allen  59:45

Yeah, so the biggest thing that we got hit with was lending. And that was like real quick and just shut down. And then they were like, Well, okay, we shut down a little too fast and started opening back up again. So we’re actually back where we were with hundred percent financing with our lenders and stuff like that. But that shutdown fast like it was That was fast. And so that I feel like from the wholesale side that that caused a bunch of concern. And so I actually built out a training to like, at that time, I was like, Look, this is never going to happen to my members again, I’m going to show them how to go raise a bunch of private money. It was like build something out. I was like to two months. And I said, You’ve got to, you’ve got to have like, 20 options for money. Like you cannot rely, even though we have we had great terms with lenders like I’m sorry, 100% purchase hundred percent rehab, right? And so everybody was like, why should I even go out and continue to raise money? I’m just gonna do this all the time. And you get it’s, it’s like a company saying, hey, Walmart is going to be my, my 80% of my business, I’m going to be supplying them and when they don’t buy that next purchase order, they’re like, I’m going out of business. So figuring that out. That was one thing that really compressed on us. And but now it’s like, we don’t have enough inventory right now. And like houses so when you read the headlines in the news, They’re talking about how like, the listings are shrinking and all this stuff. And it looks on the surface like, oh, there’s a big real estate problem. Well, the thing is there’s a listing problem, like people are just not listing their houses. So what we’re seeing now is if we have inventory to fix up and flip, like, we are getting 2030 offers, and the cool thing is, when the houses are vacant, they’re easier to show right now. You have to like move people. So we have like the top notch product baking houses, it’s we are like the top 5% of every listing on there, they’re gone like that, like, we just had one that got bid up so high that our appraisal came in $15,000 lower than the highest bid that we had. So now we’re like, Man, what are we going to do? Are we going to continue this contract? Or are we going to put it back on the market and hope the next appraisal comes in better? You know, so it’s a I think it’s, it’s interesting of what’s I think there’s a ton of opportunity. I also think, you know, you know, we did the podcast I did with your dad, and talking about how foreclosures really are driving the marketplace. So that’s one thing that we’re really doing. Watching is the default rates, the foreclosure, what’s happening with the cares act? How much longer are they going to keep the moratorium on, on these kind of things? And where is that going to end up? And then what’s that going to do to to the environment. So what I’m recommending to like to my members is go out like build a foundation right now to know how to raise a lot of money, like figure if you can have cash is going to be king down the road, if anything happens. And let’s, let’s just keep evaluating, like get in and out of the properties. We have this seven day flip concept where we’re, we’re showing people how to flip houses in seven days. And so like, that’s another thing get in and out of the properties really fast so you don’t get caught, and just, you know, plan for, for what’s going on and don’t think that everything’s going to be great all the time. So I do think that there’s opportunity here. I think a lot of people also like couldn’t weather the storm for those three to five months. And so they were dropping out of business like they were marketing and going out my marketing is not working or I’m not making enough money, and the some of the competition went away from the wholesale side. So we were able to pick up and continue to spend money and compete. Can you market and picking up that inventory. And for us, I was losing money during those months. But I had enough money in reserve in my company to be able to not lay people off. Like I kept everybody on staff. And what happened was in kind of March, April, May, people were putting pause on their sale of their house. And so it was kicking into June and July, and now August. So now we’re seeing this, like, we call it the pig in the snake in the Navy. And if there’s an area inside the pipeline, where everything gets jammed up, and it was all just jammed up and not closing, but we still had people that wanted to sell, they just needed to pay just to wait to go find another house to move into. So now we’re seeing a lot more contracts where we had this construction before. So there’s a lot of I think the biggest thing is just to be agile, and like constantly, if you’re, if you’re looking at the data like right, data driven kind of business, and you’re looking at that, then that’s going to give you the answer that you need. Like I don’t have a crystal ball, but I’m gonna be looking at the data. I’m going to be looking at the numbers Watching a little bit more news and headlines that I used to before, but they have an agenda too, right? Like the podcast that I was talking about. So I’m kind of like, obviously leaning on some of the experts like you guys, you know, some of the experts and say, Hey, what are we going to do? What does it look like? And how are we going to navigate this? So it’s important, I think, I think, you know, next year, we’re going to see some interesting things in the real estate market. And hopefully, like, you have the skills you have the understanding, you have the knowledge, you have the people around you to make the right decisions as you go into that and, and you have the support and the I like, it’s just like a giant think tank that we have, which is really cool. Because when stuff slows down in San Diego, Pensacola is like three months behind that. So I can kind of leverage some of the some of the people that are in the bigger markets to start, you know, saying, hey, my houses are sitting on the market a little longer. It’s interesting, like pre-Covid, but we were seeing that we’re seeing some of that stuff like some of the people’s houses are sitting on the market a little longer. They’re starting to freak out now they’re like, I need more houses. Like I just think We don’t have enough inventory. And it makes sense.

Aaron Norris  1:05:03

Well, we are at that time it always I always have this huge list of questions I never get to you have a great podcast 7 Figure Flipping calm is the website and the information is there. I’ve been a listener for a while. Um, you’re also I did want to bring up the Flip Hacking Live. It’s an event I’ve always heard good things about. It always conflicts with other events that I’m doing. I’m really trying hard to go this year. Where What is it? And how can people find out about it?

Bill Allen  1:05:30

Yeah, so we have an event in October. It’s the 15th 16th and 17th. And it was supposed to be in Orlando, Florida this year. And we had I had to make a decision about you know, so I plan this event for seven months. And we got to a point where we had to go all in with like, I was planning three events. I was playing 100% virtual event, partial virtual partial in person and then all in person event. And when the hotel came back to us in Orlando, like they opened back up, right, and then all these cases Florida went crazy. And so I was like, you know what I don’t want I my event that we have is not people sitting six feet apart, wearing masks, getting their temperature taken every morning before they come in, after lunch. All this stuff and the security restrictions that they were going to put on it. I said, You know what, we have to make a decision. Let’s go virtual. So we’re doing something really cool. This year, we’re building out a studio in Charlotte, North Carolina, where I’m gonna fly two speakers out, I’m gonna fly out there. And we are going to present the event from stage just like we would at flip hacking live every year. This is our fifth year, and we are going to stream it to people’s houses, their computer, they wherever they are, we’re going to bring the event to you. So it’s kind of cool because people don’t have to miss it. Like Aaron, you don’t have to miss it. Like it’s three days. It’s and it’s not an extended Zoom meeting. It’s not a webinar. It’s not those kind of things like it’s gonna be interactive. We can do breakout sessions. We can do networking, and we have we have the same team that’s running this for me that did Tony Robbins UPW event with over 40,000 people a couple weekends ago. So really cool team that I have behind me hired the best. These are the event planner that I’ve had for years. They do a lot of huge events. And I can see everybody, we actually have a ton of TVs and monitors in front of me, where I can see everybody that’s on stage, I can bring the keynote speakers in. And we have over 20 speakers that speak at this event. I’m actually bringing in three keynote speakers this year from outside, because it’s cheaper, like I can bring people in that I couldn’t afford before, to come in and speak in event like this, to change mindsets to change, kind of success metrics to change concepts to think about all the stuff and then we talked about all the like tactical things, all the all the sales, all the marketing, all the operational side of the business. For anybody in real estate, really it’s wholesalers flippers primarily but I mean, we have a ton of multifamily investors that come we have lenders, all kinds of different people. It’s really a great event for anybody in the real estate space. So that’s it. That’s my kind of quick sales pitch, but it’s not like I’m actually attending one starting Friday, Friday, Saturday, Sunday, this weekend. So I can see from a user from a customer standpoint of a friend of mines event who they’re running by same event planner to see what it’s like. And to make sure that we like we get to learn from Tony Robbins a 40,000 person event to take all the things that went right went wrong into ours a couple months later, like three months later. So I think we’ll be at a point where I want to argue that this will be the best like virtual real estate event that you have ever been to. Because it’s an experience, we’re sending a box of stuff ahead of time, we get this nice swag box, all the materials that you would get when you were checking in, you actually check in one on one with a person. We have some of the sponsor booths, and you can go check out and network Question and Answers during lunches and things. breakout sessions take people down different tracks actually do more this way than we could do in person, because we can actually be more intimate and more kind of one on one in this atmosphere and have I’m able to, to be there more often than like going to my room and all the stuff that we can do before. So pretty cool. I’m excited about it.

Aaron Norris  1:08:56

Well, I know one of the trainers that did that event that you’re talking about Tony Robbins she was one of the ones that it was over a bunch of people and how they pulled that off. So it’s it’s really good lessons on building relationships through screens. So here we are, well, they want to find out information on that. I want to make sure I post the right link on that it’s flip

Bill Allen  1:09:14

Yeah, you can just go to fliphackinglive.com. So Flip Hacking Live, I think I have my shirt on. So if you if you go there, you’ll see and the other cool thing is you don’t have to pay for a flight you have to pay for a hotel. I am recommending some people like if you need to remove yourself from your house for a couple days, go get a hotel, go get Airbnb, like be focused on this. This is not like show up for a little bit and then don’t show up for the rest other half. You want to be there and be engaged. You don’t have to negotiate five days away from your family and stuff like that. So it’s, it’s going to be a good event so and it’s cheap. It’s a lot cheaper than it was in person. I think we’re at $297 right now for ticket and we will go up. You know we have a couple of kind of step ups as we get a little closer, but usually a ticket for this event is like 1000 Then you get a plane ticket in a hotel, you’re paying somewhere between two and $3,000 to come to this event every year, so the people that couldn’t afford it that are in different time zones around the country, they can attend.  So…

Aaron Norris  1:10:10

Very good. Well, I’ll make sure to post links. And I am hoping I have one other event that I’m speaking at that might but doesn’t mean I can’t do the other day. So it’s something that I am looking at. But I really appreciate your time today. Thanks for joining us.  Thanks for having me. This was awesome. I love to talk about data and numbers. So good.  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 property radar 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.

The post The Data Driven Real Estate Podcast #9 – Flipping and Wholesaling with Bill Allen, 7 Figure Flipping appeared first on PropertyRadar.

And while many real estate investors have built fortunes from buying properties at auctions, others have not found success and have even ended up losing everything.

The key to not losing your shirt at real estate auctions is being prepared. Real estate auctions can be fast and furious. If you’re not prepared, you can leave with a property you didn’t really want at a price that in retrospect, doesn’t really make sense.

Being prepared means knowing what your target properties are, doing your homework on them, and understanding what your financial limits are. But it also means knowing the type of auction you’re participating in.

Some real estate auctions are incredibly high risk – best suited for seasoned veterans who have been battle-tested. While other auctions are safer – best suited for those with little to no experience. But how do you know which is which? How do you know which auction is right for you?

If you go into the right real estate auction prepared, having done your research and homework, you may find yourself happily walking away with an amazing deal because you knew and understood the rules to play by.

Perhaps more importantly, you knew where to find the right data to help you bid appropriately.

So, while there is high risk with real estate auctions, there can also be very high reward – you just need to be as prepared as possible to mitigate that risk and to boost your chances for that reward.

What Is Real Estate Auction Investing And How Is It Different From Other Buying Strategies?

When you think of real estate auctions, you probably imagine abandoned run-down houses in foreclosure where flippers buy them sight unseen. In reality, there are several types of auctions ranging in risk and drama. We’ll cover all of the different types below.

But first, let’s review auctions as a real estate investing strategy, as it’s very different than most common investment strategies.

Targeting and buying a preforeclosure property, absentee owner property, free and clear property, or various other types of investment properties, often still involves buying the property directly from the owner, using escrow, buying title insurance, and even using financing.

Now, often at trustee sale auctions, tax auctions and sheriff sale auctions, you’ll find there’s a much shorter time frame to research a property. And often there’s no opportunity to do a typical professional home inspection, roof inspection, septic inspection, pest inspection, and more.

And while you can always get professional title research done, you may not be able to get title insurance.

There’s simply a complete lack of access to these properties. So even experienced investors don’t have a chance to complete their due diligence to check for fundamental problems.

Also, depending on the type of auction, you may find yourself with a property currently being lived in, which means you’re responsible for evicting the tenants.

If you’ve never been to a live real estate auction, you might be surprised by how they happen and some of the small nuances that only seasoned investors know to be on the lookout for.

Watch the video below for a detailed, step-by-step experience of a live real estate auction:

You Can Lose Everything At Real Estate Auctions… If You Don’t Know The Rules!

In order to win at real estate auctions, you have to know the rules – and not all real estate auctions have the same rules. So if you learn how to play by the rules, you can end up with some great deals. If you don’t, you can end up with nothing, or worse, lose everything.

Types of Real Estate Auctions

Below is a list of the primary types of real estate auctions. Your first step to successfully winning at a real estate auction is figuring out which one is best for you.

Sheriff Sale Auctions – Judicial Foreclosures

Sheriff sale auctions are public auctions of properties that are the result of a court order. Most commonly, the properties are being auctioned because of foreclosure, but it can also be due to tax liens or lawsuits, wherein the home must be sold to pay according to the judge’s ruling. The proceeds from the auctions are used to repay these debts, with any excess proceeds going first to other junior debts on the property, and then to the owner.

Where to Find Sheriff Sale Auctions

The Sheriff is generally an elected county official that enforces the law in unincorporated areas (areas outside of cities, where law enforcement is handled by city police departments), and typically serve as officers of the county courts, which is where their responsibility for court-ordered sales comes from.

To find information on Sheriff sales in your county, do a Google search for your county + “sheriff sales”, or go to your county Sheriff’s website.

You can also use third-party services like PropertyRadar that provides a list of Sheriff sales. When coupled together with PropertyRadar’s enhanced public records data about each property, you’re better able to thoroughly research each opportunity.

Pros & Cons of Sheriff Sale Auctions

Pros – Buy below market value, doesn’t require negotiating deal with owner, less competition.
Cons – no inspections, no title insurance, may have to evict occupant, no financing – typically pay in full upfront, money may be tied up during redemption period, buyer is responsible for senior debt including property taxes.

What Types of Investors Are Suited For Sheriff Sale Auctions

• Experienced
• Have access to capital
• Do enough deals to be able to afford occasional losses
• Not recommended for those buying fewer than 10 properties a year

Pro Insights – Sheriff Sale Auctions

The saying “cash is king” is the name of the game in judicial foreclosures. Payment in full is typically due immediately via Cashier’s check upon a winning bid. In cases where a sizable deposit is required upon a winning bid, the remainder is usually due the same day. Absent documentable fraud or unfairness, all sales are final. If you are the winning bidder and later discover an unrecorded lien, you accidentally bid on a junior lien or have an unexpected squatter that moved into the property; it’s too late. The property is yours. It’s why this buying strategy is risky and why your competition is typically more sophisticated. It’s also not unusual for seasoned pros to purposefully bid up newbies appearing at the auction in hopes to scare them away indefinitely. Thorough research on the property, title, tenant, and local rules involving evictions will go a long way to preventing a serious case of buyer’s remorse.

Trustee Sale Auctions – Non-Judicial Foreclosures

In some states, properties are sold by non-judicial trustees, instead of by the county sheriff’s office. Regardless, the type of properties being auctioned are the same.

Where to Find Trustee Sale Auctions

Unlike Sheriff sales, where each county typically has only one Sheriff’s office where you can find a complete list of upcoming sales, there can be any number of Trustee’s operating in a given area. And where they operate can change over time. Because of this, the only reliable place to get a complete list of upcoming trustee sales is from the County Recorder’s office.

And though you may also find notices of trustee sales in your local newspaper, or even pinned to bulletin boards at the county courthouse, neither reliably provides a complete list.

When you go to the County Recorder, you’ll have to search for document images of each trustee sale. Once you have each document, you’ll need to copy the information for each sale into your own list – it’s obviously time-consuming but it is free.

On the other hand, you can often buy each notice from the Recorder, but this gets expensive unless you live in a State where notices are made available online for free.

IMPORTANT NOTE – trustee sales are often postponed, so to get a complete list of what is currently scheduled for sale you may need to look at every notice going back a year or more.

As with Sheriff sales, you can also use third party services like PropertyRadar that provides a complete list of trustee sales. And when coupled together with PropertyRadar’s enhanced public records data about each property, thoroughly researching each opportunity becomes much easier.

Pros & Cons of Trustee Sale Auctions

These types of auctions are nearly identical to sheriff sales, just managed by a trustee instead of a county sheriff’s department. They hold the same level of risk and reward.

Pros – Buy below market value, doesn’t require negotiating deal with owner, less competition.
Cons – no inspections, no title insurance, may have to evict occupant, no financing – typically pay in full upfront, money may be tied up during redemption period, buyer is responsible for senior debt including property taxes.

What Types of Investors These Auctions Are Suited For

• Experienced
• Have access to capital
• Do enough deals to be able to afford occasional losses
• Not recommended for those buying fewer than 10 properties a year

Pro Insights – Trustee Sale Auctions

Just like judicial foreclosures, cash is king. Your competition will range from a local Main Street flipper to deep-pocketed Wall Street firms buying properties to hold. Payment in full is typically required immediately upon winning bid via Cashier’s check. Absent documentable fraud or unfairness, the sale is final. If you later discover you accidentally bid on a second trust deed, find black mold in the property, or discover a PACE loan attached to your property taxes, it’s too late. And just like judicial foreclosures, your competition at the sale will purposefully run up your bidding price attempting to get you to overbid, hoping you’ll fail and never return. Horror stories exist of newbie investors winning only to hear from the competition post-win:  “You know that property was burned down, right?” The competition is sophisticated, and the strategy risky, which means your research game must be strong. Thoroughly researching the property, title, inhabitants, and local rules around evictions are necessary for trustee sales success.

REO Sale Auctions – Auction of Bank Owned Properties AFTER Foreclosure

When a property goes up for auction at a Trustee or Sheriff sale but doesn’t get sold, the property goes back to the lender (e.g. – a bank) and becomes what is known as “real estate owned” or an REO property.

How each bank chooses to sell these properties will differ, and sometimes the banks may use a different approach for each property.

Many properties will be listed with an REO broker, that will sell the property through the local multiple listing services (MLS), and those will never go back to auction. Some will be sold as part of a bundle of properties to a large investor. Others will simply go back to auction.

These REO auctions are often referred to as “foreclosure auctions”, but they really aren’t. Recall that it is at the Trustee Sale and Sheriff Sale auctions where the actual foreclosure process takes place, as mandated by law.

You could refer to these as an “auction of foreclosures”, since these were all foreclosed upon. But these auctions are best described as REO auctions, as they are auctions of previously foreclosed properties that the banks now own.

Unlike Sheriff and Trustee sales, where the rules are set by the state, REO auctions can vary quite a bit, with the bank and auctioneer often determine the rules. Having said that, REO auctions are often still state-regulated to a degree.

Sometimes REO auctions offer inspections, title insurance, certain days where you can preview the property, and even financing. Sometimes these auctions require you to pay in cash and you may have to deal with evicting the current occupant.

INSIDER TIP #1: Often you will have to pay the auctioneer what is known as a “buyer’s premium” in addition to the amount you bid. This catches many by surprise, because in most real estate transactions the seller pays the commission, not the buyer.

INSIDER TIP #2: Sometimes you might find the rules will vary between properties…at the same auction. Bottom line it’s super important to carefully read the terms of the auction before participating.

Where to Find REO Sale Auctions

The following companies are some of the better known REO auctioneers.

• Hubzu
• Williams & Williams Real Estate Auctions
• com
• Xome
• Hudson & Marshall
• Bid4Assets

Pros & Cons of REO Auctions

Pros – Financing may be available, inspections may be available, title insurance often offered, properties may be fixed up, auctioneers typically offer more customer services / support then other auction types.

Cons – The rules aren’t mandated by the state, so you need to carefully review and understand the rules for each auction before bidding.

What Types of Investors REO Auctions Are Suited For

Buying REO properties can be a great fit for newer investors, because there’s typically lower risk involved. That’s because many REO auctions offer title insurance, financing, inspections and the ability to preview the property.

Of course, the reward may not be as substantial as what you might find at other auctions, but when you’re just getting started, REO auctions are about as low risk as you’ll find when it comes to real estate auctions.

Of course, you should always check and understand the rules for each REO auction to make sure it’s a good fit for you.

Pro Insights – REO Auction

Some auction companies focus strictly on real estate auctions while others specialize in equipment, appliances, estate, or art. Real estate pros search for auction houses that attempt property auctions when it’s typically not their expertise. Investors watch for mistakes in marketing, errors on property details, and understand fewer bidders may show up. Also, understand “shill bidding.” The client of the REO auctioneer is the bank. It is the auctioneer’s fiduciary duty to get the highest price possible for their client. One of their favorite tools is shill bidding, which has the auctioneer purposefully drive up the price against unsuspecting bidders. It sounds illegal, but read the fine print of the auction house. They have every right to point to a nonexistent “bidder,” ratcheting up the price one more notch in hopes you’ll outbid them one more time. Online auctions allow this to happen without bidders witnessing it. While REO auctions tend to be less risky than their courthouse brethren, investors still need to do homework to understand the rules of engagement.

Property Tax Sale Auctions – properties in default on their property taxes

Property tax sale auctions are typically held annually to sell properties with unpaid property taxes. The Treasurer or Tax Collector of the county has the right to sell these properties after the taxes have been delinquent for a certain amount of time, typically at least five years.

Where to Find Property Tax Sale Auctions

The county Treasurer-Tax Collector is generally an elected county official that has the responsibility for collecting taxes. To find information on tax sales in your county, do a Google search for your county + “tax sales”, or go to your county Treasurer-Tax Collector website. Many county Treasurer-Tax Collector offices will handle these sales themselves, usually at a live event, while others may use a third party like Bid4Assets.com to handle the sale, sometimes online.

Pros & Cons of Property Tax Sale Auctions

These types of auctions are nearly similar to sheriff sales and trustee sales. The biggest difference is they typically wipe out all other liens so can be a little safer.

Pros – Buy below market value, doesn’t require negotiating deal with owner, less competition.
Cons – no inspections, no title insurance, may have to evict occupant, no financing – typically pay in full upfront, money may be tied up during redemption period which can be upwards of an entire year.

What Types of Investors Property Tax Sale Auctions Are Suited For

• Experienced
• Have access to capital
• Do enough deals to be able to afford occasional losses
• Not recommended for those buying fewer than 10 properties a year

Luxury Property Auctions – high-end real estate not in default

Luxury property auctions don’t usually feature properties in mortgage or tax default. Rather, these are high-end properties sold at auction to avoid the lengthy time on market (sometimes in excess of a few years) that luxury properties often face. The rules for these auctions are set by the seller and the auctioneer, so be sure to read them carefully before bidding.

Where to Find Luxury Property Auctions

• Elite Auctions
• Concierge Auctions

Pros & Cons of Luxury Property Auctions

While you can’t expect to walk away with a killer deal every time, these sellers typically have selected an auction because they really need to sell by the auction date, rather than having the uncertainty of listing the property with an open-ended timeframe.

With that time pressure, they may be willing to accept less, sometimes significantly less, than the value they might get waiting for the right buyer. On the other hand, really hot properties may sell for more due to the excitement and competition of an auction.

What Types of Investors Luxury Property Auctions Are Suited For

• Anyone looking for a deal on luxury property.

Pro Insights – Luxury Auction

Real estate professionals take a ton of time preparing for auctions. Luxury auctions are an excellent place to briefly discuss the differences in three types of auctions:

• Minimum bid auction: Also known as a published bid auction, the seller and the auction house will publish this agreed-upon price in their marketing. While bidding may start lower, the property will not sell until it reaches this minimum price. If bidding doesn’t reach the number, the seller retains the property. Potential buyers like the transparency, sellers like the safety net and control.
• Reserve auction: Unlike the minimum bid auction, a reserve auction allows a seller to set a price that is undisclosed to buyers. Prices that appear in marketing doesn’t necessarily have nothing to do with what the seller will ultimately accept at auction. Sellers like it because they retain control. Buyers dislike this form of auction because they may end up wasting resources preparing for an auction where the seller is just completely unrealistic. Auctioneers also don’t like this type of auction if it’s paired with an unrealistic seller because they don’t get paid unless a property sells.
• Absolute auction: This is the most exciting form of auction. When an auction is marketed as an absolute auction, it means the highest bidder wins no matter what the price, guaranteed. From the seller perspective, this appears very risky because they won’t have final say if the bidding does not reach expectations. However, when auctions are marketed as absolute, it’s more likely to draw serious bidders in quantity ready to buy, not bid.

Government and financial institutions have been heavier users of absolute auctions. But, auctioneers will always steer sellers to this type of auction whenever possible because it’s the most exciting and draws the most bidders. When it comes to luxury real estate, it’s important to know the difference in auction types because opportunity may be found in failed minimum bid and reserve auctions. When a property does not sell at auction, it could signify the auctioneer lost control of their client and could not convince them to hold an absolute auction or get them to be realistic on price. A pro investor knows to follow up and see if there’s a chance to purchase the property after the fact. There may be a creative way to solve an issue the seller is facing.

Other auctions – offered by seller, not in default

It’s also possible to buy properties being auctioned off directly by the seller instead of the bank. Most of the auctioneers that offer auction services to banks for REO auctions, will also accept properties from anyone else as well.

While auctions have traditionally been thought of only as a last-ditch effort for distressed properties, more and more sellers are turning to auctions as a way to get out of their property faster than the open-ended process of listing the property on the traditional real estate market. Some of the most opportune times to hold auctions is in hot markets. Pitting all interested and qualified parties against each other in a limited time frame could be a powerful way to reach an excellent sales price.

Where to Find These Auctions

• Hubzu
• Williams & Williams Real Estate Auctions
• com
• Xome
• Hudson & Marshall
• Bid4Assets
• Bank Foreclosure Sale

Pros & Cons of These Auctions

Pros – Financing may be available, inspections may be available, title insurance often offered, properties may be fixed up, auctioneers typically offer more customer services / support then other auction types.

Cons – The rules aren’t mandated by the state, so you need to carefully review and understand the rules for each auction before bidding.

Important Note – There are no guarantees that the sellers are willing to part with their property for a price that makes sense for you, but since they’ve listed it at auction, there’s a good chance you can get a great deal, especially for a property that you plan to rent out.

Local Property Auctions

Auctions don’t always deal with distressed dispositions of real estate. Sometimes, auctions simply serve the function of a speedy sale to qualified bidders on a specific date. It’s the Ebay of real estate.

Some sellers will use professional auctioneers like the ones we listed under luxury real estate auctions. They have national footprints, beautiful technology and robust marketing machines to attract larger numbers of qualified bidders. But, not all auctions are large. Some auctions are held by small, local auctioneers. Some auctions are even a single asset by a regular investor. As an example, a wholesaler can put together a silent-bid auction where they invite their list of qualified real estate investors to a recent buy and they can bid against each other.

Where To Find These Auctions

Professional auction companies are excellent at marketing. When it comes to local auctions help by the pros, don’t be surprised if you receive a mailer, see ads in the local paper and online, and see signage directing you to upcoming opportunities. Marketing varies by location, the asset being auctioned, the number of properties involved in the auction, and the auction company itself.

Go on Google and type in the city where you are interested in investing and type “real estate auction.” If there are auction opportunities in the area, this method will typically help you identify the auction companies making them happen. You can sign up to be notified about upcoming auctions.

Pros & Cons of Local Auctions

Pros – Financing may be available, inspections may be available, title insurance often offered, properties may be fixed up, auctioneers typically offer more customer services / support then other auction types.

Cons – The auction may be a reserve or minimum bid with unrealistic sellers. Contact the auctioneer to understand the rules.

What Types of Investors These Auctions Are Suited For

• Newer investors
• Local real estate investors
• Anyone interested in the particular property

Pro Insights – Local Real Estate Auctions

Sometimes an auction company takes on an unusual category. As an example, an auction company that typically auctions farm and business equipment suddenly has a piece of real estate in the mix. Look for errors in listings and marketing, and understand their target audience won’t always be interested in something outside the norm. You may find a good deal when a very experienced auction company lands an asset they don’t typically handle.

Also, look for new auction companies. Not all auction companies are the brand names that have been in the business for decades. These smaller auction companies may have been chosen because they aren’t as expensive. It also means they don’t typically have marketing expertise. Look for poorly advertised auctions, mistakes in advertising, strange locations, odd inventory, mixed inventory, or simply new entrants in the space.

Real estate is a local and relationship-driven business. It wouldn’t seem like relationships would come into play in the auction strategy, but it does. Auction houses don’t make money unless a property sells. Nothing is more frustrating to an auctioneer than spending time and money on an auction that fails because the seller was unrealistic on price. A savvy investor knows to approach a local auctioneer after a failed auction and submit a serious, well-researched cash offer. In many cases, having a serious cash offer backed by a knowledgeable and reputable local investor allows the auctioneer one last chance to make a commission. Cementing yourself as that local expert could see auctioneers calling you on any and all failed auctions in the future.

IRS Auctions – seized for nonpayment of federal taxes

Properties auctioned off by the IRS have been seized or acquired due to nonpayment of federal taxes. The properties are listed with state, city, basic property details, and the minimum bid. You can search by city or state. The list of upcoming auctions is usually updated every week.

Where to Find IRS Auctions

• US Department of Treasury

Pros & Cons of IRS Auctions

Unfortunately, there aren’t dozens and dozens of properties to choose from. There are very few properties that get auctioned off by the IRS every year, and at any given time there are likely to be more canceled auctions than upcoming auctions.

Pros & Cons of IRS Auctions

Pros – More time to fund a deal, inspections may be available, title insurance often available with title offered spelled out on the IRS site. Terms of the sale, down payment requirements, and details are fairly detailed per property.

Cons – The government reserves the right to set minimum bids but gives itself the right to not only bid against potential buyers, but also resend the sale after the auction.

What Types of Investors IRS Auctions Are Suited For

• Local investors
• Experienced investors

Bankruptcy Auctions

Individuals and businesses can declare different kinds of bankruptcy including Chapter 7, Chapter 13, Chapter 12, and Chapter 11. They do so when they are unable to pay debt obligations. Bankruptcy is federal law so when declared, the individual or business seeking bankruptcy enters the federal system and typically files in the state where they reside, even if they have assets in numerous states.

In a bankruptcy, a discharge is a court order which states the individual or business does not have to pay most debts (subject to some exemptions). A Chapter 7 filing transfers the assets to a trustee who is then tasked with overseeing the liquidation of the assets to pay off creditors.

For this article, we’ll simply look at a Chapter 7 bankruptcy where a discharge has taken place and real estate liquidation must take place to pay off creditors. The assets are transferred to a trustee who will use the assistance of an agent and other professionals as needed to market the property.

A notice of sale of estate property is posted on the appropriate District website of the United States Bankruptcy Court. The notice of sales will list the hearing date, the location of the hearing, last date of objections from creditors, details on the property to be sold, terms of the sale, and how to qualify to overbid. On the notice of sale is a proposed sale price. This is an actual offer obtained from a qualified 3rd party. If no other party shows up to bid over this amount, that is the dollar amount the property will sell for and behaves like a minimum bid auction.

The notice of sale will also contain contact information for the parties needed to ask questions and to investigate opportunities such as the listing broker. It’s up to you to do your due diligence to decide how much to offer on the property. If the property looks promising, follow the guidelines as presented in the notice of sale and offer an amount over what is posted. If no other bidders are present, including the bidder posted on the notice of sale, you may get the chance to purchase the property by making the minimum overbid.

Pros & Cons of Bankruptcy Auctions

Pros – More time to fund a deal, inspections may be available, title insurance often available with title offered spelled out. Terms of the sale, down payment requirements, and qualifying for the purchase, are posted in the notice of sale. May not be required to be all cash and the deposit may be minimal.

Cons – The process is not about relationships and the trustee is simply trying to liquidate assets. Bankruptcy isn’t always easy to follow and hearings may be postponed if challenged by the creditors, the court, or the debtor.

What Types of Investors Are Suited For Bankruptcy Auctions

• Local investors
• Experienced investors

Pro Insights – Local Bankruptcy Auctions

Not all bids are created equal. The offer as presented on the notice of sale may have contingencies. Agents selected by the trustees are often very consistent so you may be able to build a relationship with the agents representing the properties on behalf of the trustee. If there’s a challenging situation with the property or the agent has bids that are not on par with the opportunity, you may be able to get a heads up from the agent when an overbid would be a smart decision.

Online Real Estate Auctions vs. In-Person Auctions

More and more auctions are moving online. The move to online has been slow for Sheriff, Trustee, and Tax sales, as doing so often requires changes to state law. Still, some states have made these moves, and with Covid-19, that move may accelerate. You’ll find REO auctions both online and at live events. Some now even offer simultaneous live and online bidding.

Online auctions are especially beneficial to those who want to bid on out-of-area properties or aren’t able to go to a live event due to work schedules or personal circumstances. Online auctions often show the current highest bid but can be subject to “sniping” where folks place their highest bid in the last seconds of the auction so others don’t have time to respond.

Live-event auctions are sometimes preferred by banks because an enthusiastic auctioneer can whip up the crowd to excite people to make higher bids than they might otherwise. Typically at live events, you can “read the room” to get a better idea of interest in the property, and you typically know exactly where bidding stands.

Other real estate auctions, like Bankruptcy auctions, are neither online nor happen at a live event. Instead, buyers submit sealed bids in advance with the results being revealed at a specific date and time set by the court where the highest offer wins.

Tracking Trustee Sales & Keeping Your Foreclosure Search Up to Date

When it comes to high-stakes auction investing, you’re going to want to stay informed, not only about new foreclosure opportunities, but also about the properties you’re already interested in.

In addition to the country’s most comprehensive foreclosure search, PropertyRadar offers sale updates for trustee sale auctions every 15 minutes. You get critical information like:

• Opening Bids
• Postponements
• Cancellations
• Winning Bids
• New REOs

PropertyRadar also acts as one central place for all of your pre-auction research, including transaction history, comparable sales, investment analysis calculations, title history, owner demographics and contact information, value, equity, and more.

How To Bid On Properties At Real Estate Auctions?

Different types of auctions can utilize different types of bidding. Before you get to an auction or take place in one online, it’s important to first understand the types of bidding that exist. You will find this information on the auctioneer’s website or you can call to have the information sent to you directly. Once again, it’s important to know which type of auction is being held.

Auction Bidding Type Review

• Absolute Auction – The property will be sold to the highest bidder no matter what (there’s no reserve). The property will not be returned to the bank. This causes a higher level of attendance and excitement.
• Minimum Bid Auction – There is a published minimum price, and if that price is not met, then the property will not be sold. This minimum is distributed on flyers and online listings, so that only qualified bidders attend and understand the price desired by the seller.
• Reserve Auction – While there is no published minimum bid with this type of auction, sellers choose the price at which they will sell but do not have to disclose this information. Often the seller also has a specific amount of time to confirm the sale, usually 48 or 72 hours.

Vetting that You’re Bidding on the Right Property

At a trustee sale or sheriff sale, you are bidding on the lender’s interest in the property as described in the Mortgage or Deed of Trust. The Mortgage or Deed of Trust is the document that gets recorded down at the County Recorder’s Office.

You are buying whatever property is described in the legal description in that Mortgage or Deed of Trust. It doesn’t matter what the listed address is or the assessor’s parcel number that’s on document. It’s only what’s in the legal description on the mortgage or deed of trust that is included. So, it’s a good idea to check. Especially on unusual properties where the possibility for mistake is high.

You should never come down to the courthouse sale and buy based on the address they announce. You really need to pay attention to the loan document number that the auctioneer will announce. Now that you’ve verified your bidding on the right property, it’s time to qualify.

Getting Qualified by the Auctioneer

To bid at a live event, you’ll typically need a Cashier’s check for all or a portion of your maximum bid and a photo ID. At an online auction, you may have to post a deposit in advance. Be sure to check the rules for the particular type of auction you will be attending.

Know the Liens and Individual Property Risks

Most auction sales are made in as-is condition without any warranty. Buyer beware as all sales are final. It should be obvious at this point you can’t call the lender after the sale if your heater goes out or you changed your mind.

They also may not just be handing you the keys to the property. Depending on the auction type, and the specific rules, you may have to call a locksmith. And if there’s somebody still in the property, living there, you’re going to have to evict them. This means you need to be acutely aware of local rules on evictions, as well as the going rate for cash for keys. The cash offer to entice tenants out of the property may be the least expensive and efficient way to gain control over the property.

For trustee and sheriff sales, you are buying the property subject to existing liens and encumbrances. For example, if the loan going to trustee sale is a second mortgage, you will still owe the full amount of the first mortgage. And you also always owe past-due property taxes.

How to Bid in Increments

There are different norms for different types of auctions. Typically, at a Sheriff, Trustee or Tax Sale, the first bid will be for “a penny over”, the opening bid amount. Why leave 99 cents on the table if no else plans to bid. Once others start bidding, it’s customary to raise the bid by $1,000 increments or more. When it starts getting close to the winning bid, you may see that drop to $100 increments. When the last bid is made the auctioneer will give everyone a chance to put in another bid before announcing, “Going once, twice, third and final call.”

Pro tip: After the auctioneer says “final call” you can often still speak up with a higher bid, as long as they haven’t gotten the winner’s cashier check in hand yet.

Practice on Paper First

If you are new to auction investing, it’s smart to practice on paper before you go down to the courthouse steps to try your hand at the real thing.

Paper bidding means writing down what you would have bid, and then later analyzing the flip to see if you would’ve made a good return or not.

Just like a stock market newcomer would do paper trading, paper bidding lets you test and hone your skills. Here’s how it works: research the properties, estimate the repairs, drive by and do a quick exterior inspection if you can, and establish what would be your initial bid and your maximum bid.

You can then later check what the property actually sold for at auction and what it was flipped for by using PropertyRadar. You could even try to keep an eye out for it on a rental listing site.

You can then compare these real transactions against what you would have bid and spent on repairs to see if you would’ve earned enough profit to be worthwhile.

You Won a Foreclosure at a Real Estate Auction – Now What?

What happens next depends on the type of auction. You might be able to get a locksmith to open your door in just a couple of days. Or, you may have to wait out a redemption period, a length of time ranging from several days to a year depending on the state.

The redemption period often applies to sheriff sales and sometimes applies to trustee sales (for example, with HOA liens sold at trustee sales in California). During this time, you can’t evict occupants or begin construction work on the property. During this time, the owner has a chance to pay back what they owe, plus interest or a penalty that often goes to the successful bidder if they had to pay in full at the time of the auction, and regain the property.

The next steps after you win an auction are:

• Complete the sale – Meet with the auctioneer to provide your contact information, how you want the property to vest (for example as an individual, a partnership, an LLC or a trust) and pay up.
• Payment– Pay the required amount on the spot in cash or with a Cashier’s check (or multiple Cashier’s checks). Often on a trustee, tax or Sheriff sale, any amount you tender over the winning bid amount is returned in a refund check along with the deed approximately ten days following the sale. This is necessary as you won’t have a Cashier’s check ready for the exact amount at the time of sale.
• Taking deed – The Trustee, Tax or Sheriff’s Deed of Sale confers the title of the property to the investor that placed the winning bid. If the sale has a redemption period you may receive a certificate of purchase entitling you to receive a deed after the redemption period is over, assuming the owner doesn’t pay to redeem the property.

Final Words About Real Estate Auctions

The risk of buying at auction varies a lot based on the type of auction, and can absolutely be worthwhile, if you plan ahead, practice your ROI calculations, hold strong to your maximum bid, and have done your research to avoid hidden costs like senior liens or large past-due property tax amounts.

Investing in foreclosure auctions can be intimidating and scary at first, it can also lead to life-changing deals, which is one of the reasons PropertyRadar has become so popular amongst professional investors. It lets them track trustee sales and sends them alerts to their phone about what’s coming up for auction, and when and where that trustee sale is happening.

For trustee sales, you can get sale updates every 15 minutes, including opening bids, postponements, cancellations, winning bids, and new REOs.

Essentially, PropertyRadar helps minimize risk and puts you in a position to consistently be ahead of your competition, ultimately in the position to reap the big rewards.

Ready to discover and analyze investment deals? Start your free trial of PropertyRadar.

The post Real Estate Auctions – Your Guide To High Stakes Investing appeared first on PropertyRadar.

As a professional, you know firsthand it’s a waste of money to simply blanket a neighborhood with marketing materials, treating every household as a potential lead. You’ve got your favorite channels on HOW to reach your best leads that typically convert. The issue is more WHO to target with your marketing to make certain you’re communicating with the right prospect. Hopefully, at the right time and in numerous channels.

The Internet has become a treasure trove of lead information. It just takes some elbow grease on Google and researching on suspicious skipping tracing sites that may or may not have malware, right?

Yes, you’re laughing because the pros know better.

In this post, we’ll start with a few ways you can find the owner of a property at no cost. If you only need contact info for one or two properties, these free methods are likely best suited for you. Then we’ll cover other ways to obtain marketing lists that have a property’s owner name, phone number, and potentially other information to better determine if the property you’d like to target is worth pursuing.

If, however, you’re a professional who relies on building various segmented mailing lists of property owners and their critical contact information including emails and social media profiles, we’ll show you how PropertyRadar makes it easy to find property owners, more contact info, and all the important property data you need to make smart, data-driven decisions to grow your business.

We’ll even share one extra layer of data most of your competitors aren’t using, giving you the ability to create hyperlocal marketing lists tailored to your best prospects so you can reach them more often instead of blowing your entire marketing budget on a generic farm list.

You know the saying: “When you market to everyone, you market to no one.”

Find Property Owners Using Public Records

We’ll skip the part about telling you to dumpster dive for public records on the interwebs. We want to make sure you spend time reaching potential customers, not with IT support trying to get your computer unhacked.

All methods discussed here for finding property owners rely on public records searches. Public records are just that (records) of marriages, births, divorces, deaths, and property purchases. County Recorders are entrusted with upholding and protecting this essential public service. Great public records ensure transparency and accessibility. These nonconfidential pieces of information can also be a goldmine for businesses that know how to access and use them wisely.

While all of the methods utilize public records searches, they don’t all have the same ease-of-use. Government sites can be challenging to navigate and they don’t provide easy exporting for contact information. They also might not be able to provide mailing addresses for absentee owners.

Let’s take a look at the five methods for searching public records to find property owners and other public records information:

1. County Tax Assessor Office

If someone owns a property, you can be sure they’re paying taxes on it and that the county tax assessor will have their information on record. To easily find the website, type into Google ‘county assessor’ plus the county you’re interested in. You can even add ‘property owner’ to your search and you might get lucky enough to find the exact page you need without navigating a complicated government website.  Otherwise, you might have to do a little searching (or a lot) to get to the right page to find property owners.

Finding a property is a lot easier if you have the property’s identification number. Depending on your state and county, they will reference this number in different ways. It may be called the Accessor’s Identification Number (AIN), Accessor’s Property Number (APN), Section-Township-Range-Area-Block-Lot (STRABL), or Section, Township, Range, Area and Parcel Number (STRAP). With 3,144 counties in the US, expect lots of variation. Just know this is the number that will appear on a property tax bill.

• Pros: This information is free.
• Cons: If you’re operating in numerous counties, this can be a tedious process and there is zero consistency between county websites and the technology they employ. You are limited to basic property details, owner name, and mailing address listed where the tax bill is sent. You must create your own systems to organize and track leads. And there’s no ability to refine lists, visualize insights, or automatically update this stagnant list when conditions on the property change.

Pro Insights – Visit the Public Records Online Directory, NETROnline. This free site provides links to your local county’s Assessor, Treasurer / Tax Collector, and Recorder offices so you can search for the property and find this number. These government-run websites will allow you to search for properties by the accessor’s number, property address, and names of the owner.

If you’re simply looking to track down the owner’s name and mailing address, the County Tax Collector site will typically provide that information. You’ll also see if the property tax bill is current which can come in handy. You’ll also get to see if there are any special assessments associated with the property. As an example,  Property Assessed Clean Energy (PACE) financing is a loan that owners can take out to make energy-efficient upgrades to their property. Unlike a typical loan, these loan amounts are attached to the property taxes and the rates are typically far higher than standard mortgage rates and are senior to existing loans. Even if the owner that took out the loan sells the property, this loan stays on the property tax roll.

2. County Record/Clerk

You can find a property owner by visiting the County Recorder as well. Using NETROnline, simply identify the state and county and the site will connect you to the appropriate site. But, if you’re simply needing owner name and mailing address, stick with your County Tax Accessor. It’s far easier to navigate and free.

Think of your County Recorder office as the place to go for documents associated with property and the people associated with a specific property. Documents recorded at the Recorder’s office associated with people include things like death, births, bankruptcies, and divorce. Recorded documents associated with real estate include notice of sale, mechanics liens, bill of sale, deeds of trust, mortgages, easements, tax liens, homestead, reconveyance, and trust deeds. Another treasure trove of information for those with the patience, time, and strategy that requires this huge library of information.

• Pros: The search itself is free, most documents will cost and it will vary greatly depending on the county.
• Cons: If you’re operating in numerous counties, this can be a tedious and expensive process. There is zero consistency between county websites. Many counties offer free search and shopping cart functionality to purchase documents you’re looking to obtain but you’ll be unable to try before you buy. Depending on the documents you are looking for, there will also be limited information outside of name, property address, and mailing address of owner. You must create your own systems to organize and track leads. And there’s no ability to refine lists, visualize insights, or automatically update this stagnant list when conditions on the property change.

Pro Insights – Researching for this article took HOURS because we wanted to test a few county websites for search functionality and cost. Technology and search functionality is incredibly painful and limited. Some counties will force you to buy a full set of documents while others will allow you to process your request for specific pages of a document. Depending on the document type you’re chasing, fees can vary greatly. Some investors use public records because they specialize in very specific niches like probate and bankruptcies. These pros are chasing deals fewer players tackle because it is so time-consuming and you’re thumbing through mind-numbing legal documents.

3. Local Title Company

You call up your favorite local title rep and ask for a general FARM (Focused Real Estate Marketing) list. Some of the basic fields for the search included name, address, mailing address, property characteristics, nearby neighbors, comparable sales, transaction history, and some states have community information like demographics and school information.

Most FARM marketing lists don’t run amock of Regulation X or the Real Estate Settlement Procedures Act (RESPA). This federal law prohibits entities subject to RESPA rules (including licensed Realtors, mortgage brokers, appraisers, and title companies) from receiving a “thing of value” for referring business to another settlement service provider regulated under RESPA. General lists for information available in the public records domain won’t cause issues. However, custom lists are another story. Rules will vary by state and provider but expect a title company to charge for custom reports and marketing lists where you’re seeking information beyond what you’d find at the County Recorder’s office.

• Pros: Some of these lists will be free of charge. For custom reporting where you are charged, title reps are far more familiar with searching the information you need saving you a tremendous amount of time and money. Since they are hoping to gain your business, they won’t typically charge much outside of what it costs to actually pay for the information. Having a savvy title company may also help inform you of ways to refine your search that you didn’t even know about.
• Cons: Title reps are busy pros themselves and can’t always drop everything to work on your list. You’ll also receive a static list that starts to age as soon as it’s pulled. This means you’ll need to come back often for updated lists. It’s more money, but at least the title rep is helping you save time by not doing it yourself. Tracking these lists, however, becomes its own issue. Like other free and low-cost options, you’ll have to create your own systems to organize and track leads. And there’s no ability to refine lists, visualize insights, or automatically update this stagnant list when conditions on the property change.

Pro Insights: One of the things real estate professionals need to understand is that title reps get hit up a lot by amateurs that constantly ask them for marketing lists that never turn into title business. Don’t be that person. Respect their time as title reps are an extremely important piece of your team.

More title companies are developing custom applications for serious clients to do research on their own. This is critically important for foreclosure investors that need more updated information and access to research. As an example, First American has a mobile and web-based application that allows their customers nationwide to research property characteristics, tax information, order documents, and also see transaction history on the property. An investor would most likely need to be a customer to gain access. However, most will still call their title rep before they bid verifying they are investing in a first lien position, no liens have appeared, and no IRS liens exist. There are no second chances are courthouse steps. These apps are more aimed at a property-by-property research approach but still incredibly valuable.

4. Marketing List Companies and Marketing List Brokers

Marketing list companies and marketing list brokers have grown in sophistication over the years. These services allow you to call up and speak with a list broker that seeks to understand who you are trying to target, what information is needed, and then they go about creating your custom marketing list. Unlike the free options mentioned above, most list brokers now have the ability to obtain email and append phone data. Lists can be created based on property characteristics, neighborhood details, and demographics data on owners.

• Pros: General marketing list brokers will have some ability to append email and phone numbers to your lists.  This is typically a fast and easy process.
• Cons: Data quality is the biggest issue with list brokers. Data sources is coming from different providers and some will be updated more than others. These lists can get very expensive and there is nothing more frustrating than purchasing a list that is years out of date. Tracking these lists will be an issue. Often times, you’ll only have one year to use a list before the list provider requires you to pay for the list again. Like other free and low-cost options, you’ll have to create your own systems to organize and track leads. There’s still no ability to further refine lists without cost, visualize insights, or automatically update this stagnant list when conditions on the property change.

Pro Insights – This is a text message our VP of Market Insights, Aaron Norris, received in July. The text is referring to a rental he had sold more than two years previously.

Even more embarrassing? The property had sold again three months earlier meaning the list provider had data over two years old.

By the time you’re spending money on lists, it’s clear you’re probably needing to expand technical abilities to stay organized. Be it a customer relationship management software, sales software, or Google sheets, tracking starts to become critical as you are being forced to manage static marketing lists and lead progress.

The goal in refined marketing lists is being able to follow up consistently quality leads. You save money on large general marketing lists so you can hit your target prospect multiple times. The pros know it’s all about consistency and follow up.

5. Advanced Property Data and Owner Information Platform

If you’re a property-centric business that relies on consistent, high-quality leads to keep your sales pipeline full, advanced property data and owner information software is a must-have tool. It isn’t only Realtors, mortgage, and real estate investors that use this type of software service. Home and property services greatly benefit from access to constantly updated records as well as advanced functionality that these platforms offer.

• Pros: The ability to mix and match property, mortgage, and demographic data to create hyperlocal marketing lists whenever you’d like is something the low-cost and free methods don’t offer. You can explore leads and refine marketing lists based on visualized insights. Other advanced capabilities include social media links, skip tracing links, rich historic transaction data, emails, and phone appending, GPS functionality, property and people notes, dynamic lists, demographics details, and advanced automation functionality.
• Cons: These tools are not free. Most software is subscription-based with additional charges for specific record types like documents, emails, and phone numbers. These tools are also not built for beginners. It’s not necessarily that they are difficult to navigate, but it will take some time to explore and understand the vasts amount of data and automation that the software offers.

Pro Insights – Main Street real estate and home services professionals are quickly learning having access to Wall Street-style data and tools are a must to stay competitive. It’s far more affordable than it’s ever been and it allows the pros to focus more on what they do best. PropertyRadar often says our ideal client is someone that has a CRM system, and they need help filling it with leads. PropertyRadar accomplishes that with over 200 criteria that let small businesses hyper localize their marketing lists so they can spend more time talking to prospects who are more likely to convert. After all, savvy business owners know that talking to fewer, highly qualified prospects is better than wasting time talking to more, unqualified prospects.

How to find property owners and contact information like a pro with PropertyRadar

PropertyRadar gives you many options to find exactly what you’re looking for or discover properties you didn’t even know you should be interested in. You can use the property owner lookup to find the owner or if you have the owner’s name and want to find the various properties they own, you can search by their name.

To find the owner of a property, simply enter the address of the property you’re interested in into the search bar.

You’ll notice, as shown below, that as you type the address the search bar will autofill with the address you’re looking for.

Once you click the address in the dropdown, a split view pops up showing the location of the property on a map along with some pertinent details about the property below the map. Here you can get an immediate view of the property’s location in the neighborhood along with a few important details about the property such as square footage, number of bedrooms and bathrooms, the owner-occupied status and of course the reason you’re searching to begin with, the name of the property owner.

Now click on the address bar below the map to get the important contact information you’re seeking along with other critical insights into the property itself.

As a professional, you know that having as much information about the owner and the property you can get is vital to setting up a successful marketing campaign.

Under the Contacts tab, you’ll find important contact information like:

• Owner’s full name
• Age
• Gender
• Phone number(s)
• Email address
• Social media profile (if available)
• Mailing address (absentee owners address will be different from searched address)
• Primary residence address
• Other properties they may own

Unlike some services, skip tracing is automatically built-in for you. And you have the ability to add and edit notes directly into the Contact profile.

Property profile details

Aside from contact information, other properties owned, and everything else described above, you’ll have access to property details that will help you make smart, informed business decisions.

You will find critical property information like:

Transaction & Title History

Comparables

Ability to Add Photos, Notes, Files, and Run Investment Analysis

Other Important Property Data and Owner Information You’ll Find Here:

• Outstanding loan balance and type of loan
• Loan history
• Estimated property value
• Equity
• Year built
• Number of rooms and bathrooms
• Square footage
• Lot size
• Number of units on the property
• Presence or absence of pool
• Presence or absence of garage
• Property taxes
• Zoning and school district information

Watch our short video on finding & using owner info & property details…

Getting the most out of property owner information

In addition to contact information, the property profiles offer the information you need to make an informed decision on whether you want to contact this owner, and what you might say.

For example, if you’re a real estate investor, you might use a different pitch to communicate with someone who owns their home free and clear versus someone who’s underwater on it. You can use this information to increase the likelihood of success with cold calling, door knocking, and direct mail.

You might use this information to decide who to contact, and to prioritize your prospects. Maybe for an absentee owner who owns 5 other properties that aren’t in your area all as a trustee, you might assume that they don’t make the best candidate for your property management services. But if they own two or three properties in your area under their name, then they could be a landlord who’s ready to outsource property management.

Reaching out to property owners

Now that you’ve found the owner of the property and their contact information, what do you do next? How can you improve your success with direct marketing?

• Follow up, follow up, follow up – One outbound message simply isn’t enough. The most successful property-centric businesses are excellent at follow up. You’ll lose to competitors who just don’t quit. Automating your outreach (described below) can make this easier to achieve.
• Track your progress – You also need to be tracking your progress with individual prospects. Inside of PropertyRadar, you can do this custom lead statuses. Using our Zapier integration, you can send all of your PropertyRadar leads into your CRM and track them using your processes. With our Zapier integration, we seamlessly connect with popular CRMs like Pipedrive, Zoho, LionDesk, and many others.
• Use automation – Automating your direct mail and other forms of marketing is absolutely essential. Otherwise, you’re at the mercy of getting too busy to market your business to property owners. To win, you need to build highly targeted lists of prospects inside of PropertyRadar, and use Zapier automations to trigger actions whenever new leads get added to your list. For example, whenever a new lead meets your criteria, they receive a postcard from you and then get a follow up postcard one month later, and a month after that. Check out our automation guide and webinar for more details.
• Take a multichannel approach – Your follow up shouldn’t be in one channel, meaning you shouldn’t only send postcards or only cold call. The best direct marketing campaigns reach out to target audiences across channels. With our PRINTGenie integration, you can use their multichannel outreach templates to reach out to targeted lists of leads. For example, you can contact absentee owners whose primary residence is out of state and who have a certain amount of equity in their home. You can send them a letter, then an email, then a text message, and then another postcard. Check out our automation guide and webinar for more details.

Finding the owner of a property isn’t enough. You need to win with consistent follow up and automated outreach to come out ahead of your competitors.

Key takeaways on finding property owners & their contact info

The method you use to find the owner of a property will largely depend on your purpose and goal.

1. Going the free, government website route is always a great option if you only need a name or two. But if you need more than a handful of names, this can be a tedious, painstaking process.
2. Reaching out to your local title company is another free or low-cost option. But data is limited, you need to rely on the title brokers availability, and you need to organize and track your lists.
3. Marketing list companies and list brokers can be a fast, easy way to get lists. But your lists data can be outdated the second you buy them, often require additional costs for continued access to the lists, and the cost for such lists can get very costly and there’s nothing worse than paying for old, inaccurate information.
4. Using a property and owner information platform is definitely the pros choice. With a platform like PropertyRadar, you have the ability to mix and match property, mortgage, and demographic data to create hyperlocal marketing lists whenever you’d like is something the low-cost and free methods don’t offer. You can explore leads and refine marketing lists based on visualized insights. Other advanced capabilities include social media links, skip tracing links, rich historic transaction data, emails, and phone appending, GPS functionality, property and people notes, dynamic lists, demographics details, and advanced automation functionality.

If you’re a professional who needs to scale your business, build and organize mailing lists, and automate your marketing outreach, then PropertyRadar is the tool you’ve been searching for. Start your free 3-day trial today and start exploring the power of PropertyRadar.

The post 5 Ways to Find and Contact the Owner of a Property appeared first on PropertyRadar.

Have questions or feedback? Each show is posted on the Data Driven Real Estate Podcast #8 in our community. Catch pre-show research and continue the dialogue online after the show. Check out our recent listing on Top 25 Real Estate Podcasts, too!

Connect, subscribe and like on: YouTube, iTunes, Spotify, Stitcher, TuneIn, Google Podcast

Show Topics

• 00:00 The Data Driven Podcast Welcome Erik Bee of Real Estate Funnel Systems
• 01:48 How did Erik Bee go from a motorcycle racing appraiser to real estate funnel marketing expert?
• 05:17 How the appraisal game changed drastically during the Great Recession and how it changed his career
• 09:10 With no money, how Erik started with trustee sale auctions and why someone financially back him
• 14:45 Than Merrill, Fortune Builders, and making connections at the local real estate investment association (REIAs)
• 15:51 The guru real estate educators and who is to blame for people not succeeding in real estate investing
• 20:19 Learning from Than Merrill, CT Homes and running marketing in San Diego
• 22:33 Why equity deals were so difficult to land in the Great Recession
• 26:40 Why do people outsource marketing funnels?
• 29:42 Does a marketing consultant use the same tools and strategies with all clients?
• 35:36 What is a real estate sales funnel?
• 37:20 Is there a target conversion ratio for marketing?
• 37:27 The power of SMS marketing and the importance of compliance
• 39:04 Examples of SMS failure and not staying compliant
• 39:54 How your marketing can get you blacklisted from the Internet services providers
• 41:52 How cold email campaigns can destroy SEO on top of getting your domain blacklisted
• 42:53 Why SMS marketing is currently Erik’s top strategy and the data-driven results Erik is chasing
• 43:58 Other integrated marketing strategies employed to create holistic real estate funnels that drive conversions
• 45:01 What is RVM for marketers?
• 45:06 Current issues with ringless voicemail messaging that marketers need to know
• 45:48 Is direct mail still an important channel for real estate investors in 2020?
• 46:13 The number one reason Real Estate Funnels Systems starts with text message marketing, then Facebook lookalike advertising, and ends with direct mail
• 47:22 Is real estate marketing funnels people-centric or market-centric?
• 48:58 How important is it for a real estate professional to have a strong online presence?
• 49:51 The number one social media channel that real estate professionals should focus on
• 52:20 Why some real estate investors don’t put websites on bandit signs
• 52:42 Some side benefits of setting up a professional online presence that some people miss
• 53:16 The big risk of only focusing marketing resources on social media channels
• 53:49 How effective is social media advertising in 2020 for real estate professionals?
• 55:09 Why YouTube is changing the game for marketers
• 57:01 The shocking number of YouTube views tied directly to its algorithms
• 58:43 The metrics behind SEM paid ads for real estate professionals.
• 59:15 Aaron’s embarrassing story of paying $1,000 per click for paid ads that never converted
• 1:03:22 How leading service in mind keeps real estate pros focused on trends and landing more deals

Show Transcript

Aaron Norris [00:00:02]  Hey, everybody, and welcome to the Data Driven Real Estate Podcast. The podcast for real estate professionals dedicated to driving business success through data. My name is Aaron Norris. And with us today, we have Eric Bee. Eric Bee is going to share with you some insights on how he went from an appraiser to real estate investor and eventually a consultant. But he’s got a two-year, hilarious journey before he finally pulled the trigger that only a true data geek would appreciate. We also talk about the importance of funnels. What is it? And his role as a consultant driving leads down funnel strategies that work, strategies that are changing because of Covid-19. And we also talk about marketing through the framework of the PESO model paid, earned, shared, and own the importance of each of those channels to drive authority, looking at the data that matters most. You won’t want to miss this week. Let’s get started. Hey, Eric. Welcome to the show. Thank you for being here. I, worked on this list of questions. That is, by the way, in our portal. It’s where I sort of in our community, what I do is I sort of build the line of questioning that I think I’m going to ask. Doesn’t mean I’m always going to get to all of these. And I have a feeling you and I are going to get to all of them today. But I really appreciate you taking the time. I would love to start with your journey, how you got into real estate. You became a marketing expert. After high school, where did you go?

Erik Bee [00:01:20] Yeah. Well, thank you. I mean, I appreciate it. And I’m deeply honored to it to be here with you. I have been I’ve been following, you know, you and your father for a long time, and it’s cool. It was a fun, fun way to connect. So thank you for having me here and I really appreciate it. Man, my journey like crash. You know, it’s been, it’s been a lifetime for me. And honestly, you know, you always kind of get that question how long you’ve been in real estate. Right. And for me, the honest answer has been my whole life. I was born and raised in a family. My dad’s a real estate appraiser. He’s still appraising in his twilight years. Out. Wow. Yeah. You know, he’s still doing it. And but so, like, my first job was and I’m sure you have similar stories, but it’s like my first job was painting the rental house, you know, like in doing the mowing the lawn over there and taking care of this. And because that’s it was a family business. Right. You know, just. And not on a grand scale of anything, but that’s what our family did. My dad was an appraiser. My mom, you know, stay at home. And number one mom and, and landlord. Right. So we’re always doing that. You know, that was the business. And so that’s how I grew up. And so right out of it, it was a lot. My dad’s a lifestyle guy. And so I grew up in a very active family. So I was competing in a lot of different things. My dad’s a motorcycle racer, skier. And so we know we were doing, you know, very, very active family. And so that’s just the environment that I grew up in. And so I was had my sport and I was competing at high levels and through, you know, 18, 19 things start getting serious, you know, and if whatever you’re doing, you know, if you’re passionate about what you’re doing, it’s starting to get the talent is showing up. But that was ages. And so for me, it was motorcycle racing. And I was traveling all over and doing that. And it might get with my dad, you know, and so we were just, you know, doing this together. And so right out of high school, I got into appraising, went right into the family business and got my appraisal license and just went with the lifestyle, with my, you know, I could immediately, I knew recognized that the door of real estate was in front of me and that, you know, I had the opportunity to learn it and to get to know it and that my dad is my best friend and I really respected the way he did his gig. And so I just really connected with that. And so I did that and it allowed my opportunity to make grown-up type money. Right. At a young age. Right. And had the flexibility of my time. So I was traveling all over and I was appraising and I could come back and I could disappear and I could come back and disappear and I bought a house at a young age, you know. So I was just like doing, you know, more grown-up activities when my friends were in college and partying a lot and, you know, and doing a lot of different things, I was always kind of on this, like, professional track, although it was also mixed in my lifestyle. So that’s the answer. I was really just passionate about my my my lifestyle in real estate was the answer there.

Aaron Norris [00:04:49] It was the gateway to the means to do all the fun stuff early on.

Erik Bee [00:04:55] Absolutely. And so that led to like six years of appraising full time, you know, from 2000 to 2006. That’s all I did was a praiseful time with my dad. So two to three appraisals a day.

Aaron Norris [00:05:07] Oh. And then ’06. So clearly.

Erik Bee [00:05:10] Right, there it is.

Aaron Norris [00:05:13] Into the Great Recession. All right. Walk us through it.

Erik Bee [00:05:17] Yeah. You know, what a great learning lesson. So as an appraiser. Front row seat. Holy cow. Right. You know, looking in hindsight, man, like all of the signs and everything, I was like I said, it affected the family business in every way, affected business relationships in every way. It was like I get goose bumps when I tell the story because it well, the ripple effect in the scars. You know, like, yeah, it’s crazy. So, you know, of course, we survived. My dad did everything else, but this was I mean, Zillow, the automated valuations were getting more prevalent, you know, and then more accurate. And all of a sudden, you know, like, holy cow, I remember dinner table conversations, is appraising still going to be around? You know, Zillow is a Seattle company. So I’m born and raised in Seattle and. And, you know, so, like, Zillow was always on the forefront of us as appraisers. And the appraisers are an older community. And I’m the youngest appraiser by 20 years in any class, in anything and anything I did was always 20-year, minimum, younger. And so it’s just kind of watching all this stuff. And I always knew, like, you know what? We got to hedge our bets with real estate game. And my dad was like, man, just I know you and your personality. You gotta get your broker’s license, start looking at different angles within real estate to start playing, you know, buying real estate. Just look at it from different angles because who knows what’s happening right now with the liar loans and this than that and the, you know, the bubble of the way it was coming down and the leverage to the appraisers that, you know, that were inflating the ah, the refies. And, you know, like I remember those being on my desk in, like, the ethical battle of like, you either are going to get this value or you’re not going to get the job. You want more jobs in the future? You’re going to get these values. You get it. That stuff was around all over the place and it was like, holy cow. And then the appraisal management cut the fees and all this stuff and so like. Yeah. So I had to get diverse in real estate. So I got my broker’s license and I had my appraiser license for five years. And so I got to skip right to the broker status.

Aaron Norris [00:07:36] Oh, OK.

Erik Bee [00:07:37] You know. Right. Because there’s that you’re exempt, you know, after you have five years of appraisal, licensing and everything else. So. So I got to get my broker’s license right away. And so I was doing traditional real estate appraising, you know, and then buy, fix and sell, you know, like, oh, OK. Now, like, remember, I was just listening to Sean O’Toole and his enter in with ForeclosureRadar. I remember when ForeclosureRadar became a thing. And I remember being like, holy cow. Like that changed the game. Like for the people that were, if you remember before, you know what a market was as far as just access to data, consistent data, things were that were accurate. You could. I used to during this time, I was so curious. I remember the aha moment when I realized that people bought real estate at below market value. Like wait a minute. So most people, everybody buying at market value, that sets market value. But then there’s some people that buy below market. How much? Oh, hundreds of thousands below. Sometimes, like, I remember that just being like, holy cow, there’s a whole underworld of real estate. And I always looked at this lens of retail value and I was … I’m the appraiser. We you know, all these things. Right. And so I just remember when I just that game just kind of clicked for me and I was like, whoa, OK, I got to study this. I got to know this. And so I didn’t have money. I didn’t understand hard money. I didn’t understand the game for really what it was at this moment. But I started going to the foreclosure auctions and just studying. And just in my wife and I, we were crazy this way. We went to every foreclosure auction for like two years every Friday and just showed up in and just it was turned into networking. Right. You know who’s there. OK. OK. What’s he buy. Okay.

Aaron Norris [00:09:40] Bring your snacks.

Erik Bee [00:09:42] Who’s talking crap on who. Ok wow. This though that’s how these two play against the. Oh I started seeing the game for what it was.

Aaron Norris [00:09:50] Two years?

Erik Bee [00:09:51] What’s that? Two years I, I went every Friday in my local market for two years in, but I every time I did I picked five houses that I would hypothetically buy. And so I would appraise them prior. So like through the week I would pick five houses. Then I’d go drive them because I’m out in the field doing appraising anyway. So I’d just be like, OK, then I would nail down my opinion of value of it. So then when I go to Friday, it would be like I would have my files and it was as if I was buying. I would like mach play, kind of, you know. And then I would see what they would actually sell for. So I would get the perspective of like, OK, this is what the value is. Here is the comps. This is what it is. This is what it sold for.

Aaron Norris [00:10:32] Wow, what a great idea.

Erik Bee [00:10:33] Oh, just start watching it like, you know, like, OK. So then I started trying to figure out the math. OK, so they makin’ how much. OK. And then, in the end, I was doing this kind of obsessively, if you will, in that moment where I just built files. I treated it like an appraisal. It was just the same process. So I had a little file and I had a file cabinet in. My dad’s friend came over, you know, in the appraisal office. And at one point, like, what is that? And I’m like, oh, this is what I do. I go on Friday. I tell him my super… you know what I do? And he’s like, Man, I can’t believe you do this. Like, when are you going to finally buy one? And I’m like, I don’t have money, you know? I don’t know. I don’t like… Still learning. Right. Still connecting. Right. Just like I. I don’t know. You know, and it’s like, well man, you can do it this way, this way or this way. And he started talking about Lending. Well, I could lend you money, right. Oh, private money. Oh well, I have this line of equity that I know that I have five percent not shoot. I’ll lend it to you at 10%. And oh, holy cow. So then, this dots started connecting and they started showing up to the auction with a loaded gun. Right. Kind of with a check and then. But I never bought one. I came really close because I learned that that’s the riskiest place to buy.

Aaron Norris [00:12:06] Yes. It’s we’ve covered that a few times on the show. At the trustee sales, particularly in states like, I don’t know the other markets, but California…brutal. My brother was in that space for a really long time. And I mean, he had a CRM system,.he was using PropertyRadar, he had built a custom CRM system where he knew the people that were bidding and for what companies? And if you showed up green, they would run you up. So you never showed up again. It was brutal. So good for you. I mean, but wow, two years of never pulling the trigger.

Erik Bee [00:12:35] Yeah, two. Well, so it was it was about 18 months of like going there with no money. And then he was like six months of going there with a loaded gun, you know, like, you know, I had a cashier’s check and I’d show up and I was like, nervous having them, you know, with go through all that stuff. But I was really strict on my numbers, you know, like I just like there is the line in it. And I remember that emotional jousting in the eye to eye contacts that I have. I mean, it’s like it’s game time, you know? And and so…

Aaron Norris [00:13:09] I knew your metrics and your data, though, that key. So good for you. That says a lot.

Erik Bee [00:13:14] Yeah. And so but then the wholesalers that I figured out like, oh, you can buy stuff from these people in this than the other thing. So that’s my entrance….

Aaron Norris [00:13:22] OK, so other avenues to buy besides trustee sale. OK.

Erik Bee [00:13:26] I love my entrance, you know. Oh you know, like OK. You know, I can actually perform due diligence on a property before I buy it. Oh wow. OK. There’s other opportunities. Other avenues. OK. This is the Wild Wild West. Those are really gunslingers. Those are the real…That. OK, got it. You don’t need. Oh you can play over here. OK, you know, I mean, I just figured that out that like, you know, like there’s different ways to play the game and different approaches. And so I started to develop that and get really interested in volunteering to all the REIAs, you know, like that’s what I did. You want to know the truth. Like, I’m a kind of a grind-it-out guy. If you can’t tell, like, I’m a, I show up enthusiastically to work. I like that. That’s how my dad is. That’s how we play our sports. And, you know, so like I show up to REIAs and, and I volunteer. What do you guys need? How can I help you with that?

Aaron Norris [00:14:22] Is that how you sort of fell into the Fortune Builder’s game?

Erik Bee [00:14:25] Everything.

Aaron Norris [00:14:26] Wow.

Erik Bee [00:14:27] Everything I do is like around that principle.

Aaron Norris [00:14:30] So the Fortune Builder brand. I mean, obviously, Than Merrill is very well known, the TV show. What was your role within the company while you were there?

Erik Bee [00:14:40] Yeah. So, you know, that’s kind of where it where I’m going here is like that’s exactly where I met Than. I was at a REIA event in my local town in 2006. Right when all of this was really happening and in city homes had was they were on TV at that point, I, I never I didn’t even hear I wasn’t watching TV much. And so it wasn’t that wasn’t anything to me. I was just there at the REIA. But Than Merrill at the front of the room and Than Merrill like at that time, you know, like it was just kind of one of those moments where, you know, we just connected, you know, like hit his presentation, me in that moment, there were the whole thing just like, boom, we were their beta students. We didn’t know it at the time, but we they were very young and they were just doing their first boot camps. And we were. Yes, yeah. We’ll go being enthusiastic. They’re having a resumé and being a doer. And it’s not that I had all these tremendous results per se except for, say, already a decade or six years in the industry. Right. And a very thorough understanding of what it is. So I brought insight.

Aaron Norris [00:15:54] I definitely think the guru education definitely gets a bad rap. I actually heard a lot of good things specifically about Fortune Builders because they were really focused on a lot of tools and funding and everybody learns differently. I think that’s what’s interesting. Some people really need a format. They want that boot camp experience sort of like a classroom. You know, it’s like getting your MBA. Like, for me, I know I educate best with a format where I’m consistent showing up. If you leave me on my own, I’m not always good. So everybody learns differently. And all the education out there, it’s built differently and works for some and not others. And there’s a very small percentage of people who pull the trigger and ever execute. So nothing necessarily to do with the educator and more to do with the person involved. But you are already well on your way to being in executing the business. Just what did the boot camp format do for you that made you pull the trigger?

Erik Bee [00:16:49] Yeah, it’s a great question and something that really, I think is important, because what I learned is that there’s a lot of enthusiasm in sales. OK. And so a big part of sales in general is enthusiasm and getting people into that moment of belief into wherever they’re going. And that’s sales and anything. Right. But in this guru seminar sales, they’re really great at creating energy and belief and that are done. And so they get a lot of people that that fire in and go and pay big money for different education. Unfortunately, what you see is just that enthusiasm drops off under the radar. And a lot of people don’t make their investment. They don’t they don’t get out what they put in it. It happens a lot. Now, Fortune Builders, I can tell you with the thing that really what I connected with them is that Than is, he’s a tremendous leader. He really is. And the thing about Fortune Builders, man, that he inspired the whole his whole company that way. So fulfillment was that way. And so that’s a big difference when you not only when you have a front and sales with all that energy and belief and it. People come into, you know, anybody can play real estate and you just got to learn the game. Anybody can do it. It’s the truth. And I’ve seen it go zero to hero all the time. And so you get it. You get that. What Than, though? What I believe in. You know, I had my little sliver of part of this was just doing the business and carrying that energy through the fulfillment. So leading people into action that way in with good ethics and integrity and showing them, you know, the true business for what it was in a very systematic way that, you know, if you were to really follow the steps and really take the action and do it, you know, oftentimes you have to show up with enthusiasm. You can’t just show up with a pulse, but you’ve got to show up and do it. But if you do it. There’s a result to be had.

Aaron Norris [00:18:53] Yeah, I think there’s a misconception that this business is easy and I think HDTV has ruined a lot of things, that it’s so shiny and packed, packaged in an hour’s show. But I don’t want to focus too much on that. I just. It’s important for, you know, just the sake of we’re gonna talk a little bit more about data and how complex it’s gotten. But you’ve really worked. You coming up through the appraisal, getting your broker’s license, being a real estate investor and then operating sort of in the education space. You see why people win and fail. So it’s an important conversation as we get into really where you’ve gone. So in Fortune Builders you got more into the marketing side. You really helped them a lot with their marketing. And I have to say, I’ve probably been in marketing now well over 20 years. The last 10 years has been insane. The different channels I have to focus on, the amount of just reaching people, breaking through all the noise has gotten so much more complicated. Marketing.

Erik Bee [00:19:53] Yes. So, you know, like this is this is that kind of cheater line. The inside line that I got, like, really sparked the marketing juices for me. It was a flying underneath and learning underneath Than Merrill. He’s like a marketing guy. Like, he’s just, that’s the way he thinks. Marketing and act… And sales. Marketing and sales. Marketing, sales. That’s his brain. And so I was, he I was under his right weight, you know, like for many years. Like, I got to that he I got to follow his patterns and follow his lead, and see why he was doing a lot of what he was doing. And I carried that over into real estate right in. And so I had the opportunity to manage all of the marketing in acquisitions at City Homes and here in San Diego County. And that’s their real estate invest Tamaro own city homes and that’s their investment company. And so I was leading all of their marketing and acquisitions there. And so I had his marketing budget, his marketing influence. And all I had to do is show up enthusiastically to work. Right. And just be a part of it and just go and see these experiments unfold. OK, what are we doing? And adjust and go in and try to create something, be on the front edge of what’s working, what’s not working. That was the seat that I got to sit in for four years. And I cherish that. You know, I really because I was not that it was, you know, free marketing money, but he was like, as long as we could justify the budget, we had the budget to do what we needed to do.

Aaron Norris [00:21:23] Now, to be clear, the strategy was going after off-market equity deals, correct?

Erik Bee [00:21:28] Correct. Exactly. So, yeah, we’re trying to find investment opportunities and working directly with sellers, you know, pre-market, pre, you know, we had an MLS strategy, but this was, you know, all to single-family below for, you know, two to four-unit SFR, two to four-unit type of acquisitions, most equity. But over the years that I was there, I mean, we were doing a high volume of transactions, you know, 80 to 100 ish type of transactions per year. So that’s, you know, we got really good at the foreclosure niche. There was several years there where we were doing 50 to 60 foreclosures per year. We were doing that same volume in short sales there for a while. And so I got really, really great at working within a team of foreclosures and short sales. And again, that’s where PropertyRadar was like our silver bullet to all of, you know, dissecting those transactions and setting up a team for success all the way through that.

Aaron Norris [00:22:33] Well, certainly in a specific period of time from, say, like 2007 to 2010, the majority of everybody is an opportunity, I should say the majority. But it was far easier to have conversations with banks and through the foreclosure or the short sale route because talking to equity sellers was very difficult, because a lot of times they knew the prices had gone down. But when you were presenting an offer and you were in years like ’07 where prices were coming down so quickly in California, I mean, you’re only Inland Empire, we halved our price, our median price, it was insane. And in some neighborhoods, it was worse. So, you know, you show up and maybe you send out a postcard and if you were talking to an equity seller, they call you a month later, you’re like, yeah, that price was good for that month.

Erik Bee [00:23:20] It’s yeah, we’re redoing that..

Aaron Norris [00:23:24] Brutal. Brutal. So going after the distressed market was clearly, you know, very popular. And then Sean made the switch from ForeclosureRadar to PropertyRadar, which is really important because a strategy very much changed. So you fell into marketing there. So after you left Fortune Builders, what have you been doing since?

Erik Bee [00:23:41] Well, yeah. So I spent so many years in the experiments of marketing, so direct mail, I ran all the direct mail campaigns, pulled all the list, did all the pay per click. All of the you know, the social media, the YouTube for seeking homes and everything. You know, I had all of my hands in that stuff, copyrighting, everything that goes down into it. I took that and essentially started my own company. Where were we do it, you know, on our and our turf. And then but really wanting to know take this. Because what I proved over the years and it was always kind of like I knew I was in like a science lab, you know, just doing all these different experiments. And. And here’s the real, it’s the best part of what I was doing was not only was I creating results in our markets and failures. Right? learning and adjusting and winning and learning and, you know, doing all of that on a day-to-day basis with my team, but having the opportunity to be a teacher. So I was teaching at Fortune Builders. We had a studio there, a training room. And so once a month, we’ve got to be once a month. I would host a training where 90 people from across the country would show up for three days. And I would teach exactly what we’re doing in the marketplace right now. Currently, this is the letter we’re sending. This is, you know, the messaging that we’re doing. It’s the frontline insight to everything that we’re doing. And so the best way to learn is to teach. I believe that. And so I really love teaching and I really love the way you can really sharpen your own skills by being a great, dedicated teacher. And so that was my teaching outlet. And so I, by having that, I would always get inspired the conversations from other people across the country, you know, like, oh, what’s happening in your market? I would try this. Oh,  and I would get connected to the results. And so I started to establish like a coming out, like what is working across the country, what is working and what can I start taking in a scale and really doing. And…And so I just put together the key systems that it takes to run a marketing engine from a very small, simple level to that has scale. So you can add to it and have run 10, 15 different campaigns, all as long as you have it all integrated. It is truly just a funnel that goes through a channel into, you know, and ultimately an inbox but or CRM where you’re managing your leads. And so that’s what I would teach. It’s the funnel aspect that you have to have a wider net. And then step by step into a sales process. And so we just we’ve just spent years developing that process. And now I offer that and across the country to other people that that is really want to pour into the science of marketing and acquisitions because it’s always different. You got to know the science of it to follow it, right?

Aaron Norris [00:26:37] Yeah. So realestatefunnelsystems.com. That is your company. I love the word funnels because it’s channel-neutral. So let’s start at the beginning. Somebody comes to you and says, is it the people that are coming to you, is it because they’re not good at marketing or they’re trying to outsource just because they’re good at a specific side of the business? What are they looking at before they come to you?

Erik Bee [00:26:59] Most the time, it’s people that are scaling. You know, when you’re growing you, there’s only so much you can do. Right? And so oftentimes the marketing is it’s where you’re spending your money. So business owners, myself included, we all keep a really tight grip on your marketing dollars and what you’re spending on your marketing and this net for the most part. And oftentimes it’s a business owner doesn’t spend enough time there to be, you know, have a total relevant understanding them. I have a vague understanding of what is today’s marketing, but it starts getting complex quick. As far as where do you go? How do you develop a plan? How do you track it? All these different things that go into it. So it’s usually the business. My clients are the ones that are making it from a going from that small business space to: OK, now we’re running a team. Now we’re going and now we’ve got a marketing budget consistently and now we’re now we’re really going for it. Those are my clients and the ones that are shifting into that space in there. That way they can. They’re outsourcing their marketing department to a team, myself and my team. This is all we do. Like with this is we know what questions to ask. We know where to focus our attention. As far as. OK, which demographic. Well, let’s go data. I called data hunting. Let’s go see where your demographic is. Let’s go see, you know, you’ll learn real quick if you should be focusing on foreclosures or not, depending on how many there are. You know, you just go I go data hunting into the marketplace and we develop a plan based on the data and their ultimate strategy.

Aaron Norris [00:28:41] Are you. You oftentimes helping them refine their… You are. So you’re actually almost consulting them on like, hey, I know you’ve been focused here, but the data is telling me this, really?

Erik Bee [00:28:52] One hundred percent? Yeah, it’s all the whole thing, it’s you have to consult through it because it’s not it’s not the same answer everywhere. So I always go into it understanding where the results have come from, where there hasn’t been a success pattern that we can pick up on. If there is great. If there isn’t, then we need to develop one. So that’s fine. Where’s the most logical place to start developing a baseline of success that we can then start working on and improve? And that’s what it really takes.

Aaron Norris [00:29:26] We talk at PropertyRadar about chocolate versus peanut butter, chocolate being who you bring to the business, what people are good at inherently to where they can just it’s how they develop their niches, because it who they bring to the party. And then there’s the peanut butter, which is the data. It’s when the marriage of those two. So one of the questions I would immediately get from, you know, referring somebody like you would be, well, he’s just going to execute the same, you know, Investor Carrot website and he’s gonna be running the same exact ads. And I’m going to be competing with his other clients. What do you say to that?

Erik Bee [00:29:57] Yeah, it’s a great question. And so right now, there’s a first and foremost, like there’s, everybody has access to most of the same tools. There’s no I don’t have anything that’s like Woo! Which appeared. And that’s the beauty of it. Like I was, I’ll show you the way and I’ll teach you, you know, I can teach anybody the DIY, the DIY people. And there’s a lot of them. I’ll just do it. You just described that profile like, well, he’s just going to. And I can do it. Yeah, you can do it, too. Right. And you can go to grocery store and pick up everything just like, you know. And you can go like and we can all do it. It’s not a problem. Where do you want to focus your time and your ROI personally is the question now? Yes. I’ve had tremendous results with Investor Carrot websites as an example. So if there’s a success pattern there, I’m not going to tell you to change it. Let’s say let’s continue to maximize it. But let’s look where else we can maximize your results and most of the time. There’s people running run into a blank slate. They don’t. They don’t have that level of thought or time to energy to answer these questions. And that’s where they start leaning on somebody that can say, all right. This is how I would approach it. I would focus on this dataset. This is in line with what you can offer them. Right. What are you offering? Are you only offering cash offers? Right. Is that your only trick? Mm hmm. First, let’s work on that. But number two, like, let’s make sure that you’re your we’re spending the time with the demographic that can say Yes to your cash offers and not, you know, something else. Right. It’s got to be a good match there.

Aaron Norris [00:31:42] How often do… In your experience, so you’re clearly talking to somebody who’s already got experience. Doesn’t sound like you’re necessary. You’re trying to tackle people who are brand new. So in their mind, they already have an avatar, if you will, like a target. How oftentimes when you go through the process of onboarding do they end up changing who they decide to market to? I mean…

Erik Bee [00:32:03] Always, always. Almost always. Almost always.

Aaron Norris [00:32:06] Well, it’s interesting working with a marketing person that understands the business enough to know the insides and how. And the other opportunities that there are. So that’s interesting is just interesting.

Erik Bee [00:32:18] You know, like especially now, I mean, because the data set is changing so much with, you know, what is happening right now. You know, like so there’s so many, so many people there. They’re looking right now and they’re they’re just kind of scratching their head. The foreclosures are gone. The easy answer is the way you know, where that have been there, whatever. There are those. It’s all changing. Right? And so but the opportunities are always there. And so what I always do and just when we debrief with our clients. But you can right now, it’s people with equity. You know, it’s that second homes are people are selling those things quickly. You know, it’s the land rich, cash poor, is happening. And so people are having to adjust, you know, their position, you know, with their assets to get more cash into their hands. Right now, it’s just happening. And it’s going to continue to happen right now. And so we’re not going to be we’re not going to be in the foreclosure game for a little while, you know, but we are going to be… People are going to be trading equity for cash, you know. So…

Aaron Norris [00:33:27] For sure. We’re watching all the winners and losers across all the different categories. There’s going to be a lot of interesting things to watch for. And some of it we just don’t know. Nobody can predict because we don’t know that the path to containment and control of the virus. And, you know, the longer this goes on and people get a chance to sort of dig in their heels into a lifestyle adjusting to this, what if you can educate and work from anywhere in the world and you decide to take your kids on a nonstop Airbnb hopper every month, you’re just going to go to a different Airbnb across the country and experience something new. There’s just so many different ways that people can play this pandemic. And it’s going to be interesting to see real estate’s role in that. Here in California, the market’s very hot. Covid-19 has definitely changed that up. Are you seeing any major issues with marketing and communicating and finding people.

Erik Bee [00:34:19] Yeah, I mean, you know, there’s in California. It’s been hard. Been hard hit on this topic for sure. And, you know, so the thing to me is like the people that are actively marketing and if you’re getting your message out there effectively right now, there’s, I’ve had my clients that have record months and I’ve had other clients that are, you know, that are struggling to see the opportunity. So there’s a lot of, there’s a lot of mindset happening right now internally, externally. So just know, like, that’s just true. But the thing is, like, we’ve been really good at just using low-cost marketing strategies, like SMS type and marketing strategies that allow us to get to such a broad spectrum of data set. So we’re just turning through more data, people, yes’, no’s faster, bigger. And so, we’re turning up, you know, ratios it that are great. You know, our lead conversion right now is strong. And so we’re just figuring out how to be more efficient through this game and in processing.

Aaron Norris [00:35:38] Let’s back up a little bit. Real estate funnels. Let’s define funnel. Somebody is stumbling upon this little. What do you how do you describe a funnel?

Erik Bee [00:35:46] Yeah. So I. Sales funnel. So there’s a top of the funnel you’ll hear in sales. And that’s how people first meet you. You know, first see you. It’s the top of the funnel. So it’s that first outreach. Okay, so that’s that’s the very top of the funnel. Then there’s the next step down, a sales process to where you actually, you know, convert into money, if you will. Right. And so there’s all these different stages that happen. And so each one of those stages has conversion ratios. You meet this many people and then at a certain percentage of those people want to talk to you again. And then a certain percent of those people wanting to talk to you even further and then a certain percentage actually become a sale. So that’s just a sales principle in process. So at Real Estate Funnel Systems we’re, we just build that process for our clients, that we’re just through that process. Because to me, that’s where all of the answers that seem so vague. Well, what’s working? What’s not working? Well, let’s look at your funnel. Let’s look at your conversions in your ratios where that’s where the answers are. Are you if you’re reaching, if you have a 50 percent response rate, but you have a point one conversion rate that just tells me you’re talking to so many people, but nobody’s interested. Right. Nobody is interested. So, like, okay, so let’s understand these ratios. I would rather talk to a fewer amount of people that convert at a much higher ratio. Right?

Aaron Norris [00:37:20] So do you have a target ratio, conversion ratio out of the gate that you’re always in the back your mind you want to hit?

Erik Bee [00:37:27] Yeah, per channel. So, you know, like, right now we’re playing so heavy in the science of text message marketing. And it’s really that’s a fun arena. And that’s not the only arena that we play in. But that’s a fun arena to plan because you’re so much instant results.

Aaron Norris [00:37:48] Really. OK.

Erik Bee [00:37:50] You know, test a measure is like you can test one phrase against another phrase as an open liner and get a ratio within an hour. Wow. Okay. Okay. You know, because just 80 percent of your responses when you send a text message, happen within the first hour day. So you just get this level of instant result back. And so then, you know, of course, the results will continue to come in from a text message beyond that. But when you start understanding, like, hey, we can create these phrases, intro statements, conversation starters, and you have to be as creative as possible. Here’s the challenge of all this game, is that we’re at war with the carriers. The carriers are trying to shut down spam and sales and all this stuff. They don’t want this to be happening. And we are systematically doing OK. So we have to be compliant. There’s a whole set of rules and things that have to be aware of in order to even be relevant in this arena. So…

Aaron Norris [00:38:57] And I’m not that guy. So I would definitely hire only people that know how to play the space carefully.

Erik Bee [00:39:04] You know. So if it becomes really heartbreaking when you have you, you’re all jazzed up on your text message campaign and you build a, you know, opening line phrase. You send it out to a thousand people and it didn’t get delivered to you. Why? And you don’t even know why. And until you go further and then you ask more questions and you go, you know, spend hours and hours and hours and hours and hours and hours and hours and hours finding out that there are certain keywords and there’s not a published list necessarily. But there are certain keywords that if you put them in any text message, it will immediately go span get marked. So there’s a whole science, an algorithm that you’ve got to be aware of to then play into.

Aaron Norris [00:39:48] So you’re saying that the carriers will shut down the delivery before it even happens?

Erik Bee [00:39:52] Yeah. Based on words.

Aaron Norris [00:39:54] OK, a quick, embarrassing story. I learned this really hard lesson. I love to test. I bought this program and I forgot where I bought this e-mail list of Realtors. It was a long time ago. I bought this program knowing that if I tried to email the Realtors out of the blue with cold email that the Internet service providers would shut me down because it says, I don’t know who you are. You’ve never emailed this person before. So AOL cut me off. So I was like, OK,I know the name of this game. I bought a program that throttled one email a minute. And I just left it running for weeks until one day it was clear that none of the emails from anybody in the company was being delivered. It was just everything was bouncing. And we’re like, what happened? I had been blacklisted by three different Internet service providers. I thought I had understood the rules. We had to hire a technology company an entire week at high expense to beg to be un blacklisted because we couldn’t send e-mails out at all. It was terrible. So I can’t stress the importance of doing it right. And I didn’t know the carriers were onto that game and were able to shut things down. So that’s good to know.

Erik Bee [00:41:06] Oh, totally. No, you’re exactly right. And I’ve got so many more stories of just like that. Exactly. And how would you know? Right? And two, because these little hacks show up in this, and that, and, but it’s a serious game. And so I’ve had clients like, oh, because you can now skip trace, skip tracing has opened the door to a whole lot of people, to a whole lot of information that didn’t previously have access to it. Like whether, you know, it’s just now skip tracing it’s gotten so easy compared to five years ago. Even, you know, even 10 years ago, skip tracing was just, you know, private detective stuff. Like now it’s like you buy a list, go skip tracing. Where do you get, you know.

Aaron Norris [00:41:50] Yeah.

Erik Bee [00:41:52] So now people will take that list and then just cold e-mail and do cold e-mail campaigns and then blow up there you are ill and get flagged and get and then all of a sudden they’re, they’re SEO goes, and they’re like, it’s all connected.

Aaron Norris [00:42:06] It is. You have to be so careful.

Erik Bee [00:42:09] It’s all connected. So an understanding that it’s all connected when you build out your funnel strategy. Like there’s certain it’s not that you can’t play in the cold email game, but you have to do it in a way that if it breaks, it won’t tip anything else back. OK. Right. There’s certain firewalls that you can set up to still dabble. It’s still run experiments in certain areas. Right. So so it’s just to kind of keep relevant. But at the end of the day, like, we really, really love the experiments that we’ve been playing with the text message game and in establishing and improving upon metrics on that game because it’s inspiring.

Aaron Norris [00:42:53] So the text sounds like a top of funnel awareness, a function. Is it. Is it a function strictly of the cost per impression?

Erik Bee [00:43:03] Yeah. Deliverability. OK.

Aaron Norris [00:43:05] OK.

Erik Bee [00:43:05] And then response, timeliness of the response where it wins just about every category down the funnel, if you will, when done properly. So like our, our texting campaigns, they have the highest deliverability rate. And then so you know that your client we can measure how many of them just even got to our clients. We know exactly 98 percent of our message got right to our client’s pocket. OK, perfect. That’s what I want to know. Right. And then I can see, OK, how many of them, you know, obviously responded to them in the open. Right. OK. Wow. Oh, wow. I can see that. And then. Then how many reply directly to us within how long. Right. I can see that metric really quickly. So all the way down to a contract. And yeah, it’s where you start with text.

Aaron Norris [00:43:58] And what other what other channels are you really incorporating into your integrated marketing strategies these days?

Erik Bee [00:44:05] So. Well, we were text and we do custom Facebook audiences. So with marketing, it’s the omni presence of, you know, you got to just kind of be around your clients, you know, essentially, and the better you can do that, the better, the more effective your marketing is. So I like you and what we’re focused on as a company is just direct to your cell phone marketing. Right? That’s the device that we’re all addicted to, that it’s now the smartphone is now in just about everybody’s hand, you know, my grandma like from head to toe. My son, who is, you know, like if everybody’s got him now, it’s just like, period. Right.

Aaron Norris [00:44:48] So that’s what marketers have to do. It’s a fast way to cut through the noise fast. Fast way to cut through the noise.

Erik Bee [00:44:53] Yeah. Yeah. So. So with that being said, so we do some RVM messaging. We dabble in that.

Aaron Norris [00:45:01] What does RVM stand for.

Erik Bee [00:45:03] Ringless voicemail message.

Aaron Norris [00:45:05] Got it. Yeah.

Erik Bee [00:45:06] So we used to do that a lot more than we are doing it now because it that’s, it creates a lot of noise and the rest of the metrics, the conversion ratio is down. The RVM route had not been as good for whatever reason. People like to get upset about that delivery method. But they the. So we do RVM text message and we do Facebook custom audiences. And so we match our audience to Facebook so that our message is being delivered, delivered directly to them. So just about any time they’re on their cell phone, there’s going to be hearing from us.

Aaron Norris [00:45:46] They’ve always got it. They don’t have to go to the mail to pick it up. Now, do you still like direct mail as a channel?

Erik Bee [00:45:51] Yeah. Absolutely. We’re just very selective in when we do our direct mail. The direct mail is always going to have its place. I am a firm believer in historically, if you were to say, well, where have you gotten your most results from? Historically, I would have to say direct mail. Like, you know, granted, I have the most years doing direct mail for sure, but direct mail always have a place. I just use kind of reverse funnel process to it like I used to. Lower cost per touch points to weed through the list. If I can start a conversation with you for five cents or less, let me do that before I send you a dollar. You know, before I spend a dollar to talk to, you know, for sure, you know. So that’s that’s kind of my approach. We use that as filtering right down to. OK. This part of the list didn’t react to anything else. And here we go.

Aaron Norris [00:46:47] The PESO model of marketing, it’s it’s a chart I forget. I’ll post a if you’re on YouTube listening to this, I’ll post it. If you’re not familiar with the model and I forget who created it. It’s one of the most brilliant ways that I’ve seen, sort of the different functions of marketing, public relations and advertising sort of communicated. It stands for paid, earned, shared and owned and sort of in the middle of those circles that are all running into each other, you have influence. So do you sit down with customers and sort of find out where they’re going to thrive the most? How much is people-centric vs. market-centric?

Erik Bee [00:47:22] It’s so people-focused. Really? Honestly. Yeah, I think that’s how that’s my approach and that’s my vantage point to it. I really believe it’s this what we do it it’s it’s a people business. Right. And so how we approach what we how we say, how we set up every step of the communication is about connection with our clients in how we support them and making a very serious decision, you know. And so…

Aaron Norris [00:47:53] So, so you’ll tweak your campaigns to back a little bit more into them personally instead of doing the same exact cookie-cutter for every client.

Erik Bee [00:48:04] Of course. Yeah, you really I mean, we have a baseline we have a really great template.

Aaron Norris [00:48:09] Right.

Erik Bee [00:48:09] To work from. But everybody’s a little bit different. And so but I definitely try to steer my clients into a really well-rounded real estate approach, you know, like this… I think my approach to real estate has always been an investor and real estate agent working together, you know, in really balancing different options and not pigeonholing a client into one scenario or one option, if you will. So that creates better results, better testimonials. But I mean, all the way down the line, more options. There’s a bazillion different benefits of really setting yourself up that way on the front end. And so that’s what I really help my clients see and execute at a more efficient level.

Aaron Norris [00:48:58] Let me run around the PESO wheel, and maybe get some ideas of the metrics that you think are important that people might not be thinking of and how successful they have been in the mix. So let’s start at the very end with Owned. How important is it for a real estate professional to have their own developed channels like their own website? The things that they ultimately control that are not reliant on anybody else but them.

Erik Bee [00:49:22] Yeah. I think it’s important. That’s what I would call the foundation. You know, what you own is your foundation. And I think the more long term committed you are to the business, the more important your foundation is. Period. And so so, yeah, I always encourage everybody to, you know, have a strong foot forward on your base Website where you own it. And your YouTube channel. You know, that’s the other asset that you’re going to be hearing more and more and more of is YouTube is growing. Its influence in its media center is staggering. So people, like, really understanding, you know, that’s something those are assets that you can own and communication channels that you can share. So that’s what I’m really helping clients understand and start to build out.

Aaron Norris [00:50:23] I think that Owned plays the most important role in the sort of the search engine optimization space as well. I always warnedin real estate professionals, lock up all your brands and all the social, but make sure that you’re also in social things like address. And if you’re marketing to people and they sort of go searching on the Internet, you have to be very careful what shows up. You better know what’s showing up. And if you don’t, I think people can get suspicious. I think that’s really changed. Once upon a time, it was fine if you didn’t have a Website. I don’t think it’s not only important for you to have a website, you have to look a little bit like a professional.

Erik Bee [00:51:00] Yes. You know what I mean? So there’s two sides to that, I’ll say. OK. Yeah, there’s two sides to that in. I see this in the field quite a bit because the right and the right answer is the more established you are and you come across online, it helps in every way. It just everything is easier if that’s the case. So that’s the answer. You know, put it put a lock and key on that, especially, you know, as is the longer you play the game. Now, the caveat to that is if I mean a direct response scenario with a client, how often have they had them or handled that objection of like, well, let me see your website before I talk to you or get real serious about this. In the hand-to-hand combat scenario of, you know, getting that phone sale moment. It doesn’t come up that often. OK. Now, how often does it come up when you and you don’t know about it. Those are the dead. You know, like when they’re doing things that they didn’t tell you, they looked at it. Right? They but they surely did. You know, how do you measure that? Right? And so you’re right. That’s hard.

Aaron Norris [00:52:20] Bandit signs are one of those things where somebody said, oh, put a number and you want them to call and you want to talk to them. Don’t send them to, don’t put your website on a bandit sign. It’s, you call. So. OK, I just. As far as owned stuff you can look at, it’s just ranking locally to wherever you’re investing. You can start playing the search engine optimization game of ranking for your keywords. And because as you’re building out websites, you can actually drive down paid ads because you’re basically driving people to be useful. And I think especially as we get into voice search optimization, as we engage more with these voice bots, it’s something that we have to learn how to play the game better. And it’s just setting up your brand appropriately, backing into what you’re doing, creating content that makes sense for your brand and location.

Erik Bee [00:53:06] Absolutely. And that’s it’s like the snowball that just keeps building. The better, the better. You do it upfront. You just it just pays off big as you go.

Aaron Norris [00:53:16] With a lot of the funnels to always warn people, one of my goals is always to drive it to own channels, something that I can control, trying to capture their email, their phone number or drive them to the website to where I can deliver sort of remarketing campaigns because social makes me nervous. I mean, we’ve got Friendster, MySpace, Vine, you know, we’re looking at TikTok, maybe becoming an issue when you build your entire brand on a social channel that you don’t control and that could go away. It is really scary.

Erik Bee [00:53:48] It’s really hard to predict.

Aaron Norris [00:53:49] Yeah. What have you had good success on social media when it comes to conversions that you can point to because of social ads?

Erik Bee [00:53:58] It’s hard. It’s the hardest arena. I know where. It’s the engagement. So the ads that we’ve been playing with that we’ve had the best results as of lately are the ones the messenger bot ad style. So we’re actually creating an engaging, So it’s when it’s funny how we are. It’s like this is part of our science of human nature right now is how we just want a response right away. It’s like this instant thing. You know, so if I can get a response right away, then you have my attention. Right? So that’s how those bought ads work is. Okay. Learn more information. They click that, Learn more information. Then, boom, a question with a Yes or No button. And if the question is engaging enough, it’s easy to get me to put yes or no very little effort. Yes or no. I’ll see where this is gonna go.

Aaron Norris [00:54:48] OK.

Erik Bee [00:54:50] And then you have another engaging question that will have its choose-your-own-adventure style questions. So it just makes it easier for them to naturally engage with you. Which brings them down further down the psychological sales process, makes it, more interest, more and more interest.

Aaron Norris [00:55:09] On YouTube, You said that was an exciting channel for you. Why?

Erik Bee [00:55:13] Because I think that it plays a big role in this, you know, kind of in the bigger foundation of your footprint and I think that YouTube is you know, there’s no YouTube TV. Right? So where instead of Comcast or whatever else, you’re just paying YouTube. That’s already here and that’s going to be growing. And so what that allows is the Internet. You can take your YouTube, my YouTube account to when I take my European vacation or wherever else. I still have my access to my same media and everything else. And so the image channel viewership is growing in commitment to like, you know, YouTube fans and being dedicated. I now have a handful of YouTube channels that I’m like a dedicated fan of. Right. For not only for, you know, like a personal but professional and all these different niches. Now I’m using YouTube more in my life than I ever have. And I think that that’s going to be continue to school for all of us. But you should see my son. Holy cow.

Aaron Norris [00:56:21] Why is he, you know, a YouTuber? Or…

Erik Bee [00:56:24] Well, like he’s, he follows. I mean, like, this is a big part of why I’m developing this opinion is because, like me, in the way watching my 10-year-old in the way he’s interacting with the device, the Internet and whatever else, it’s YouTube. He’s following YouTubers, he has, he subscribes to in he found his niche. He found his world and it’s incredible the amount of content and then the other followings, there’s millions of people following the same little niche that you and I would have no idea that is out there.

Aaron Norris [00:57:01] Yeah, I heard a metric that 70 percent of views on YouTube at this point are now coming from the algorithm as well. So as you’re sort of processing that metric, why it plays such a good role in SEO if you do it right, there’s some opportunities to optimize at the channel level, the playlist level, and then the video level. So everything from your title to the description to close captioning to the buttons that you the artwork that you create. It is a science and.

Erik Bee [00:57:30] Now you’re letting the secret’s out. Yes.

Aaron Norris [00:57:32] Well, I do eventually, I do want to get a specific YouTube or on the channel to really talk about the data and the science, the science behind each of these channels, because it’s not. And I think that’s why a lot of people are going to come to somebody like you. You happen to use PropertyRadar. It’s one of the technology stacks that you can use to help people discover the audience. But the social media stack is sometimes very dependent on the personality and the person. Some people are just really awkward in front of YouTube. I always say as a joke, like maybe you have a radio face. If you’re awkward in front of YouTube, it’s awkward. Nobody is going to watch you. So you really need to understand what you bring to the table or find somebody in your company who can do that. But it is, when you do a Google search, and I know Google is still a very predominant search engine. The vast majority of traffic that I see to website our websites that I’m involved in. That’s where it’s coming from. You get the paid ads up front, the geographic ads are there, some natural, and video ranks really high. Once upon a time, tweets were showing up in search on mobile, but not on desktop. But now the tweets are gone again. So it’s you know, it’s playing the game.

Erik Bee [00:58:41] Google owns…

Aaron Norris [00:58:43] YouTube, the second largest search engine. You just have to know. So it’s good. OK. Paid ads have definitely changed for me and I. It’s in our space in the real estate professional space, the cost has gone up a lot. A lot. And the conversion rate has gone down.

Erik Bee [00:59:05] So we have gone away…

Aaron Norris [00:59:07] From paid ads. That’s great to hear. I think that’s so important. I think people end up…

Erik Bee [00:59:12] You see what you just said? It’s just that it’s just. Yep.

Aaron Norris [00:59:16] I have to tell you a quick story, because this is hilarious. I paid, I Survived Real Estate with the Norris Group. It was a nonprofit function we did, and an HGTV brand I talked to, this is not HGTV itself, but it was an affiliate website. They’re like, oh, we can get you millions of views. And, you know, I’m like, OK, well, OK, I’m going to give you this. Add millions of views. Even if I get like point zero one percent, that’s going to drive some great traffic. Over three months, millions of supposed website impressions that I was being delivered. I had three click throughs. I just want to, I paid three thousand dollars and I negotiated that because it was a nonprofit event. So I paid $1,000 dollars per click. I couldn’t measure any conversions because I couldn’t. And so I basically am pretty sure that it was me on clicking those, making sure it was still a really rough lesson. Don’t do that when you’re talking to somebody that is talking strictly about impressions and not conversions. I just always warn people run away if they’re not having a really solid conversation about conversions, you’re working with the wrong people.

Erik Bee [01:00:28] Well said. Totally, totally agree. And painful lessons that I’ve learned time and time again. And it always comes down to conversion. You’re so, so right. And without that metric, I don’t care. It doesn’t matter. Without a conversion metric, it just doesn’t freaking matter.

Aaron Norris [01:00:51] I also remember the very first time I hired somebody to do my paid ads, and I was so proud of myself. I set it up and like, yeah, my reach is two hundred thousand. And my, you know, my clickthrough is or this and my conversions this. He came in and he more than half and nothing happened to my conversions except I paid less for them. I’m all, okay, I’m embarrassed. We’re running out of time, we’re getting to the end and we’re a little bit all over the place. But I wanted to land on this E concept and I’m gonna do another show on the earned the Public Relations side of things. But I want to cover it this way with you. Somebody hires you and outsourcing because of wanting to scale on the earned media front. What can they do to support you? In everything that you’re doing, is it being out in the community? Is it creating content in-house? And you leveraging it? Is it closing more deals because they’re taking, you know, training on sales? Like, how can keep your customers help you do more business?

Erik Bee [01:01:55] Yeah. Wonderful question. Thank you. You can’t content’s king right now. To me, you know, so I just. Anytime that I am, I have a full schedule of videos that I need to be shooting at. You know, my queue is long, you know. And so a big push for us is just to put out quality content. I mean, you know, things that we believe in. I want to be helping as many people as possible. I truly believe in leading that way with serve. I seek to serve. And it’s just the way it is. That’s the way I’ve always run my business. And so I see putting out content that way. If I can help you and if I can help you for free, I will surely will. A lot of people and serious clients. And the more serious you are about it, the more they want to pay you, because the more they get out of you. And it’s just the way you. You can buy any book for, you know, for what it is. But to really get it. You go, you know, and. And that’s how I’m going to operate. You know, I’m not trying to be the biggest marketing agency in the world. What I’m trying to be is really focused on the quality and the niche of my clients. And I do only work with one client per market. I do not double stack markets on top of each other whenever I work with anybody. And it’s because I’m dedicated to my client in their results, period. That’s what I have to be.

Aaron Norris [01:03:16] OK. Is there any kind of content that you just think we should be focused on?

Erik Bee [01:03:22] Yeah, for me, I think the mass migration, you know, of what’s happening on the big scale and what are the bigger trends so that we can be, you, we individually can better position if we understand a mass trend, a direction of what’s happening. You can now put yourself in a better position in front of that mass, whatever is happening in that one direction. And here’s a simple example. And there’s so many more. But like the baby boomers retiring in how many how many people are downsizing in any one market? In four with equity in they’re you know, they’re going they’re selling the house that they’ve owned for 20 years. You know, those that mass migration of people understanding that for what it is that you can say, wow, there is a big channel, a mass migration of something happening. How can I stand in front of it to serve them? How can I make sure that I can help them with whatever they’re doing in this mass way? I want my marketing message. I want my business. I want everything to be in line with service there.

Aaron Norris [01:04:43] Well, we have run out of time, but I’m going to make sure to post all the links on the website. And maybe I’m hoping that you can join me on the live premiere in a couple of weeks on this and we can answer questions if that’s cool with you.

Erik Bee [01:04:55] Yeah, I would love to.

Aaron Norris [01:04:56] OK. 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 to 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.

The post The Data Driven Real Estate Podcast #8 – Real Estate Marketing Funnels with Erik Bee appeared first on PropertyRadar.

Dr. Lacy eloquently shared the history of the suburbs and how they evolved after WWII. It was SO good, we wanted more!

Dr. Lacy  is a data-driven professional that has spent years studying black middle-class families in the Washington DC area for her book, Blue-Chip Black.

We learn how she approached her research, where she found the data, data that was and was not available, and the techniques she employed to write an incredibly interesting book on race, class, and the middle class. We learn about the federal government’s role in segregation as well as local examples of discrimination via developers, agents, lenders, city governments, and banks.

Have questions or feedback? Each show is posted on the Data Driven Real Estate Podcast #7 in our community. Catch pre-show research and continue the dialogue online after the show.

Connect, subscribe and like on: YouTube, iTunes, Spotify, Stitcher, TuneIn, Google Podcast

Show Topics

• 00:46 Dr. Lacy’s background and how she ended up as a demographer and sociologist
• 03:56 How much of Dr. Lacy’s work is qualitative vs quantitative?
• 04:48 Is quantitative data for research easy to come by for research on segregation?
• 5:55 The missing data on segregation that Dr. lacy had a difficult time finding and the incredible commitment to find it
• 09:02 How Dr. Lacy’s research butted up against existing academic understanding
• 10:40 Is being a flip-floppers always a bad thing?
• 11:16 The concept of the American identity and the difference in minority vs European immigrant experience
• 13:23 The role Class plays in how Black Americans process identities
• 15:44 The data Dr. Lacy used to identify the areas and families she used in her study
• 17:33 Was public records data part of the process?
• 21:33  FHAs role in segregation and the suburbs?
• 22:30 The Home Loan Corporation, residential security maps, and how appraisers used the color-coated maps
• 23:13 What is redlining and HOLC’s role?
• 24:41 How the FHA took the security maps and systemized racist policies
• 25:00 The reason FHA justified using these practices and the goal of keeping race and classes segregated
• 28:03 How white families have benefitted from homeownership starting after WWII
• 28:47 What was Levittown and why is it important in the conversation of segregation?
• 30:50 Were the developers of Levittown racist or were they falling in line to comply with needed FHA guidelines to get the funding?
• 32:29 What William Levitt said in response to why as innovators they were not selling homes to Black families
• 33:24 How prices increased when Black families moved into all-white suburbs
• 34:30 Blockbusters and their role in stoking fear and furthering segregation
• 36:24 Different professions who played the role of blockbusters
• 37:07 An example of how a local bank redlined in the Boston area
• 39:24 Public housing and how FHA incentivized white flight into the suburbs with subsidies
• 42:38 What is steering? Dr. Lacy firsthand experience in real estate while undercover
• 44:14 How studies by HUD have shown Black families are shown fewer homes, steered towards specific communities, and/or told homes are not available 46:31 What housing discrimination looks like today
• 48:51 What does the future of the suburbs, housing and integration look like?
• 51:03 The concept of whitopias and what it will affect
• 51:33 The education outcomes of those that have and those that do not and impacts we’ll see in 2021
• 52:55 How low-earth Internet may change the shape of the suburbs and choices in housing
• 53:52 An impact of remote work and diversity that not many people are talking about
• 55:32 Are their cities that are doing a thoughtful job on integration and urban planning?

Show Transcript

Aaron Norris [00:00:02] Hello, everybody. Welcome to the Data Driven Real Estate Podcast, the podcast for real estate professionals dedicated to driving business success using data. I’m your host, Aaron Norris here with co-host Sean O’Toole. And our special guest today is Dr. Karen Lacy. We first stumbled upon …now, Karyn, do you like to be called Dr. Lacy or Karyn? Any preference?

Dr. Karyn Lacy [00:00:25] Yeah, definitely. Dr. Lacy is fine.

Aaron Norris [00:00:27] I like that. You’ve worked really hard for that title. I always like to ask. We stumbled upon some of your work on a CalMatters podcast, Gimme Shelter, and we’re fascinated with your conversation and your knowledge on all your research on the suburbs. So we’re really excited to talk to you today. I guess the first question. Your background in study. You’ve got a B.A. in Urban Studies and Black Studies, a Master’s in African-American studies and sociology and then a PhD in sociology. I would just how did you stumble into this career and why this passion?

Dr. Karyn Lacy [00:01:02] Well, I’ve always been interested in cities, and I always wondered how we could make cities better. And, Initially, I thought that I was going to be an urban planner and it went to college that required us to spend winter term doing an internship. So I worked for an urban planning office in a small city and I did not enjoy it. Before I had taken on the internship I thought that cities were not so attractive because people were unimaginative and they had people who really had good ideas that in cities would look better, functioned, function better. And one thing that I learned in the internship is that there is a lot of red tape. There’s a lot of bureaucracy. And even when you come up with a really good idea, it’s very hard to push that idea for a city council to convince a city manager. So there’s a hierarchy that this idea has to travel through. And most ideas don’t make it. And, so in that sense, the internship was really useful because it helped me to realize what I did not want to do.

Aaron Norris [00:02:35] It’s very funny. I almost went back to school for urban planning as well from an arts degree and. Yeah, and lived in New York City. And I stumbled upon all this research. I was I loved the subway system and was just really curious how the five bureaus came to be and New York being so diverse. Like, how do these specific populations end up in very specific portions of town? I just, I just loved it. And then when I moved back to California and started getting involved in the city and the county, I had the same exact experience. And I shut that down real quick. Yeah.

Dr. Karyn Lacy [00:03:07] God bless urban planners. And they may they don’t get enough credit for the ideas that they come up with and the work that they put into trying to bring them into refrigeration.

Aaron Norris [00:03:18] So then you started just to focus on the sociology instead?

Dr. Karyn Lacy [00:03:23] Well, I have always felt like a sociologist. I have always been sort of attentive to patterns and thinking about why we see the kind of outcomes that we do. You know, when I was a little kid, I didn’t know there was a word for it. Were people who didn’t learn that until I got to high school? But it’s not like a natural fit. And it has been in a lot of ways.

Sean O’Toole [00:03:56] A lot of your you know, you’ve done research on foreclosures in the suburbs and all these things, I was looking through some of your papers. How much of your research you do is qualitative vs. quantitative?

Dr. Karyn Lacy [00:04:13] I mean, if not a person or almost all of it is qualitative, I do work at the University of Michigan,  which is the quantitative powerhouses. Most people know. And we have exceptional graduate students. So, I am involved in a few projects that quantitative graduate students are working on with me. They run the data and then we have the analysis, we put it together. So it. It’s a good marriage.

Sean O’Toole [00:04:48] Yeah, for sure. How accessible or how often is getting good data, you know, a problem in doing, you know, your research. You know, obviously on the qualitative side of it, I’m doing interviews and other things. But on the quantitative side is access to data problem or is it generally pretty good?

Dr. Karyn Lacy [00:05:13] Well, I’m glad you asked that question, because a lack of access to data was the motivation for Blue Chip Black, the book I wrote about the D.C. suburbs. I started out training as a demographer, which is a person who uses datasets to analyze research questions. And I was interested in how middle-class Black people decide where to live. Much of their literature on residential segregation suggests there is a lot of discrimination in the housing market. There’s racial steering. There’s redlining. And the literature suggested that even if you are a middle class or upper-middle class, you’re still going to have a hard time getting into your neighborhood of choice. And was that was what I was really interested in exploring, and I was having trouble finding the data that included the variables that would allow me to do that. And in consultation with my dissertation advisors, we decided that I should just go down there and start to interview people about how they made their housing decisions and also to engage in ethnographic observation, which is. To the extent that you can, trying to become sort of a member of a committee or an organization to see how that institution works from their perspective, so you go down and sort of try to live the way that they do. Going to the same grocery store is that they do you driving through all the traffic they do in the D.C. metro area. You go and you shopping malls, all the things that that a person who lives in that community would do in everyday life. I tried to do as well.

Sean O’Toole [00:07:09] Wow. So that’s a that’s a huge commitment.

Dr. Karyn Lacy [00:07:13] It really is. It’s it’s exhausting. At the end of the day, you write field notes about what you saw and try to figure out what it means.

Aaron Norris [00:07:23] How long were you there and how many people did you have to interview?

Dr. Karyn Lacy [00:07:27] So it’s there for two years and my goal was to interview 30 couples. So 60 people altogether and I interview the spouses separately. But in the end, there were six people who I was unable to interview because the timing was never quite right where their schedule or because the spouse just did not want to participate. So I ended up with 54 interviews that I had to transcribe. And then also all the field notes from my activations, which included going to community meetings and town halls and community events. The. um, that is in suburban communities that tend to have an annual block party. So I went to that. They do cleanup’s in their communities every year, though. So, again, whatever it is that they were doing, I tried to do it as well.

Aaron Norris [00:08:35] So that’s extensive for two years. You really committed.

Dr. Karyn Lacy [00:08:40] That’s not unusual for an ethnographic project. Although I appreciate you guys recognizing how much effort it takes to pull off that kind of study.

Aaron Norris [00:08:52] There was you know, I was reading the introduction. I haven’t finished your book yet, but I did buy it. And I am posting a link to it on our Web site. So Blue-Chip Black: Race, Class and Status in the New Black Middle Class. And in the introduction, you said, it was sort of sweet. You were talking about data collection and some of the data was missing or it was up against one of your professors. Can you talk a little bit about the process? Because it seems like some of the things that you were researching butted up against the data that did exist. Can you share a little bit about that?

Dr. Karyn Lacy [00:09:23] Yes, that is true, and normally that’s a good thing, because what academics are interested in is is building on our existing knowledge base and taking that knowledge in new directions. So generally, if you find something new, that’s a good thing, right, for the publication of a book or an article. The problem is that what I found ran counter to what one of my dissertation committee advisors had found. And I did not want to tell her that she was wrong. So in the department, we have colloquium sessions and graduate students present their work. And I tried to present it without saying that she was wrong. And she finally said, “just say that I was wrong.” Then she, I was worried for nothing. She really didn’t care at all. She’s not the kind of person who is sensitive about being challenged about her work.

Aaron Norris [00:10:31] I guess I appreciate that, because it was the honesty of the data. The data was able to speak, I thought was pretty cool.

Sean O’Toole [00:10:40] I’ve always had a problem with this idea that, you know, flip-floppers are bad, right? Like, not to make it political, but like this idea that flip-floppers like it should all be our goal to, like, learn new things and change our opinion based on better data, like every day.

Dr. Karyn Lacy [00:10:57] It shouldn’t be. Yes. And it also should be the case that academics are not so sensitive about someone finding a more nuanced interpretation of their work, that should be fine as well. But that isn’t always the case. So the issue with my dissertation advisers work is that she had written a wonderful book called Ethnic Options, which is a study of third-generation white people and how they think about their identity. And the idea was that over time, white ethnic immigrants who came to this country exchanged their culture of origin, whether they were Polish or German or Irish, for an American identity to become a part of the American mainstream. And the sense was that they would do that voluntarily because, who would want to be a part of America? And what she found is that as discrimination against those groups declined over time. So you were no longer penalized if you were Irish in terms of where you could work or who you can marry or where you live. That those immigrants took on a white American identity that was not distinguished by ethnicity. Was it that sort of prevailing view in Washington from interviewing white ethnic, third-generation Americans is that they actually did care a lot about having an ethnic identity. They thought being just white was really boring. They called it, quote, “plain vanilla.” So they were attempting to latch on to some kind of ethnicity. And often they were wrong. So there is a Polish woman who said that she celebrated her identity by eating sauerkraut. It’s not representative of Polish culture. So it didn’t really matter for them whether the ritual that they embraced was an authentic representation of the identity that they claim. The point was that they wanted to be something.

Sean O’Toole [00:13:17] But that’s interesting. Yeah.

Dr. Karyn Lacy [00:13:21] But she.

Sean O’Toole [00:13:22] Go ahead.

Dr. Karyn Lacy [00:13:23] She argued that Black people don’t have any identity options. Right. That because of the way race is defined in the U.S. and the search for meaning attached to it. Black people are just Black and that’s it. And what I found in Blue-Chip Black is that, that isn’t at all the way Black people, and particularly Middle-Class Black people think about their identity. They don’t see themselves as defined solely by race. In every context.

Sean O’Toole [00:13:57] That’s it. Yeah, I get that. You know, it’s it was interesting for me. My name’s Sean Patrick O’Toole, right. It’s super Irish.

Dr. Karyn Lacy [00:14:04] Yeah.

Dr. Karyn Lacy [00:14:32] And certainly I certainly tell other people when they hear your name, are going to realize that you are Irish, even though it may not be a salient identity for you. On an everyday basis.

Sean O’Toole [00:14:45] Yeah. Yeah.

Aaron Norris [00:14:48] How did you stumble upon this area in D.C. where you were aware of this already? There’s two neighborhoods in the book that you talked about. I believe one was in Virginia and one in Maryland, correct?

Dr. Karyn Lacy [00:15:00] That’s correct.

Aaron Norris [00:15:01] And the one in was, I can’t remember the name, the two different areas. But you were specifically studying upper middle-class Black families and where they chose to live. But that’s how you found this. How did you even find these two neighborhoods so close together?

Dr. Karyn Lacy [00:15:18] Well, that’s another instance where data is really important. I knew I wanted to find a sample of Middle-Class Black People because I wanted to understand how if you have enough money to live wherever you want. What are your choices as opposed to people whose choices are constrained by financial limitations? So then the question was, where do I work? Do I find these mysterious Black people? So I went to the census and started to look around at different census tracts to figure out. What tracts would meet my criteria and for comparative purposes? I needed one tract that was majority Black and another tract that was predominantly white that all had the same characteristics. So the same median monthly mortgage payments. The same percentage of college graduates. The same median income. That sort of thing. And through that process, I was able to identify two community names, one in Prince George’s County, which is majority Black suburb, and the other in Fairfax County, which is a predominantly white suburb. So you can see here, too, that even though I was planning to do an ethnography and to do interviews, I still had to rely on a dataset. The census in order to get started.

Aaron Norris [00:16:51] So interesting. Now, where did you live in that two years? Did you live in D.C. and sort of travel out or did you spend time in each of those neighborhoods?

Dr. Karyn Lacy [00:16:59] So this is where it being a poor graduate student makes life interesting. I lived on a lot of couches. So fortunately, our friends in D.C. let me say some of the time with them, and I do have an aunt and uncle who also live in the area. So a lot of living out of a suitcase.

Sean O’Toole [00:17:28] Yes. You know, one of the things we really focus on making public records data more available. So county assessor, county recorder. And there’s quite a bit of information there. You know, that would be useful for you. Did you use that type of public records at all or primarily just census data?

Dr. Karyn Lacy [00:17:52] We get started, I mainly use the census data because I wanted to be sure that I had the right communities for my research questions before I started the equally hard process of convincing people to participate in this study. So I definitely wanted to be sure I had the right communities. I got started in P.G. County because of the contact that I had already. But it was a lot harder to get started in Fairfax County. Initially, I tried snowball sampling, which is when you start out by asking people you’ve already interviewed if they have friends or contacts in the neighborhood that you hope to interview. And I did get a few leads for residents of Fairfax County from that. But when I called them, they didn’t want to do it. Their friends who I’d already interviewed and said that here’s a person you should contact. I’ll do it. And when I contacted them, they were like, oh, no, I’m not going to do that. So. So I was really sad and thought that going to graduate, I’m going to be a baby for the rest of my life because I only have half of a comparative study. And I got to the point where I would tell anyone when I feel sorry for every stranger on the streets of D.C., because I would tell them this sob story about how I had no contacts in Fairfax County. And one day I went to a bank in downtown D.C. to open a student account and the manager there started asking me questions. What do you write in anticipation about? And I told her and I told her that I wanted to interview people in Fairfax County. Nobody would talk to me. And just by luck, she happened to live in the track that I wanted to study. And she said, you not only could you interview me, I’ll also introduce you to some of my neighbors. And from there, it just took off. So you never really know where you can find the right contacts for your research.

Sean O’Toole [00:20:09] And that’s the snowball started with the one the one banker, and then snowballed into completing your thing. You know what, I am thankful for hungry, you know, grad students and the rest, because otherwise these things wouldn’t happen. Right. Like most of us wouldn’t go go through that, right, without having that kind of angry desire. Right.

Dr. Karyn Lacy [00:20:35] Well, most people who have full time jobs, even if they have the desire, they lack of time, it’s very time consuming to do that, to observe all day and then to come home and right up field notes. Most people who work full time this is a real impossibility to do something like that.

Sean O’Toole [00:20:55] Love to jump in, too. You know, you talk about the history of suburbs. You know, listen to CalMatters. You know, I thought some of that was really fascinating. And, you know, a you know, even I’m familiar with Levittown and some of these things, but I thought you brought a lot of interesting and I’d love to jump into that with maybe your, I don’t know if he’ll start with, like what you think the top takeaways, you know, should be for folks to understand about suburbs and how they originated.

Dr. Karyn Lacy [00:21:31] Okay, I’m sure. Yeah. I think the most important thing for people to understand is the FHA’s role in segregating America, that the Federal Housing Administration is really the architect of residential segregation in America’s suburbs. And I say that because most people think that if they want to buy a house, you identify a neighborhood or maybe two, you find a realtor, you search your house and then you just move in, and that’s not at all the way that housing searches work historically for Black people who wanted to buy a house. So it’s important to understand that for decades, the FHA influence where people live through the policies that the organization promoted. And I think they’re most consequential policy was the adoption of the HLOC, the homeowners loan corporations, residential security maps, and those maps represented the HOLC’s assignment of a rating to every block in every city in the country. And there were four categories, green and blue neighborhoods, which the HOLC felt would always appraise well. For the HOLC, the motivation was to create and standardize appraisal system that appraisers. So that appraisers at different parts of the country would be using the same criteria to evaluate properties. So, you know, 4000. This is 1933, so a four thousand dollar property in Wisconsin would reflect the same characteristics as a four thousand dollar property in Ohio. So the green and blue neighborhoods were the best ones, the yellow and red neighborhoods were the worst neighborhoods and all Black neighborhoods were assigned the red designation. Which is where the term redlining comes from. So even Black neighborhoods, they had brand new housing stock because the people living in those homes were brown. We’re still with signed the red designation. And then the FHA came along and decided those residential maps are a great way to fulfill their plan to segregate every community in America by race. So the HOLC was really interested in just appraisals, so they weren’t doing something malicious with their residential security maps. But the FHA did, so the FHA actually took the racist practices that were employed by lenders in real terms at the time and converted that into federal policy.

Aaron Norris [00:25:00] Did anybody given a reason why that was done at the FHA level?

Dr. Karyn Lacy [00:25:06] Well, the FHA today says that they were principally concerned with property values. The FHA doesn’t actually loan money directly. They insure the loans that lenders grant to home seekers. So they were very concerned with property values, but their premiss was racist in their underwriting manual, they said if a neighborhood is to retain stability, it is necessary that properties should continue to be occupied by the same social and racial classes. So they were instructing lenders that it’s not necessary for you to grant loans to Black people to live in green or blue neighborhoods. And the federal government is fine with that. And as a result, for the next thirty-four years, at least, 1968 is when the Fair Housing Act was passed. But we certainly know that there’s still a red lining going on today. For at least the next 34 years, from 1934 to 1968, Black home seekers were shut out of predominantly white neighborhoods in the suburbs, were typically classified as green or blue. So what we have is communities that were designated exclusively for white home seekers that were funded through taxes paid by everyone. So I often hear even in some of the articles that I see, I’ve seen recently in response to Trump’s comments about the suburbs. I see white suburbanites saying, I earned this, I deserve to be here, in part because that’s the way we conceived of homeownership in this country. Right. But the people who work hard and who are successful are the people who deserve homes that people who are poor don’t deserve a nice home. Right. But there’s little awareness that that community exists for an option for you if you’re white because of all the work that the FHA did for 30 years. To exclude Black people and increasingly Latino people. So it’s useful to think about the way our communities would look if the FHA had made a different choice. Right. If they had decided to promote racial integration instead of racial segregation. And had they done that, we would see Black people accumulating wealth at the same rate that white people have done. For the last eighty years since the FHA came into existence.

Aaron Norris [00:28:03] I was talking to my father about this very thing, his family was in Brooklyn at the time after World War Two. My grandfather got a V.A. loan in New York and we were talking about what that meant to our family over, you know, for the last 60 years. What that equity buildup has meant as far as education of family members of wealth within the family and it is very important to understand that history. And I was interested in going down the rabbit hole, I don’t think I’ve ever prepared more for an interview in my life. Just so you know. I started reading a lot about Levittown and then affordable housing. I really didn’t appreciate where affordable housing started. And it wasn’t, it didn’t start necessarily as a low-income play. It was a really, really a function of World War Two. Can you talk about that a little bit?

Dr. Karyn Lacy [00:28:47] Yeah. I mean, in there to the FHA is relevant because Levittown, which is was the largest at the time. Nineteen forty-seven, the Long Island, Levittown was the largest suburban development ever constructed by a developer. And that development would not have been possible without the backing of the FHA, the FHA insured loans, Levittown home seekers. So the Levitts could take certain risk without risking financial loss. And they built homes that cost about seven thousand dollars, which is in today’s dollars would be about eighty-four thousand dollars. So it was an affordable home. And for most New Yorkers, moving to Levittown was cheaper than paying rent.

Sean O’Toole [00:29:44] One of the things you know, one of the other big pieces of the history of Levittown, right, was a use of a restrictive covenant that basically said that the house could not be used or occupied by any person other than members of the Caucasian race. And I always thought that was, you know  just a you know, the developer, the Levitts, you know, you know, basically bringing their own ideals or norms or what they thought would sell best or protect their community the best of the rest. But I’m wondering now, based on this thing with the FHA, if maybe some of that wasn’t to to ensure that, you know, they could get the folks coming to Levittown to get loans. But then maybe did they, well, you know, did one lead the other? Was it, were the Levitt’s racist and didn’t want Blacks in their community or were they reacting to these FHA rules and the ideas there?

Dr. Karyn Lacy [00:30:50] So the Levitts took their lead from the FHA. And as I said, the first Levittown was constructed in 1947, restrictive covenants or outlawed in 1948 by the Supreme Court, who said that restrictive covenants were unenforceable as law and contrary to public policy. But the FHA dismissed that ruling and continued to accept applications from homeowners who were seeking to buy a house in homes in communities governed by restrictive covenants until 1950. So for two years after the practice was rendered illegal, the FHA continued to say, we’re fine with you engaging in this discriminatory practice. The Levitt brothers actually were asked about why they refused to sell homes to Black people, especially because they had been innovators in so many other ways in terms of the construction of large scale suburban developments at a very rapid pace. Right. They were having prefabricated walls and flooring and crews shipped into the community instead of building houses one at a time. They would snap together more than 30 houses a day, which were in 1947 was phenomenal.

Sean O’Toole [00:32:27] Today it’s phenomenal.

Dr. Karyn Lacy [00:32:29] But what they said when they were ask about selling homes to Black people, William Levitt said, we can solve a housing problem or we can try to solve a racial problem. We can not combine the two.

Aaron Norris [00:32:44] There’s a there’s a video on YouTube, “Crisis in Levittown” it. I think it’s a documentary shot in 1957 about the, it was a newsreel of the first Black family, I guess, that moved into Levittown. And they’re interviewing the white families. They keep winning it, leaning into this concept. It’s going to lower the values of our property. And I guess talking about this in the way that we are when it comes to the appraisals, was that truly possibly a fact? If for some reason that the zone would change at that point, 1957, did those districts with the HOLC still exist as far as the colors?

Dr. Karyn Lacy [00:33:22] Designations did still exist. But the what the data show is that the first Black family to move into a majority white community actually raises the property values because that family pays a premium to move into that community.

Sean O’Toole [00:33:47] They are opening up new demand.

Dr. Karyn Lacy [00:33:48] Right. I mean, basic law prices, supply and demand. And the more people you have that want into a place. Right. That should, unless that one Black family chases away so many white families. But I just. Well, see that.

Dr. Karyn Lacy [00:34:02] Yeah. Well, then. So they. So the first problem is that the Black family is being overcharged for that home. And then that benefits existing white residents because their property values go up as a result. So, I mean, it would be a twisted policy, but you could advocate that every majority-white community try to recruit one Black family. I’m joking. I’m joking of I’m joking. I was probably a joke in poor taste, but it is the case that their property values go up as long as one Black family moves in. The problem is that, that one Black family moving in gets constructed as the beginning of neighborhood transition. I think this is what Trump was alluding to initially when he said the suburbs would be destroyed. But it’s not because the family is is Black. It’s because blockbusters tend to to follow that one Black family into the community, and they would knock on the doors of white residents and say, gee, you know, there’s a Black family that moved in down the street from you and your home is going to lose its value. You should sell it before it’s worth nothing and you’re penniless. And that strategy worked with a lot of white people who were frightened about losing their only asset or their most valuable asset, and they would sell in. Once one person started to sell, another person would. And then you get a domino effect. And that’s what made the Black community transition over to Black, the developers intervention to cause that outcome. So what we hear in popular culture is that a Black family moves in, the neighborhood goes down. But there is an intervening variable, which is a blockbuster who comes in and then causes that kind of sell-off.

Aaron Norris [00:36:09] You say blockbuster.

Dr. Karyn Lacy [00:36:12] Blockbusters.

Aaron Norris [00:36:12] I’m not familiar with that term, what is that?

Dr. Karyn Lacy [00:36:14] Blockbusting is the process that I just described, which is the deliberate racial turnover of a community for profit.

Aaron Norris [00:36:24] I guess I mean, who would that be? Is there a role besides just causing trouble? Is it a Realtor looking for business? Is it an investor looking to get a home cheaply? Is it. Is there a specific role that person plays?

Dr. Karyn Lacy [00:36:36] So investors and Realtors who are interested in profit because as the neighborhood is transitioning, transitioning, you make money, you force white homeowners out and you sell the homes that they abandoned to Black people at a very high price so that you turn over a profit. But there is and this is a fairly widespread practice. There’s a book called The Death of a Jewish American Community. I think the authors are historians, but I’m not quite certain about that. But in any case, what they describe is a consortium of banks in the Boston area got together and decided that they were going to redline and they were only going to sell homes to Black people if they were only going to provide mortgages for homes for Black people, if they agreed to move into this one section of Boston that they had cordoned off and designated as appropriate for Black people from Mattapan. The problem is that that community already had people living in it, they were Jewish and they had synagogues and Jewish supermarkets and all kinds of cultural practices and institutions in that community. And the bankers pushed them out and put Blacks in. And for years, that community was a majority Black community, it’s now becoming gentrified and transitioning as many predominantly Black communities and large cities are. But that’s a very clear and disturbing example of how the banks in a city might all form a coalition to enforce redlining practices.

Aaron Norris [00:38:42] So you had federal policy coming into play. You had local policy. It’s it’s so fascinating to see all the different pieces to how we know where we’re at today. Also spent quite a fair amount of time researching, you would probably appreciate this as an urban planner, a lot of the 50s concept of affordable housing. The stuff in Chicago, I live close by the one in the Harlem area. Just very stark, 1950s like a le Corbusier, a Bauhaus movement. Man, buildings almost look scary. What did we learn about the housing that they were building at that period of time?

Dr. Karyn Lacy [00:39:24] Well, initially, we are an image of public housing now is counter to what public housing was at its inception. So initially, to get into public housing, you had to pass a moral test, right? You had to be upstanding. You had to have a job. You had to demonstrate that you had a moral compass in order to get it. And it was you had to apply. There was a long waiting list and it was it was hard to get an apartment in public housing. But then the FHA helped to initiate white flight in central cities by subsidizing the suburbs and in the process, they really caused a lot of harm in central cities. And that’s when you start to see the public housing transition to a home for lower-middle-class, working-class people who are trying to be upwardly-mobile to places for the working poor.

Sean O’Toole [00:40:41] It’s really I mean, it’s it’s stunning to me how. We touched a minute ago on like Realtors and investors played a role in blockbusting. And I don’t think most folks realize, right. The National Association of Realtors, I think’s been around since 1908. And they have this, you know, code of ethics. But past versions of their code of ethics include a Realtor should never be instrumental in introducing into a neighborhood members of any race or nationality whose presence will clearly be detrimental to property values. So it was like the code of ethics was to keep, you know, folks out of neighborhoods to not hurt. So, I mean, it was really systemic. And that stayed in the Realtor Code of Ethics and tell 1950.

Dr. Karyn Lacy [00:41:35] Mm hmm. Yeah. I mean, it’s. It’s still the case among some Realtors that. Well, let me say this, Realtors build their clientele based on their reputations. They find a house for someone, the person is happy, and then that person recommends them to a friend. Right. Well, if you as a Realtor develop a reputation as the person who brought Black people into a predominately white neighborhood, it’s possible that you won’t have very many clients going forward. I’m not justifying what Realtors have done. I’m saying that from their perspective, they’re trying to grow their business and they’re trying to make money. And everyone from the FHA to developers to lenders are saying discrimination is fine. So why would you do the right thing?

Sean O’Toole [00:42:38] To be fair, the you know, the code of ethics does not say that anymore. It clearly says they should not do that. But but I believe that it’s still happening. In fact, you went undercover to be to just go see this in person. And what was that experience like?

Dr. Karyn Lacy [00:43:01] It was it was jarring, I mean, in part because I’m a very bad actress, so I was very nervous. But also because I you know, at that point I’d been in graduate school for three years. I had read a lot of the literature on housing discrimination and I had residents in P.G. County, in Fairfax County, most of whom were saying that they didn’t encounter any discrimination when they were looking for their house, that they wanted a house with the fireplace or they wanted a house where all their kids would have their own bedroom and they had that. And so because they had found that they wanted they were content and they they had no idea how many fewer houses they were shown compared to their white counterparts. Right. Or they have no idea whether they were steered into communities that had a higher composition of people who look like them than their white counterparts. Right. So there is no way for them to draw those comparisons. HUD’s audit studies help us to do that, because they sent out people who were assigned fictional identities and so you’d have a Black auditor in a white auditor. And they were assigned the same kinds of jobs in the same income and the same educational attainment. So the only difference between them is race. And they would go out into session to apply for a home or an apartment that was listed. And it’s through those studies that we found. But there’s still quite a bit of discrimination with Black people told homes are not available even when they are on them or being shown fewer homes or only being directed to homes in communities where there are other Black people or communities where there’s a concentration of poor people. And we wouldn’t have known those things without the audit studies. So, while that in mind, I walk into this Realtors office to pretend to buy a house, and at that point I’d never bought a house that I was also nervous about that when I had been able to be exposed as a very naive home seeker. So I gave my speel that, you know, I was my fiancee and I are going to move to the area. He’s has finished up medical school. He’s starting the residency. We want to live in this community, which is the one that I was studying and the Realtor was actually really nice. You know, he told a lot of jokes. He told me you wanted to look for a house where the people are either getting a divorce or somebody die because those are really good deals, which is true. So that was good advice. Then he was also engaging in racial steering because even as I insisted that I wanted to live in the neighborhood that we were sitting in, he kept directing me to get a large map in his office and he drew his finger from where we were up to another community, which I knew had a lot more Black people in the housing stock was much older. And he said, you want to live here because here is where you would know who your neighbors are. Which is an interesting.

Aaron Norris [00:46:28] That’s an interesting way to put it. Yeah.

Dr. Karyn Lacy [00:46:31] Yeah. And I said, well, we want to live here. And he said, you can’t afford to live here. But the problem is, I had never given him a price range and I had not said whether we would get money from our parents for the down payment. I never mentioned price, but he looked at me and determined that the neighborhood was out of reach for us. So in the process, I actually was like, this guy is nice. He’s trying to help me, even though I have read all about stuff about housing discrimination. So I can see how the average person who hasn’t read any of the stuff that we have, any of the literature that we have would come out of that interaction, not thinking that they had been discriminated against because the guy was nice.

Aaron Norris [00:47:16] The racism has just got a lot more subtle.

Dr. Karyn Lacy [00:47:21] It has.

Sean O’Toole [00:47:21] It’s an interesting I’m a big science fiction reader. I don’t know, professor Lacy, if you if you’ve read Neal Stephenson at all and maybe Snow Crash and Burb Claves.

Dr. Karyn Lacy [00:47:34] I have not yet. I should, let me write it down.

Sean O’Toole [00:47:37] Yeah. So it’s a you know, it’s a dystopian or at least I’ll I’ll take it as dystopia and look into the future. And so basically it has the suburbs becoming a franchise, a franchise nations. So they have their own constitutions, they’re city-states. And, you know, I think the underlying theme is, is that I don’t necessarily mean this on race. And, you know, I think class is probably another conversation we can be having here about differences. But race, certainly class, etcetera. And he basically said, you know, the theory is the book is in the future. It basically we come to decision we can’t all get along. And so instead, we have the suburbs become their own little nations of like-minded people. And I always thought that was just a fascinating, you know, take I mean, our goal here has been to try to, you know, to try to have integration, you know, I certainly think that’s a good goal, but I guess, you know, I’d like to ask you what you think the future of, you know, suburbs and housing and integration or maybe how we get there?

Dr. Karyn Lacy [00:49:01] Yeah, well, there is a nonfiction book about that process that you’ve just described called Whitopia, which is written by a journalist. He’s a Black journalist who spent, I think it was two week in each of these communities that he calls whitetopias, which are the suburbs in distant communities. They’re really exurbs where white people who lived in California and other places where there’s growing diversity are attempting to escape people of color, both Black people and Latinos, and also attempting to distance themselves from poor people. So they have literally moved out to the boondocks and started these exclusive gated communities that contain only people like them. And that’s a real-life example. That’s not, that’s not fiction. I recommend that book, too. It’s a really good treatment of that of those communities. So I recommend that book. But I think we’re just going to see further divisions by social class where people who are wealthier and have the money to cordon them off from everyone else continue to do that.

Sean O’Toole [00:50:26] What do you think the long term impacts of that are? What’s the, you know, so, yeah, I mean, I think that is happening, continues to happening. You know, I probably live in one of those communities, so, you know, it wasn’t out of some desire to escape anything, just. You know, appeal to me, I’m not even sure why. So what? What do you think the impact of that is versus, you know, say, my choosing to live in the city with greater integration?

Dr. Karyn Lacy [00:51:03] It’s going to affect everything. And I think we’re going to see inequality skyrocket because if, for example, the best schools in 30 years from now are in whitopias. What about everyone else? What kind of education are the kids who can’t afford to live in those communities going to get? Right. How are they going to be prepared for a changing job market. They probably are not. There’s a lot of discussions now because of the pandemic about what’s going to happen if the schools don’t open. And I’ve seen reports where middle and upper-middle-class parents are creating these learning pods, where they’re pooling their resources and then hiring experts to teach their kids. So at the end of the academic year, in 2021, their kids are probably not going to be behind. But what about the kids whose parents can’t afford to hire a teacher to create a learning pod? Those kids are going to be behind next year and they’re going to be behind by a lot.

Sean O’Toole [00:52:16] But also, when they create that learning pod. Right, they’re going to have a lot more choice in what is taught and what is not taught. Even those kids that get that better education, it’s going to be a very selective education.

Dr. Karyn Lacy [00:52:28] It is probably very value-laden. Yes.

Sean O’Toole [00:52:33] You know, I actually think, you know, it’s interesting you brought up Covid in, you know, because it’s changing where people work. Right. We’ve really seen this, you know, if you look at most of the population in the US, right. You know, rural areas have been dying and urban areas are just exploding. Right. And, you know, not only work from home, but one of the things I’m also fascinated in about right now is new low-earth orbit, satellite Internet. And what that’s going to do is bring high-speed Internet to rural communities. And I think that’s going to be pretty awesome for rural communities. But we might see an acceleration of these, you know, burbclaves or Galt’s Gulches or Whitopias or whatever, where people go, you know, no longer have to be in the city, no longer have to work together, no longer have to. And they can go off and find their own space that’s idyllic in their own mind, and I think that has a lot of interesting implications for the future of integration, race relations, etc.. Any thoughts on that?

Dr. Karyn Lacy [00:53:52] It does. I heard a report that Google is going to allow their employees to work from home through next July. I mean, there are a lot of implications from that. One is that, you know, even people who live in homogenous communities often work in environments with better, more diverse. Right? So at least in the workplace, they’re exposed to people from different cultures and who may think differently than they do. But now I’m under the pandemic when you don’t even have that. It concerns me how. What will happen to the racial progress that we’ve made so far, when people don’t have to manage those kinds of cross-racial interactions.

Sean O’Toole [00:54:45] It’s much easier to vilify the other when you don’t actually have to talk to meet and, you know, spend time with the other and realize that they’re really not very different at all.

Dr. Karyn Lacy [00:54:57] Exactly. Exactly. So it’s. Let’s say it’s definitely a concern.

Sean O’Toole [00:55:04] Yes, go ahead, Aaron

Aaron Norris [00:55:06] Are there any cities that have done some work, an improvement on the topics that we’ve been talking about that you’ve been excited about? The right approach at the right time?

Dr. Karyn Lacy [00:55:22] Hmmmmm.

Aaron Norris [00:55:22] Well, that says a lot.

Dr. Karyn Lacy [00:55:25] It shows. Well, there are some cities, so Shaker Heights is one such community. It’s a suburb in a suburb of Cleveland that was featured in Kamau Bell’s CNN special on Sunday. And I’ve actually known about that community for some time, but they’ve been very proactive about managing residential integration in their community in Ann Arbor, which is where the University of Michigan is. At one time, you could not post a for sale sign there because they didn’t want to create the kinds of sell-offs that we were talking about a few minutes ago when we were discussing blockbusting. So there are some communities that have made attempts to both. Recruit white people who are interested in living in a more diverse community. And then to make it possible for them to stay there and still maintain the property values there. But they’re few and far between.

Sean O’Toole [00:56:36] You know, you certainly don’t want to head down a path where we all have to live in the same thing and there aren’t incentives to work hard and get ahead and the rest. You know, we started off this conversation on urban planning and, you know, you know, praise for urban planners and how hard their job is. But I also wonder, you know, to what degree, you know, you know, even back in the foreclosure crisis, I really felt like some of the problems in the foreclosure crisis came back to urban planning. Right? the McMansions out in the cornfields that we saw here in California that, you know, just really made no sense, even from like a heating and air conditioning, but side of things and like the lack of thought and to, you know, OK, you’re gonna have some larger homes, you need to have some apartments. You need to have some smaller homes with, you know, smaller pieces of the property so you can hit different price points and income levels rather than having one on this side of the tracks and one on that side of the tracks, which seems to always be the case. You know, we’re fairly close. I’m fairly close to Reno. Right. And up on the mountains towards Tahoe is where all the higher end homes are. And then down kind of on the other side of the valley and to the north is where the lower-income stuff is. And that really feels to me like a failure of urban planning.

Dr. Karyn Lacy [00:58:10] Yeah, yeah, it’s definitely an aspect of the crisis that there’s there, too, there is the federal government is complicit there, too, because they allowed lenders to engage in predatory lending, granting mortgages without any documents to support the income that the homeowner reported. And those predatory loans were concentrated in minority communities. So there, too, you see that people of color were selected for differential treatment in the lending market as well.

Sean O’Toole [00:58:56] So we worked with the San Jose Mercury on a pretty large study of that in the Bay Area, Silicon Valley. And it was a really interesting thing where, you know, they looked through at the Hispanic community and how much harder the Hispanic community was hit generally than the other communities and basically the same geographic area. So I was shocked. I didn’t really think that there would be a difference there. And I didn’t really understand the mechanisms for why there would be a difference. But using our data, there clearly was.

Dr. Karyn Lacy [00:59:43] Yeah. Yeah. It sounds like you guys you read the paper I read about the foreclosure crisis in the journal American Behavioral Scientist. But there, too, I also discovered that in California, the hardest hit people were Latino and Asian homeowners, in part because they bought homes in bull markets and very expensive markets. And when the housing market crashed, their property values just plummeted. So I think the public narrative is that despite by people seeking homes that they couldn’t afford caused the crisis. And it’s actually much more complicated and nuanced than that. You’re right.

Sean O’Toole [01:00:33] Well, yeah, I mean, let’s. The 2008 crisis didn’t happen on Main Street. It happened on Wall Street.

Dr. Karyn Lacy [01:00:40] Exactly.

Sean O’Toole [01:00:41] I don’t think that personally there’s any debate about that. And I think it was backed by politicians. Dick Kovacevich, you know, the Wells Fargo guy went in and pushed for the Commodities Futures Modernization Act, the repeal of Glass-Steagall. And those things that basically let lenders make loans without recourse and add the Fed pushed that because it kind of saved the economy after the dot com crash. Right? And, you know, we’ll do anything to save the economy. You know, as a country. And we’re seeing maybe a little bit of that right now. But that was clearly what caused the housing crash. And a lot of people got sucked up into this sale that, you know, real estate only went up and, you know, the plenty of blame to go around on that one. But I don’t I personally don’t think any of it belongs to folks that bought into that dream of homeownership.

Dr. Karyn Lacy [01:01:42] Yeah, yeah.

Aaron Norris [01:01:44] Well, we’re at that hour mark.

Dr. Karyn Lacy [01:01:47] That went by really quickly.

Aaron Norris [01:01:49] I know, we didn’t even get to all the questions. That’s typical. But is there any work? What’s next for you? Are you going to move somewhere else for two years and work on…

Dr. Karyn Lacy [01:02:01] Unlikely. Unlikely. I so my dream project would be, this can’t happen because the IRB at my university, really at any university would never approve it. But I would like to conduct an experiment where, you know, you recruit a group of people to live in a community for five years, a racially diverse group of people, to live in a community and interact as neighbors for five years and see what happens.

Aaron Norris [01:02:38] Interesting.

Dr. Karyn Lacy [01:02:39] Well, you can’t do it legally. You can’t make people. You can’t make people move where you want them to. But it would be interesting to see how they how they get along for five years.

Sean O’Toole [01:02:52] I don’t know. I think with a little financial subsidy. Right. You could say, hey, we’re looking for five volunteers of different racial backgrounds to move into this community. And I don’t know that that seems doable to me.

Dr. Karyn Lacy [01:03:09] OK. If you guys are and I mean, you got to go with me.

Sean O’Toole [01:03:12] All right. I’m happy to try to help you figure that out. Okay. I think it’s fascinating. Right. Like, you know, some of those experiments don’t go well. I remember all the people put into that the space habitat thing. What was the name of that?

Aaron Norris [01:03:31] The Sphere?

Sean O’Toole [01:03:32] That like, yeah, they had the sphere. They put all the folks in and it just turned to pure chaos.

Aaron Norris [01:03:36] But I didn’t know that.

Sean O’Toole [01:03:41] Yeah. They wanted to simulate like what a group. You know, you take a group of people together that all look like they’re they’re awesome together. And in like a situation like Marx writes, they’re in a bubble and they can’t leave and they have to work together and cooperate.

Dr. Karyn Lacy [01:03:59] Interesting. How long do they remain in the bubble?

Sean O’Toole [01:04:01] Boy, I’m trying to remember the details. Well, we should actually try to show that.

Dr. Karyn Lacy [01:04:10] There is the NBA, NBA, which is in a bubble. So that’s one example of that concept. Yes.

Aaron Norris [01:04:18] Sounds like a reality show. Maybe we just found how we get this funded.

Dr. Karyn Lacy [01:04:21] If you guys are in I’m in.

Aaron Norris [01:04:27] All right. Dr. Lacy, is there any way that people who would like to follow you and your work in the future where you’d like them to connect?

Dr. Karyn Lacy [01:04:35] Yeah, they could follow me on Twitter at Karyn Lacy.

Aaron Norris [01:04:42] OK.  will definitely mark that. Thank you.

Sean O’Toole [01:04:45] Thats Karyn with a Y. Right?

Dr. Karyn Lacy [01:04:47] It is.

Sean O’Toole [01:04:48] K A R Y N L A C Y with no E, Aaron.

Dr. Karyn Lacy [01:04:53] That’s correct.

Aaron Norris [01:04:54] I caught that once. I’ll go back through and check everything on the website and post all the links to some of the fun books and videos that we found. And we’ll link to your Twitter account for sure. Thank you so many times today.

Dr. Karyn Lacy [01:05:06] Thank you guys for inviting me. I really enjoyed talking with you.

Sean O’Toole [01:05:09] Thank you. Appreciate it.

Aaron Norris [01:05:11] Thank you for listening to the Data Driven Real Estate Show. You can find show notes and links to some of the resources mentioned in the show at DataDrivenRealEestate.com click that join the community and you’ll be forwarded to our community where you can even ask questions for upcoming guests. Ask questions of current guests. We monitor there and we’d love to engage with you. Please don’t forget to like favorite subscribe and share on any of your favorite platforms. That helps us out a great deal. Thanks for listening and we’ll see you next week.

The post The Data Driven Real Estate Podcast #7 – Fair Housing Insights with Dr. Karyn Lacy appeared first on PropertyRadar.

From the family pariah to the most popular data geek at the party, learn the data-driven approach he uses to identify the best up-and-coming cities and neighborhoods for real estate investing in the single-family and multifamily real estate space.

Neal shares his journey from constructing commercial to investing in single-family homes and back to commercial real estate. Now managing 2,000 commercial units nationwide, Neal talks about multifamily and commercial trends in a post-Covid world. Who will be the winners and losers in the game of real estate?

Have questions or feedback? Each show is posted on the Data Driven Real Estate Podcast #6 in our community. Catch pre-show research and continue the dialogue online after the show.

Connect, subscribe and like on: YouTube, iTunes, Spotify, Stitcher, TuneIn, Google Podcast

Show Topics

• 00:47 How Neal Bawa went from technology to real estate
• 03:15 If you can build in this state you can build anywhere. Name that state.
• 04:33 The journey of commercial construction to single-family investing
• 05:11 Why Neal’s family disavowed him in 2008
• 06:04 The one piece of data Neal was looking for on real estate in every city he was considering
• 06:48 The power of technology, Zillow, and a hacker
• 07:46 How the real estate data turned into a day trip to Madera, CA and the big discovery
• 09:03 Why a builder had to sell a property that cost $180,000 to build for $90,000
• 09:43 An amazing deal on ten new rentals with a huge problem and how Neal solved it
• 13:25 The biggest mistake was listening to one particular “expert”
• 14:38 Does being data-driven in real estate investing keep you out of emotional investing?
• 17:38 Creating a 3,000 city database on city data trying to find the data on where to invest next
• 19:04 The accidental real estate data educator
• 26:09 The five key data points that matter most in identifying a great city for real estate investing
• 27:22 Why looking at city metrics and data isn’t enough to select your next investment locations
• 27:54 Why neighborhood data is more powerful that city data alone
• 30:00 Correlation between poverty and delinquency and retention rates in real estate?
• 30:59 How student housing impacts real estate data
• 35:06 The concept of the corridor and identifying the next investing location
• 35:38 The Corridor of Opportunity and Neal’s three favorite hot real estate markets
• 37:20 What makes a great city for real estate investing?
• 37:58 The concept of compression and path of progress for real estate
• 40:15 Secondary markets and issues with them being the last to appreciate in a boom, the first to go bust, and the last to come back
• 40:54 The potential long-term positive change coming to real estate because of Covid-19
• 42:52 Where money from the retail meltdown with gravitate towards in real estate
• 43:26 Volume of people that may exit big cities like San Francisco
• 46:04 New York landlords are offering two months of free rent for new tenants?
• 47:12 What comes first, a great city culture or people moving into a city?
• 50:18 Could Chicago go bankrupt?
• 53:10 How to select the right real estate assets in a city
• 53:25 Three real estate types that may have unique issues due to Covid-19
• 54:35 Student housing could do well during Covid for one key reason
• 55:11 The one asset class that will thrive as retail suffers
• 56:31 Will Amazon’s investment in robots impact our need for more industrial real estate?
• 58:54 How Covid is driving suburbanization and decisions businesses are making
• 1:00:33 Is Covid impacting Opportunity Zones investments?
• 1:02:42 An important risk factor to watch when investing in an opportunity fund in an opportunity zone
• 1:04:33 What is the one thing that keeps Neal up at night?
• 1:07:32 Neal’s favorite sources of macroeconomic information.

Show Transcript

Aaron Norris [00:00:02] Everybody, welcome to the Data Driven Real Estate Podcast, the podcast for real estate professionals dedicated to driving business success using data. I’m Aaron Norris. And today we are here with Neal Bawa. He is with Grocapitus, founder of Grow Cabinets, a commercial real estate investment company. He negotiates and acquires commercial properties across the US for nearly 500 investors with a portfolio of over 2000. You’ll also serves as CEO of MultifamilyU, an apartment investing education company, and you can even catch his work on you to me. So welcome, Neal. Nice to see you.

Neal Bawa [00:00:35] Thanks for having me on the podcast, Aaron. It’s so exciting to be on a podcast that has the word data in its name. It’s like, wow, I think I’m a fit for this. I think I’m a fit.

Aaron Norris [00:00:44] Yeah, yeah, yeah. You know, a few things about data and technology. So let’s back up a little bit and talk about your background. So it’s not in real estate. It’s in technology, right?

Neal Bawa [00:00:54] It is. I mean, I you know, most people that get into real estate start, you know, with either private lending or maybe they do a fix and flip or maybe they, you know, buy a rental. In my case, I got into real estate in reverse. My first project was a six million dollar new construction, custom-built Apple-style campus that my tech company built for my, for us. So, I mean. And the way it happened was, you know, I’d been running a company for 12 years and it had grown by leaps and bounds out. You know, our staff count was up 20 X from when back when I started. And we were doing so well that eventually the CEO of the company and the senior partner I was a junior partner said we are not going to be renters. We want to be landlords. We want to do this ourselves. And I’m like, yes, that’s really an awesome idea. And he’s like, you’re going to build our new campus. And I’m like, all right, I haven’t even done, I haven’t even rehabbed my own house where you’re talking about. I don’t know anything about this. You can’t we can’t build anything from scratch that. No, no, no, no, no. Don’t worry about it. I know a lot about it. I’ll mentor you any day. I mean, he knew tons. And so, you know, basically that started this 12-month timeframe in 2003. It was nightmarish. What I went through it because we were running this company that was growing 30 percent year over year, which already is very hard to do. So eight to six-year on a company and then 6:00 PM to 2:00 AM we’re real estate guys planning and building a campus from scratch while running our company. And I have to tell you, I bitched and moaned and I complained in every way possible for 12 months. And I haven’t started I haven’t stopped thanking Paul for the last 16 years. I mean, it was such an incredible learning experience. I look at these indicators. They’ve been buying multi-family for ten years and they don’t know how to build one from scratch. Right. And I have that experience of actually knowing things like, you know, what is the air conditioning and cooling flow for a particular area where the fire door required requirements? I mean, there’s a million things in the background. People know that there are some rules, but they don’t know why these rules exist. And so I had this incredible fortune of starting my real estate journey with this. It’s almost like a master’s degree in real estate construction in real-time. You write lab only note. No, no theory. Right. And so that’s how I got started. And then it just sort of, you know, the ball was sort of rolled from there.

Aaron Norris [00:03:15] Was the building in California as well?

Neal Bawa [00:03:18] It was. Which meant that it was twice as hard to do. Right. So it was in Fremont, California, which is Silicon Valley. And, you know, there like just as you’re done with their book of rules, they’re like, oh, but we wrote this new book last week. Wait, wait. We’re going to send it to you now. Right. So yeah that’s California for you. So one of the biggest things I learned from that and by the way, we ended up building six campuses. Right? Right. That was kind of just the beginning because it was such an explosive success for our business to build a custom campus for our needs. It drove our business like real estate, usually doesn’t drive technology businesses. But in this case, it did. And so we ended up building or partially building six different campuses. As we were building those out, you know, I learned that it’s a terrible idea to be building anything in California. So while I love California, I live in California. Now, when I’m building, I’m building a 240 unit building, 117 unit. They’re all outside California because there’s so much easier to build and the risk is so much lower. So, yeah, those are going California. Just don’t like building here.

Aaron Norris [00:04:20] A lot of public builders would say the same thing. And we were talking to John Burns about that two sessions ago. So I don’t blame you, but commercial is how you got started. Did you… How long did it take you to make the switch?

Neal Bawa [00:04:33] Well, I did a weird switch, so I went commercial, then single family, then small multifamily, then very large multi-family. Right. So it was kind of four steps. And I’ll tell you, my story, actually that part of my story is interesting. So I love telling that so. So I see all this stuff that’s happening with this commercial building. I see the depreciation. I’m like, this is insane, man, that the benefits and real estate are almost like cheating. Right. This is the first time I’ve really been exposed to this. And guys like me, the big fat tech salary people. Right. We’re making a lot of money. But not keeping a lot of money, right? We’re giving 50 percent of it away to California, to the Feds. And so all of a sudden I start seeing the depreciation benefits are like, oh, this is awesome. Right. And so by the time I get to that point where I have the money to invest in it, it’s already late 2008. So the world’s falling apart. All sorts of bad things are happening. My family’s telling me that I’m the world’s greatest idiot for looking into real estate. I’m like, no, no, no, no, no, numbers, numbers. And they’re like, what numbers you? You’re an idiot. Don’t buy real estate. Right? So my family pretty much disavows me because they know that late in 2008, all of my evening time is spent doing research into real estate. Right. All like data stuff. And I keep throwing Excel spreadsheets at them and they keep throwing four-letter words at me. Right. So this is kind of goes on for a while. And eventually, they’re just they just stopped talking to me. And I’m like, look, I don’t think that these guys get the numbers. The numbers are like, incredibly powerful. So what I do is I’m like, I need to get numbers. And, you know, I don’t know if PropertyRadar existed back then, but I didn’t I couldn’t find the data. So I’m like, I’m going..

Aaron Norris [00:06:03] What were you looking for?

Neal Bawa [00:06:04] What I was looking for was a very specific piece of information. I heard that when real estate goes up, it goes up way far further than it should. Right. Bubble when it comes down. I’d also heard that it goes down too far. Right. It goes down beyond where it should. So it’s a natural sort of up and down thing. And so I was like, I need to find a piece of data, which is what I need to know every city in the US. What was the 2005 peak price? Or maybe 2006? And what is the 2008 December trough? Right. So what is that Delta? Because at delta shows me which cities in America are good to invest in. Now, there’s probably ten, fifteen better ways of doing that. But back then, I was just beginning. Right. I didn’t know what I didn’t know. But that was actually a pretty good way of investing in 2008. So what I do is I go to this Ukrainian hacker on Upwork.com. Right. Which is called something else back that I think was called Odesk or something like that.

Aaron Norris [00:06:56] You’re right.

Neal Bawa [00:06:57] Right. So I go to this guy and I’m basically like, there’s this website called Zillow, and I want you to basically spider their thirty-three hundred cities. And somewhere in there, there’s a graph which shows, you know, their peak and their trough. And I want you to basically get that data and put it in Excel. And I was like, you know, it’s probably gonna take this guy a month. Well, I got my lesson in the power of technology because twelve hours later, an Excel spreadsheet with thirty-three hundred cities arrived in my, you know, in my Excels. The first thing is I’d like God. Please don’t send the FBI to my door for, you know, crashing the Zillow website. And luckily, luckily, we didn’t crash it. Right. But he must have been on it like all night to get that much data out in a single day. So all I did was, I mean, this is where the power of data really started to to to, you know, amaze me. And it’s never stopped amazingly me. So I click on the button that basically shows the max fall right from 2005 to 2008 and ends up being a Californian city. Right. So I’ve never heard of this city. It’s one hundred and forty-four miles from my home in Northern California, Madera, California. So I Wikipedia it and it turns out that it’s 20 miles north of Fresno. Basically, a lot of the people that live there work in Fresno, so on and so forth. It’s got it’s an agricultural area with lots of farms around it. And I’m like, okay, Madera, California. So if this happens to be a Friday, so I jump into my car. It’s Saturday now. I’m driving a hundred forty-four miles. I show up in Madeira and I spend the entire day talking with people. And real estate agents in Madera are developers, brokers. And here’s what I learn. I learn that all of these homes that are being sold in Madera are all brand new. They all built in 2005, 2006 by Kaufman & Broad. Right. One of the big, you know, big dude manufacturer builders. And what these builders did is basically when these homes were ready, they had all these agricultural workers working around, they call them in. And did these no income show loans basically filled out? They sold 5000 of these homes. And now pretty much that entire section of the city was empty because all those workers by 2008 had figured out these are not going to go up, they’re going to go down. So they all left. Right. So like a section of Madera brand new that even the roads were like dark black. Right. There were all new. It was mostly empty, like 90 percent plus percent empty. So I go and see a developer and I say, how much does this home cost? I mean, it’s available to me. If I want to buy ten of them, I can buy them for ninety thousand dollars each. He says it costs me one hundred and eighty thousand dollars just to build it. So I’m like, but how can it then be selling for 90 thousand? He says they’re not worth ninety thousand, Neal. But you don’t understand the problem. There’s only one problem. There’s no tenants. If you had tenants right now, if you could figure that out, you would be very, very rich. Right. And I’m like, I that really stuck with me. So I’m like, I’m driving back a hundred forty-four miles and all the way. I’m like, how do I get people to come from twenty-two miles away. Right. Twenty-two miles away. Do they get all these people. There’s all these beautiful homes. So the next morning I call up a bank in midair and I tell him, you know, I want to buy ten of these properties, but I can’t. I’m going to put them in. Track. And then I need a timeline. I need time. I need 60 to 90 days. And the banks are, like, really friendly back then. You know, they’re in so much trouble. They’re like, oh, yeah, sure, sure. You know, put ten of them in contract for you and you can kind of walk around and do stuff. OK. I’m like, this is great. So then I drive the next Saturday to Fresno, which is 20 miles further than Madera. And I go there. I see an agent. I sit down with him and I say, I want to buy a property in Madera, but in Fresno. But I don’t want it to be new. I want it to be old like twenty, twenty-five years old. Not like falling apart old because I am buying it. But like, you know, not one of the newer properties you have in Fresno. So it’s like, no, no, no, we’ve got better deals on the newer side. No, no, no. Please don’t give me any new ones. I would reason I want an older property for a reason. So the guy says, OK, we go and buy this property, you know, in like three or four days it’s done. Hundred and ten thousand dollars. Old nineteen ninety-four property. So then I go back to the Ukrainian hacker. Remember the Ukrainian hacker that hacked Zillow for me? So I go back to him and said, I have this home that I now own in Fresno. I want you to give me like an astonishingly large number of tenant leads. And he’s like, why do you want so many kind of leads? You want you got one property? I’m like, no, no. I actually have ten more properties to sell. I need a huge number of leads. So the guy basically does all of his hacks. He goes to all these websites like show me the rent dot com Kosi and, you know, all these sites that we haven’t even heard of. And he uses all his hacks to basically put that one address in like fifty-five different ways. Right. So normally you can only put one address one way. But he figures out like here, if I had a semicolon, I can add the property again. If I, add like an asteric here I can add it again. And before I know it, I’m receiving like my email box is just filled with hundreds and hundreds of leads. So then I realize, there’s no way I can process these leads. There’s too many of them. So I go back to the Ukrainian guy and I say, you have any people that can get on the phone and process leads for me. Like, no, Ukrainians don’t speak English. Well, you know, but there’s this Filipino lady that we hire from time to time. She’s really good. So I go off to the Filipino lady again using upwork.com, and I hire her eight hours a day. We get her an American number. That is kind of a Madera number. And we tell her, hey, you’re going to basically process all these people. And she’s like, OK, what’s my pitch? Well, pitches this. Well, that Fresno one is leased out. Right. So sorry you were too late, but we have ten brand new homes. Beautiful. They’re not three bedroom, they’re four bedroom, and they’re four hundred dollars less. Right? And people are like, really? That’s awesome. Yes. But they’re twenty-two miles away in Madera. Oh no. I don’t want to go to Madera. I know I’m a Fresno person. So if somebody said no. Right. Our pitch was we would offer them a twenty-five dollar gift card to go just to Madera to check this home out. And, you know, no other obligations. And if they said no, we would then bump it up to fifty bucks. Right. And if they said, yes, we would immediately schedule an appointment and save our twenty-five bucks. So she does this all day long, calling all these hundreds and hundreds and hundreds of leads at this house. And Madera is getting a little bit of bait and switch, but I’m offering something much better. Right. So 30 days later, without me having purchased any of these properties that are all in contract. Right. All those people from… have I visited, all those Fresno people have basically gone there once they go there, they realize that nobody’s ever lived in these homes. They’re all brand new. They’re beautiful Kaufman & Broad, makes very good looking homes. And so I have 10 tenants. And on day one, I have an astonishing amount of cash flow because you’re buying these things for ninety thousand dollars. The tenants are paying you, you know, whatever, twelve hundred bucks. And at the end of it, I mean, I couldn’t believe that I’d actually pull this off. But I did. And I made the greatest mistake of my life right there. I listened to my loan broker. He said, you can only buy 10 homes. So I only bought 10. What he should have said is you can only get conventional loans on 10. This other guy over there will let you buy as many as you want. That one statement kept me from becoming like a mega-millionaire because I swear to God, I would have had a thousand of these things by now if I had known. But just 10. Right. And I still own like nine of those 10. And I went on and managed to, you know, get my mother-in-law to buy them in my name. And so I kind of did build it up beyond 10. And so I still owned most of these. And so that’s how I got into the single-family side of things. Right. So that’s the, how did that go backwards from commercial to the single-family part of the story.

Aaron Norris [00:14:38] Now, being data-driven to that keep you out of your emotions, even though your family was searching four letters words at you in 2008. It felt really scary. Is that how you stayed out of the emotional component?

Neal Bawa [00:14:50] I think that the data-driven side keeps, you know, keeps you sane. Because obviously, if my family, all these experienced people are telling me that I’m an idiot, it is going to affect me. Being data-driven doesn’t mean that I’m a robot. So I’m thinking maybe I’m wrong. But then when you look back at the data and you look at, OK, where people two years ago, three years ago, five years ago, that we’re buying all these homes compared to where I am today. The data was basically saying, your situation is you can’t lose. You may not win, but there’s no way to lose from this situation. Right. That there’s no way that you would if you’d rented these homes, you couldn’t lose. And so eventually, my family, of course, came around to it. They went out to Madera. They bought a bunch of homes. They now all on them. But in fact, it was interesting and it was definitely terrifying, you know, to kind of take that leap of faith and especially do it for Tannebaum.

Aaron Norris [00:15:42] And it’s very scary when family starts to listen to you and now all of a sudden you’re everybody’s favorite guy on the holidays.

Neal Bawa [00:15:48] Oh, yeah. I mean, a year later, they were all beating me up for not letting them in. You know, before they did. It’s like now things are too expensive. Neal, you should have gotten us in before.

Aaron Norris [00:15:57] Oh, brother. In me in 2009. Oh, yeah, that’s terrible. So let’s go there. So you went to residential and then you went into multifamily.

Neal Bawa [00:16:08] Yeah. And there’s an interesting story there. So what happened is, you know, I’m doing this stuff on data. And I really begin to understand that there’s not enough people dealing with data and real estate because, you know, being a technology, you’re used to like data sources being very clean and very available. And people are doing different things. You know, PropertyRadar was starting up and, you know, housing alerts was there. And some of these places were pretty expensive. What I. So I came up with this concept that, you know, I want to be like a wikipedia of data. I want to just give it away. I don’t want to have, like, a business model attached to it. I just want, you know, to give it away. And then that initial idea morphed. And so eventually I was like, I don’t wanna be the Wikipedia of the data. Because real estate data, because it’s too much work. I’m too lazy for that. So what I what I said is, what I want to do is I want to put together an investing toolkit, something that’s straightforward and simple, that makes it easy for investors to figure out where to invest. And I want to give that away. Right. And initially, it was just because back in 2008, 2009, I was very heavily influenced by Wikipedia and Craigslist, two models of basically, you know, giving stuff away. Right. Craigslist could have sold to eBay for two billion dollars. And they said, yeah, but, you know, you know, you can make everything paid. Everything’s free right now on Craigslist. So they didn’t then that influenced me. So I was like, I have to find a way to build like an easy toolkit. Right. And then start giving that away. So I start doing my research. And as you can imagine, I go back to the Ukrainian hacker and this time we basically start getting data set. So we start pulling data sets from the Department of Labor website. We’re pulling them from Zillow. And basically anybody that has open data, we’re just pulling it all together and creating this 3000 city dataset. And then what I start doing is I put it into statistical analysis software. I’m like, I’m going to just crank this and keep throwing things into it and seeing which things affect profit the most. Right. So it’s like I’m going to throw in population. Does that affect profit, population growth? Oh, yeah. There’s an effect. But how much does it affect it? Okay, I’m going to pull population out and I’m going to throw in job growth. How much of a spike in profits occurred there? Then I’m going to throw in crime. I’m going to throw in schools. I’m going to throw in home price growth. I’m going to throw in poverty levels. I’m going to throw in all these different things. And then I’m gonna figure out which ones of those matter the most. And then I’m going to take out the stuff that’s redundant, like schools matter. But if I take schools out and keep the rest of them in, does it still show me the same data? Does it should still show me the same good cities in the same neighborhoods. So I ended up taking some stuff out because the other stuff that was in there was already giving me the appropriate result. So I think this went on for a while and we basically started doing it. And while I was doing this right, somebody approached me because I was running this technology company was a technology school. I had large classrooms. They came in and said, we want to open a Meetup. And this is like 2010. Something like that. And Meetups were a brand new thing back then because a company had just opened up. And so they’re like, yeah, we want to run a real estate Meetup. And you have classrooms rights, you have Internet access, projectors. I’m like, come on in. You know, I’ll show up as well. So initially I show up to these six o’clock Meetups, which are one hundred and fifty feet from my office. Right. A very convenient and start learning. And then eventually one day, you know, I start talking about all this jambalaya that I’m doing with that with this statistic stuff. And I start talking about people there in the room are really interested. They’re like, why don’t you present on this? I’m like, no, no, no, I’m not a real estate guy. So they’re like, who cares? I mean, you’ve got something interesting go present on it. So, you know, next month they don’t find a speaker, which happens a lot with Meetup. So they basically a day before they call me and say, why don’t you just talk and, you know, just tell people about what you’re. People and I’m like, you know, four or five people are going to show up. But they had send it out with a description from me and like 50 people show up and they’re all like nerds like me, like total geeks, like a bunch of dorks in the room that are like, wow, this guy’s doing something interesting. So I tell them this, that the rules that I’ve come up with and what, and somebody in the room said, you know, you need to give this a name. So eventually I called it the Real Focus System. You know, five minutes of work and we call it this Real Focus System. They’re like, what do you want to do with it? You want to create a company? I’m like, no, I don’t want to create a company. I just want to give it away. And so, like, that’s great. So that goes well. And then somebody that was in the room realized that I was giving it away and called me on to, you know, his Meetup. So I went and taught at his Meetup in San Jose. And before I knew what people were calling me for conferences. And these days, of course, it’s podcasts. But, you know, back then it was conferences. And so eventually I gained some notoriety as like this data geek guy that goes around talking about data. But he does it in an interesting sort of way. So people like it and he points to cities and neighborhoods that are appropriate for real estate investments and others that are not. That was my focus. And so, I mean, it just sort of between 10th 2010 and ’13, this sort of kid just kept snowballing. And I started keeping a database of all the people that were coming to my Meetups in that database, kept building and building and building. And by the time 2012, 2013 came around and I really got into multifamily and, you know, from a professional perspective until then, this is all, you know, while I’m running my tech company. But I. But well, we sold our tech company in 2013. So I was like, OK, what’s next? Right.

Aaron Norris [00:21:35] Right.

Neal Bawa [00:21:35] I have this huge database of people that I’ve never done anything with. For years. People have been saying, we’d like to invest with you. I’m like, no, I’m a tech guy. I think you can invest with me. Right. And now it’s like maybe I should invite people in. So I start doing projects from the very beginning. Multi-family seemed more interesting to me than single-family. And when I did that, those people did want to invest with me. They’d like the geek approach of looking at cities and neighborhoods. And so that transition actually became fairly smooth. So one site we bought our first multifamily. It’s been a long time. Two hundred thirty-seven units. You know, things just got rolling. And now we’re about two thousand units in multifamily, about five hundred investors, about 270 million dollars. So now we’re adding asset classes and we’re adding industrial. We’re adding public storage. We’ve added student housing, looking to add senior housing at some point. So it all seemed really planned, but it was completely chaotic as it happened. So that’s the name of the next piece to it.

Aaron Norris [00:22:36] I’m just thinking about how helpful are you building the grant from the ground up commercial in the state of California? And then what a great transition. I mean, you are. That’s the hardest part; ground up. So getting in the multi-family now, were you building new multi-family or were you renovating?

Neal Bawa [00:22:53] I should have started with new multifamily construction, but I didn’t. I was I was afraid that because, I mean, some of these projects were 20 or 30 million dollars. So the first four that we did were not ground up. They were just value-add. We were buying old multi families and improving them. But the last five projects that we’ve done, three of them have been ground up multifamily construction. So eventually I ended up where, you know, where I started in a different sort of professional fashion. But, yeah, that’s where we ended up. And that Real Focus System sort of blew up to the point where one day somebody came in and said, you know, this thing is really powerful. But all this Meetup stuff, it only gets you fans in the San Francisco Bay Area. Sure. You get some through podcasts, but if you want this system to go national, you need a platform that’s really big. So we walk around asking people, you know, what’s a big platform if you want to give something away for free, like a system that allows you to figure out the best cities in the United States. And I think 30, 40 percent of the people came up with this website that gets 100 million hits a day called Udemy.com. Right. Take this course, make a video out of it, add some labs and stick it on you to me dot com and give it away for free. And I’m like, OK, that sounds like a good idea, right? Again, maybe if there was a podcast back then, maybe you are. That’s what I would have I would have done. But I want the Udemy route. And initially, I’m like, you know, if I get a thousand people a year, I’m gonna be really, really pleased. And now there’s right now there’s six thousand people taking the course. Right. And it became the most popular real estate course on udemy.com simply because it was always free and there was no pitched right at the end of the course, of course, there’s no tool kit, there’s no next step, there’s no if you do this, you will get X, Y and Z. That there it isn’t there. In fact, what’s funny, Aaron, every week I get one email at least saying so at the end of this you didn’t tell us what to buy. And I’m like. This was meant to be a gift. You got it. You don’t have to come back and talk to me about it. Udemy doesn’t even give me your email address. So I don’t know how to talk to you. Right. So it’s interesting how it became very popular. And the big thing that came out of it was that the national conference circuit then sort of accepted me. So I started teaching at conferences last year. We did about 18 conferences. This year will do more because they’re virtual. So there’s just more conferences this year.

Aaron Norris [00:25:23] Yeah, it gets a little crazy having to do all the conferences. And I Survey Real Estate at the Norris Group I was asking some of these people who were serving in leadership roles at the National Associations, and I think it was Pat Combs’ was her name. She said one year she gave up three hundred days of her life to travel or something like that when she was chair of the National Association of Realtors. So, yeah, if you want to be on tour a lot. But you’re saying Udemy, when was the last time? Are you continually updating the content?

Neal Bawa [00:25:52] I update it once in a year. So it needs a post-Covid update. So that hasn’t happened yet because the biggest thing with Covid is so. And then let me tell you a little bit about the course itself. And that’s that’s an easy way to answer your question. So what I discovered after all this massaging of data in this statistical software was the five things that matter at the city level were population growth. Job growth. Income growth. Home price growth and crime reduction. Right. So, once again, population growth, job growth, income growth, home price growth and crime reduction. Right? And one could say while their schools there, there’s poverty level. But what I found was if I was ending up with a mix of cities and then I would throw in more stuff and end up with the same mix of cities. Well, that would make the private product more complicated. And my goal was because it is free and always meant to be free. I want it to be simple. It’s like you should be able to pick some random city that you’ve never heard of, apply the system in less than 10 minutes and be able to say things like Fort Myers has really low population growth, but it’s you know, it’s got decent job growth. But five miles away, Cape Coral has phenomenal numbers, much better than, you know, Fort Myers. You should be able to say that while never having talked about Cape Coral or Fort Myers. So that 10-minute benchmark meant that I had to give up on being truly comprehensive. I didn’t have every single metric that helps job growth. But the key ones that started that, that were driving profits. The key one where those five and then over the years, people came back and said, your system is incomplete because this only counts at the city level. And all great cities have lots of crappy neighborhoods. So you need to basically design a second set that’s designed for neighborhoods. So then we went back and updated the Udemy course and built an entire new section that had five benchmarks for neighborhoods. Right. So so we did that to me, to be honest, the neighborhood section was more powerful was because you can really I mean, you can you know, you can go into a great city like Phoenix and a mile and a half from Phoenix is the county jail. I can tell you I wouldn’t be seen there after 5 PM I mean, that’s a really nasty area. So the the key thing was I was telling people here’s a bunch of map benchmarks that allows you to compare cities that you shouldn’t be investing in, like Detroit with cities where that you should be investing in like like, you know, a bunch of cities in Utah or bunch cities in Idaho. Right. But I’m not telling you where in that city to go. And so eventually it took a lot more work. But we what we managed to figure out five metrics for neighborhoods as well and others the same or different, that some of them are the same. So the the neighborhood metrics and our goal was basically cash flowing investments. So we weren’t trying to basically be the end-all of real estate. We’re trying to say, you know, by that time I had a pretty big audience and my audience was into cash flowing real estate. So instead of giving them a just a fixed numbers, I gave them ranges because, for example, I said the median household income in your neighborhood should be between $40k and $70k. OK, for you to invest in it. And they’re like, well, what happens if it’s higher than seventy thousand? Is that a bad thing? I said no. But once you go over seventy thousand dollars an income, that’s a B plus neighborhood. And because there’s so much appreciation and a B plus neighborhood, your cash flow is going to diminish down. Right. So if you want cash flowing neighborhood, that is your range at 70, sort of peters out beyond that point, you’ll have trouble making cash flow work. And if you’re an appreciation based investor, if you’re rich, you don’t mind sitting on it. Stay above 70. That’s fine. But the system also is showing people exactly how to figure out the 40, 50, 70 range of, you know, income for each neighborhood. How do you. Go and figure out this information for a neighborhood, right? All of that was part of the system. It was part of the course. So we did that then. We did poverty level. We found that any time in any neighborhood in the US, if the poverty level is above 20 percent, the delinquency spikes and the retention rate falls a lot. Right around 20 percent. So with the rule that we said was try to stay below 50 percent on the poverty level side. And you’ll see Long-stay times and you’ll see low delinquency. So delinquency seemed very tight, the poverty level, because if people are poor, they’ve only got this month’s money in the bank. This month’s rent. So anything happens, like the car breaks down, they don’t pay rent. Right? So you want to stay away from that. And so you don’t want to go into areas with high poverty level, even if the rent growth there is very high. So stuff like that was part of the neighborhood system and the neighborhood system really made us take off. I mean, it just people just absolutely adored what we were doing and they were coming back and giving us feedback. Some people went and corrected our system and came, and you made a mistake here, and we, we corrected that. Then we had to issue an update for student housing, because if you are if you have a neighborhood that student housing, all of our numbers were wrong. Why? Because students incomes are at zero. Right. So we were basically there were all these perfectly good neighborhoods that our system was saying are crap. Right. And obviously, our system was wrong and we had to basically come back and say students. Well, you know, here’s this place where you go and you check to see how many student, what percentage of the people living here are students. And you’ve got to adjust for that. Right. Otherwise, you’re just going to miss the boat on some of these really nice areas. So those sorts of things. But it was all, you know, community-driven, e-mail driven people kept sending e-mails. Now, if you go to you know, you to udemy.com, we have five hundred five star reviews. So I saw that yesterday, an astonishing number of reviews to getting people really enjoyed it. And so, yeah, it sort of that really helped me get into the multi-family side because people would go to you to udemy.com, take the course, and then they would basically ask the inevitable question, thank God. Which was so Neal, what are you doing in terms of investment? And by this time, I could actually say I am investing in real estate. Right. But it was no longer like the free stuff for tech, you know, that that had been happening. I actually had something to offer. And so I as I said, as I started telling people about projects, I started getting more and more investors. So it became a fairly large size.

Aaron Norris [00:32:21] So is. And so that’s clearly the genesis of Multifamily University.

Neal Bawa [00:32:26] Yes. Because people then eventually said, but you’re a multi-family guy and you have this system called a Real Focus System that really has nothing to do with multi-family. And I was like, no, this system works equally well for single-family and multi-family. But the truth is, it only looks at one aspect of multifamily. It doesn’t talk about asset management, doesn’t talk about the legalities of multifamily, doesn’t talk about like the 50 other things that you need to know about multifamily. All it tells you is where to buy multifamily. So it was very incomplete. Right. So we were like, OK, so let’s design a Web site called Multifamily University. And what we’ll do is we’ll take people that are like superstars in multi-family. They know 10 times as much as I do. And we’ll call them in and do like these deep dove long webinars, some of them two hours long, just teaching content. And these people are amazing that they’ve given it away. I have never paid a speaker a dime and speakers are not allowed to do pitches on our platform. So I’m not ever really fully sure what they’re getting out of it. Maybe it’s just branding. I don’t know. But they come in and they do these amazing events and we do about 40 to 50 webinars a year. And about seventy-five thousand people sign up for these webinars. Right. So it’s just it is crazy community and everyone’s giving feedback. Our Facebook group is about to hit 10,000 people. It’s phenomenal. I mean, yesterday, the day before yesterday, somebody posted a question and he received ninety-one responses to that question. Right. Probably 10 of them were even good. Right. But it was nice that the community does that now. So it’s not, Neal, that has to answer all these questions. There’s just so many people knowledgeable that are in there. So …

Aaron Norris [00:34:09] You know that’s not normal right. Like that is extremely difficult to build a community that will do that. So kudos to you.

Neal Bawa [00:34:14] Yeah. And I think here’s the weird thing I learned from that, Aaron. The best way to build a community, I think, is to start with everything except the goal of building a community. I think that some of the communities that haven’t been built from the very beginning, their goal was we are going to build a bunch of people together in one place. I felt like that wasn’t a good goal. I felt like a good goal was we’re going to find some really awesome stuff that nobody knows about and put it in this one place and make sure that people know about it. And I think that built a better community than you usually, you know, than you usually get.

Aaron Norris [00:34:50] Content first. You’ve always…

Neal Bawa [00:34:52] Yeah. It was a very content-driven approach and. We built that, kept building on it, Multifamily University, went beyond the concept of the Real Focus System, it just became one aspect of it. And then we started doing data reports. We started writing about areas in the US that people didn’t know about. Like, for example, we got into this concept of corridors, like I’m very fanatic about corridors. People talk about this city is great and that city is great. I don’t think that’s right. I think what really happens is at times in the US, certain corridors which are always along freeways become powerful. And of course, there’s some cities in there. So three years ago, when somebody I know named Bruce Norris started talking about Florida, I published and this was in twenty seventeen, you can Google it, an article called The Corridor of Opportunity. Right. Or Neil Bawa’s Quarter of Opportunity. And it defined a space that was one hundred and forty-four miles. And it started from above Orlando. So northeast of Orlando, running through Orlando along four, going through Lakeland, hitting Tampa, turning south, heading down to words, you know, Bradenton and a little bit further. And then a year later, I updated it to extend the corridor further from Bear Bradenton through Sarasota. Now ending in Cape Coral and Fort Myers. And then I then the final iteration of that quarter was I started calling it a web because it started to spread beyond the freeway to the villages and to other places. Like it basically started going north of Freeway four and south a freeway four and became a web. Right. And then we started we found a second corridor. It was in Utah from Logan to Springville, passing through Salt Lake City. And now my favorite corridor today is fifty-nine miles between Austin and San Antonio, passing through New Braunfels and San Marco. So we will start writing about this like geeky stuff. And we gathered this community of geeks. They’re like, oh, this is really great. And some other people like this is the most boring shit ever.

Aaron Norris [00:37:03] I am excited. I want to find out how to participate. This sounds amazing. No. You said corridor way. So is it… it’s like you’re reading off my notes. I haven’t even I have this long list of questions to think that we’re all over and it’s perfect. It’s exactly…

Neal Bawa [00:37:18] Sorry, I bounce all over.

Aaron Norris [00:37:20] It’s great. What makes a good city? What makes an excellent corridor? What triggers that. Aha. Moment for you?

Neal Bawa [00:37:27] Well, I think a lot of times it’s compression. So if you look at I say Lakeland might be a better opportunity than Orlando and Tampa because of compression. So the corridor is usually defined by two anchor cities. Right. So in this case, it’s Orlando in the east and it’s Tampa in the west. And then the corridor then starts to extend. So from Orlando, it’s now extending up north toward Jacksonville. Not quite all the way, but, you know, maybe another 40 or 50 miles and then from 10 by its extending downwards towards Cape Coral and Sarasota. What I find is there’s usually one city, well, two cities that are compressing. So San Antonio is only about 60 miles from Austin. And what we at what I’d learned was the San Francisco Bay Area sort of became this compression area and entire sections of freeway became cities like cities just got plopped in. Right. So Concord used to be a city and Freemont used to be a city. And then in between, there wasn’t much. And then cities like Dublin appear, cities like Danville sort of appeared over the last 20 or 25 years. So we realized that when you’ve got to anchor cities, the area in between gets filled in and that area is much more profitable. Right. Than the cities themselves. So, you know, and then there’s the secondary concept. Sometimes you don’t get to cities in a corridor. Sometimes it’s a primary that is becoming so powerful and creating so much profit for real estate that it drives its growth down in the direction of some freeway. So here are some examples. Right. So Denver is really driving the growth of Fort Collins and Colorado Springs. Right. It’s the driver. The San Francisco Bay Area is responsible for Sacramento’s growth. Right. Right. You know, Tacoma benefits from Seattle, Olympia benefits from Tacoma. So what we started realizing is that what was happening as a city was actually driving the growth of all the other cities around it. And the bigger opportunity was always in the smaller cities. It wasn’t in the large ones, because by the time you heard about the large ones, 50 million other people had to. So you were usually late. So it made sense to figure out where does the growth now flowing like today? I don’t feel like the right place to go to is Phoenix. I think it’s Tucson because so much money has been made in Phoenix in the last four or five years that those people are like I you know, I bought something for a hundred thousand, sold it for two hundred thousand, bought it for $200,000, sold it for $400,000. I don’t think it’s going to double again. Where should I take my money and go? I live in Phoenix. Well, the answer is I should go to Tucson and buy it for $200,000. Hopefully it’ll become $400,000 again. Right? So I think that if you use data to figure out these compression cities, you start seeing patterns that are really amazing and you can get really crazy returns. Absolutely nuts sort of returns.

Aaron Norris [00:40:15] Now, that really works when you’re in a sort of like a bottom of the market. Do you have any concerned? And this is some of the research that The Norris Group, when I was there full time, did a lot of. So as an example, in California, you had a lot of people. Affordability became an issue on along the coast. So they would end up in the Inland Empire, in the Bay Area, they went to Sacramento because they got priced out. But when the market returned, those were typically the first to give back and they were the last ones to come back. Right. Any concern there?

Neal Bawa [00:40:46] To a lesser extent than five years ago. So. One of the I’m going to say something that for a moment I’m going to apologize and say, look, what I’m about to say is going to sound incredibly heartless to those that have lost lives in the last four months. One hundred thirty-five thousand people have died because of Covid. But it is my belief that over the next 10 to 20 years, people will see Covid to be a phenomenally beneficial defining event in the history of our country. Because what had really happened to America and to most countries in the world was that growth worldwide is slowing because of our ridiculously bad use of real estate ridiculously bad. We’ve crammed, you know, 50 percent of the world’s population into two percent of the landmass. We say that we don’t have space, which is nonsensical. Ever see a map of the of the US at night from space? Only about three percent of it is lit. Clearly, we have all the land in the world, but the problem was the jobs. The problem was the jobs were concentrated, especially the well-paying jobs were concentrated in certain areas. And so you had basically this one-hour free trade radius around that. And that was the bubble of the US. That’s ridiculously, crazily inefficient. Right. And nobody’s really addressed that until Covid all of a sudden addressed it. And what Covid did and what will be people will write books about this in their time to come is covered, took 20 to 30 years of growth in virtualization and compressed it into three months. Right. Right. And it did the same thing for e-commerce. So it just, you know, e-commerce is up 77 percent compared to last year, usually grows about 10 percent a year. So we got seven years of e-commerce growth in the last four, four months, seven years. Right. This just absolutely astonishing. Absolutely mind-blowing. So right there, by the way, if you understand, what are all the things that need e-commerce and what does e-commerce need? Like logistics, warehousing. Right. So you just in four months got 77 percent of growth? Well, we didn’t create new warehouses. We didn’t create new logistics. So guess what’s going to happen in the next five years, you’re going to have a supply-demand crunch because retail meltdown. That money is going somewhere so well, it has to go to bear housing because warehousing is one third the price per square foot. And that’s what people need today. Right. Warehousing to deal with this explosion in e-commerce. Now, in the same way, you apply that comment that Covid is creating a liberalization of the work anywhere, live anywhere paradigm. We’ve been talking about people leaving the San Francisco Bay Area. You know, Bruce has been talking about people are leaving and going to Florida. Yes, but how many? Hundreds of thousands. Yes. But what? What I believe is about to happen is that hundreds of thousands is now going to become millions. And when it becomes the millions, it actually changes real estate. It changes the way that we’ve been doing real estate in this country because it then forces CEOs to do what Facebook and Twitter did, which is if you don’t want to come back into office after Covid is over. You don’t have to. Right. And I use the word be forced lightly, Aaron, because what Covid did, which was its greatest gift to humanity, is it forced 10, 20 million CEOs to get to learn Zoom to get webcams, to get high-speed Internet at home, clean up the background and do virtual backgrounds like this one. Basically, it forced them to do everything that was needed because the CEOs were the ones that were preventing this work from home model. They were the ones that were big. You know, there were a few that were good at it. So it’s not everybody. But in general, if you look at a million CEOs, they were the problem. And we took 20 years of that mindset shift in the minds of CEOs and be forced into three months. So in my mind, going back to Europe, this is huge. And five years from now, I guarantee people will talk about this, that Colvert did this. Kovik resulted in this. Sorry that I’ve moved this Mike back here. And but today, what this means is that I am not as worried about secondary markets in the US crashing and burning because job diversification is now a reality. And it’s it’s actually going to accelerate in the next five years. And if job diversity accelerates, then the smaller cities don’t get hurt as much in the next recession as they would have in the past. So this is a paradigm shift, right? I do not believe that this thing where a recession happens and jobs come back to the center is going to happen. Yeah. In this recession or the next one. We actually haven’t seen job losses in some of these smaller cities in the last four months.

Aaron Norris [00:45:46] So if you were a city in a secondary market. You might be advertising aggressively to primary markets, trying to get people out your way.

Neal Bawa [00:45:57] You might not even have to do that. I think people are doing it anyway. So there’s videos. Watch them on the Internet. New York has an eighty-five percent growth in apartment inventory in the last four months. Eighty-five percent jump in inventory. That’s catastrophic. Rents they are now the average apartment owner is offering two months free. That’s the norm. Right. So that market is going to suffer because there’s a huge number of people that are like all of a sudden free to leave. And yes, we know that seven out of ten of these people will come back. Maybe it’s eight out of 10. But you know that two out of 10 for such a large number is also an extraordinary number. And that creates a massive amount of change. It basically pivots the situation towards smaller cities. And I think that’s a multi-decade pivot. That is the key lesson to learn from Covid.

Aaron Norris [00:46:51] Very interesting. So in this city, the metrics you gave me, population growth, job income, home prices. And crime reduction. I’m thinking about how that relates to how can you tell what is a good city? And you sort of built it into that. So I was going to one of my questions was, what makes a great city? Is it a smart city? Is it a city investing in really fast Internet? Is it somebody with a great entertainment mix? But I guess if you’re looking at these things, they’re doing something right.

Neal Bawa [00:47:21] Usually what happens is if you do those five metrics right, and there’s a bunch of cities that do really well on those metrics. You know, Salt Lake City, for example, Provo, Utah, does really well. Orlando does really well, or at least it did until about four months ago. But when you when you see those metrics, people think culture is created first. And then because culture is created, the jobs come. That is a very popular myth. I think it’s nonsense. What I found is jobs are created and that creates culture. So you look at Austin, Michael Dell built, you know, started Dell there in nineteen ninety-four and that built, you know, Austin story. And then five or 10 years after that they started doing that big show south, southwest, south by Southwest….

Aaron Norris [00:48:08] SXSW Conference, yeah.

Neal Bawa [00:48:08] Right. And that started to build that show, started to build Austin’s culture. But that happened 10 years after the jobs came in. Now, if you take that example and apply it to a bunch of other cities, you’ll start to see that their culture develops as they go. Silicon Slopes, I mean, the astonishing culture that Utah and Provo have was not there. I mean, a lot of this culture wasn’t there 10 years ago. And a lot of the jobs moved because they started Adobe started to move jobs from the San Francisco Bay Area to the Silicon Slopes because they realized that their universities are phenomenal and they’re, you know, one-fifth of the cost of our universities here. And so one company, I think Novell started that move. And then it was followed by Adobe and now basically just everybody. Right. So Facebook, Amazon, and Google all open billion-dollar locations there in the last six months. So I think it is not culture that that makes a great city. It’s these fundamentals that make a great city. And then the culture grows. It automatically grows and some cities do it better and some don’t do it as well. And I think, for example, Austin now has developed a really cool culture and so is Tucson. Tucson has a very artsy scene.

Aaron Norris [00:49:18] Now, I have to go back and see when Austin got weird.

Neal Bawa [00:49:22] Yeah, that’s right. I tell people Austin is a cheaper city in California and they look at me for a second and then they’re like, oh. Oh, yeah, right. It’s like, yeah, they think of it. I mean, because they’re like, no, it’s the most expensive city in Texas. Like, no, it’s not in Texas. It’s in California. It’s really cheap. Right. And you look at it that way and people are like people get it. It’s like, so Austin has room to grow. Yes. It has decades to grow because it’s competing with California.

Aaron Norris [00:49:49] My sister just moved there. Yeah. I totally understand. I was there for the first time last year. I was by a hotel where they had the fruit bats under the bridge is very strange after living in New York for seven years. I did a stint in Minneapolis. I spent a lot of time in Chicago. I like big cities. It’s gonna be interesting to see the winners and the losers. So there’s no there’s nothing that you’re looking at like, oh, hey, they’re talking about a mass transit system and a train that’s eventually going to reach there.

Neal Bawa [00:50:17] I used to do that. I’ve stopped doing it because to be honest, what I found was when I came up with a list of powerful cities, especially the post cities, every one of them was doing those things. Like I mean, you look at Salt Lake, they’ve just filled finished building a phenomenal train system. They’re doubling the size of their airport. They’re building an entire inland port that is larger than the size of Manhattan right now. That’s one example. But if I was to take like ten of my favorite cities and I’m probably not investing in six out of these ten, I just love their demographics. They’re. All doing great things. So the great things didn’t lead to cities doing well. Cities doing well led to great things, right. And the opposite is also true. So one of my all-time favorite cities in America is Chicago. Right. Phenomenal city. One of the great cities of the world. Right. Not just of the U.S., but I tell people that it’s a horrible thing to be investing in Chicago right now. And they basically say why? And my answer is that great cities build great works in Chicago seems to be consistently failing at building new great things. And the second thing is they’ve managed to get themselves into a situation. And there’s a little bit of jest in this. But but but get this. And this was pre-Covid, right? Pre-Covid. I said Chicago and Cook County, they have three choices. Bankruptcy in two years. Bankruptcy in three years. And bankruptcy in four years. Those are their three choices. Right. When you have only those three choices and nothing else is possible. Why would I want to go and invest in these great cities? I’m going to wait until that bankruptcy happens. Stockton cleaned up its act. Orange County cleaned up its act. Chicago being one of the great cities of the world will clean up its act. I’m just going to wait until the bankruptcy before I add Chicago to my list, cause today it’s horrible. And just in the last four months of Covid, Chicago and used to have a D grade on these sites that rank cities and their stability. It’s gone from D to F. They’ve lost two billion dollars in four months. And now we’re at the point where enough within a few, I think two quarters or three quarters, they won’t be able to pay interest, just interest on their loans. So that has to be a full stop. If you cannot pay interest on your loans, you can only do one thing. You can create a Ponzi scheme and get more money so that you can pay the interest and now you have new interest. So you have to get even more money. You know how that ends, right? I mean, that’s where it is. Chicago is months away from Ponzi scheme, right?

Aaron Norris [00:52:55] Well, let’s talk about Covid-19 and asset class. Now, we’ve talked a lot about cities and selecting neighborhoods. How do you go about selecting, well, first an asset class and then we’ll go to Covid-19 and maybe there’s a little bit of a mix. But you are diversifying your mix. So how do you go about asset class in those great cities?

Neal Bawa [00:53:14] So the first thing I look at is what asset classes are benefiting, right? What’s happened? Right. And I’ve always believed in self public storage. But when I looked at public storage in the last four months, it hasn’t done well. So I’m basically saying the data doesn’t suggest that public storage is doing well because all that new construction of public storage, some of which was not documented because it was mom and pop, is basically pulling down rents. I looked at multifamily, multifamily did the family did pretty well in the last four months. But I’m a little hesitant because it seems to me that multi-family received a very large boost from the unemployment benefits. So I want to see how multifamily does for two months after that the benefits expire. Right? They’re talking about bringing them back in a much tinier fashion. You know, we might get 200 dollars a week, but that’s still too low of a number for people to pay rent. So I want to see how multi-family does. And as I’m looking at different asset classes, I’m looking at senior housing. I’m not so sure, you know, would you if you’re if your grandma was in one of these big-box facilities with 200 other agent people, would you leave her there or would you just move her to your basement? So to me, until a vaccine, a strong vaccine, not a weak vaccine, but a strong one is found, I think senior housing is going to have issues. I think it’s a good asset class, but it’s going to have issues. Right. Student housing. I think I was wrong on that. I predicted student housing doom back in April. I said students are not going to come back. Turned out I was wrong. The enrollment nationwide for student housing for fall is as strong today as it was a year ago. And the biggest reason that we’ve now learned is students are fed up with mom and dad. Mom and dad won them out and they want to get out of mom and dad’s house. Right. So that that four months of basically just being trapped in the house with mom and dad means that students have really wanted to go back to the university. So that was I was wrong on that one. I think soon housing might do well. But I think the biggest one is industrial. I keep saying this. You know, e-commerce, 10 year, 10 percent year over year is normal growth. Seventy-seven percent means that we’ve gotten seven and a half years of growth in four months. That growth is going to create supply shortages. We need a billion square feet of industrial in this country. We have to because keep in mind, we’re about to lose at least 500 square feet of 500 million square feet of retail. Right. This is a swamp. It’s not a net new gain. It’s a swamp. Money goes from one place to another place. Right. Retail is going to see an absolute meltdown. I don’t think hotels are going to be as bad as retail.

Aaron Norris [00:55:55] Yeah, I can see that. I know John Burns was on the show a couple of weeks ago, and we’re talking about mall owners. And Amazon has clearly been targeting malls are in perfect placed positions really well located in cities. But I don’t want our local mall to turn into an Amazon facility. So asking about mixing up the inventory, senior housing, apartments, more entertainment. And then it just so happens here in Riverside, in Moreno Valley, a neighboring city. They’ve been talking about the World Logistics Center. Highly controversial, very political. And I’m really concerned about the jobs that, everybody likes to promote the jobs. But I know I mean, Amazon has been investing in robotics for years. I am obsessed with robotics channels and I see industrial how tall they are. And I can see how far the product goes. But in the corner, there’s this one picture of an Amazon warehouse where floor-to-ceiling, it looks like five stories tall. Do you think because of robotics that we’re gonna need as much industrial because robotics will fill the gap and be able to help us with that problem of they’ll be able to fully utilize the entire aerospace and industrial?

Neal Bawa [00:57:00] I think robotics is the greatest threat to our economy in the short run. I mean, it is incredibly dangerous. But if you think about it, I’m more bullish on industrial because of robotics. Think about it. Robotics give you incredible salary advantages. Now you have these thousands of robots that are running around two million square foot warehouses that are mostly empty right now. It isn’t my job to provide jobs for my, you know, my citizens. I am not a politician. Right. And I don’t lead a city. It’s my job to provide returns for my investors. So from a socio social perspective, the rise of robotics is terrible for people. Right. You can now have a two million square foot facility with only one hundred workers where 20 years ago there’d be 5,000 people working there. Right. I get that. But, Aaron, why is that bad for industrial? It’s good for industrial. Because what we’re doing is we’re swapping space for people. And people, salaries are always more expensive than space on a per square foot basis. If you take five thousand people and cut it down to two hundred, that’s forty-eight hundred persons worth of saving is massive compared to the one time investments and the robots. So the robots are here. They’re here to stay. And it accelerates from here on. That’s why I think industrial is a very powerful story. Does it have a colossal bad impact on our employment numbers in the US? Yeah, this is just the beginning. Remember, Covid also accelerated e-commerce, which means it accelerates robotics, it accelerates all of the stuff that’s happening there and makes things a lot worse, actually. So there’s going to be a lot of unemployment issues related to that.

Aaron Norris [00:58:48] Are there any other Covid trends that you see coming out in either residential or commercial.

Neal Bawa [00:58:54] Yeah. One of the trends that I see is people are not just going to move from places like New York and Los Angeles to places like Phoenix or Salt Lake City. That’s gonna happen. But people are also going to move back to the suburbs. If you had to go into the office four times a week, you wanted to be 30 miles from work. But if you had now I have to go back to the office once a week or twice a week. You’re going to be in a 50 or a 60-mile radius. So we had this movement back in the 2005, 2012 timeframe where people were beginning to go urban again and then starting to 2016. It started to go the other way where people were beginning to go suburban again. We started to see vacancies falling both in suburban multifamily and also in suburban office. And today’s suburban office has the same vacancy as Central business district. Downtown office. Right. So things have adjusted to the point where it’s come a long way. There was a huge gap between the two. And it’s now the same. Why? I’m not sure if people are falling jobs or employers said, you know, I don’t want to pay four dollars a square foot. I’m going to go pay a dollar twenty in a flex industrial building in a suburb that allows me to open a location. Right. So maybe they went first and then people followed them. Or maybe people said, we’re going to, we can’t afford the central business district, you know, home. So we’re gonna go out there again. And then the job sort of followed. But whatever happened, it happened. And so in 2020 and February before Covid, we were already seeing this push back to suburbanization. And then covered just massively, massively accelerated the suburbanization.

Aaron Norris [01:00:32] Interesting. OK. Opportunity zones. I know that’s something that you’ve talked about are still excited about them. Any impacts of Covid?

Neal Bawa [01:00:42] I think I’m more cautious than I was in February. And. And the reason for that is the premise of opportunity zones was that government is going to give you phenomenal tax benefits so that you and a bunch of other investors highlight you and a bunch of other investors are together, are going to put lots of money into opportunity zones. And because you put money in and they put money in, there was an all ships rising effect and lots of money was made. The area went up in value. And everyone was happy and everyone made profits. Right. Nobody really talks about what happens if that premise wasn’t true. And you were the only one that ended up investing in that opportunity zone and other people invested in other opportunity zones, not yours. Right. Well, in that case, you built a class A asset in a Class C, distressed area with low incomes and no population growth. Right. Well, forget about the tax benefit. You are at risk for your principal.

Aaron Norris [01:01:37] Right.

Neal Bawa [01:01:38] So there’s both of these ways of looking at this. So I’m very cautious about opportunity zones because opportunity zones that really needed to, it’s a good idea. But to grow, it needed fertile ground. It needed the economy to be strong in 2019. And it was in 2020. It wasn’t 2021. It’s not going to be and maybe not even 2022. So I think there’s gonna be some crash and burn stories that are going to come out of that area. But at the same time I think that there are going to be certain opportunity zones where it’s going to keep going. I just think that the outlook is not as bright as it was four months.

Aaron Norris [01:02:14] It was very cloudy going into opportunity zones. I didn’t see cities marketing the two different. You could be a business in an opportunity zone and you can be a developer. I didn’t see any cities doing a really good job communicating that, at least here in California. They tried. They started the websites. Whoever was leading the charge disappeared in 2019 and worked for the federal government. And it just sort of fell apart and it got quiet. So it’ll be interesting to see how it pans out. And you bring up a good point. When people have raised money in an opportunity zone, you have a lot of people in bed together for 10 years. A lot can happen in 10 years, though. Not all of it good.

Neal Bawa [01:02:51] Yeah, I feel like the developers, there’s too many developers that people are giving money to that have never held assets. And so one of the things when people ask me, who should I give money to an opportunity zones? Neal, you only have one project, it’s been years. It’s been funded. You don’t intend doing any others. My advice was, make sure you only give money to developers that by their nature, hold assets because ten years is two recessions, maybe three. If you give money to a developer and that developer has basically gets fed up with the property they’re going to sell. Now, not only do you lose your profits, you also lose your tax benefits. Right. So it’s a double whammy for you. So make sure you’re giving your money to people that have asset management companies. They have employees managing assets because 70 percent of developers don’t manage anything. They feel good enough. They feel stuff and they sell stuff. And often they’re there. So, you know, so much of a hurry, they don’t even feel it. They give up that money to somebody else. They just basically sell empty buildings as soon as they’re done with them. Right. And which always strikes me as stupid, because if you just filled it up, you’d make a lot more money. But then their whole model is, no, I’m done with this. I don’t want anything to do with it. Somebody take me off, take it on my hands, go fill it yourself and I’ll give you that that extra delta for it. When a developer thinks like that. To be in bed with them for 10 years, with you going in with one of the biggest recessions of all time. Doesn’t sound the best opportunity out there.

Aaron Norris [01:04:21] No, it doesn’t. And I was just thinking about all the taxes that can change. The cities trying to plug the gaps. It could be a messy decade.

Neal Bawa [01:04:29] It could be. I mean, and one of the key things, Aaron, is and people say, you know, I was on the Realty Mogul podcast and Jillian Helman, Realty Mogul CEO, asked me, you know, what keeps you up at night, Neal? And I said, you know, so far with Covid, things are being OK. And, you know, the government response was very, very strong on the fiscal side. Very strong. And so it’s been OK. What keeps me up at night is helping a world-changing black swan event like this occur and a domino not fall. So Gillian says, what do you mean by domino? So I said, we have all these deadbeat countries that have been in deep trouble for a long time. Japan, Italy, Greece, we have deadbeat economies in the US that are in trouble. Parts of New Jersey, Cook County in Chicago, we’ve all these places that were one domino away from just falling apart. Right. And then this happens. Right. They were already in deep stuff. So in my mind. What hasn’t happened yet, but is a certainty to happen, is that a big domino falls. People are like, yeah, but Greece went bankrupt. The world economy didn’t stop. Greece isn’t in, Greece is a fraction of one percent. What if Italy goes bankrupt? Italy is more than one percent of the world economy. The shockwaves would be colossal. Cook County is a $500 billion dollar economy. The economy of Greater Chicago is bigger than most countries in the world. So to me, this is not like Stockton or Orange County just declaring bankruptcy. Those are localized events. This is something that shakes an entire country to its core. And if it happens with Italy, it’s going to shake the Eurozone to its core. So to me, those dominoes are ahead of us. They cannot possibly have happened yet. But in the next six months, I think a major domino falls. Black Swan on top of a black swan. Yes. To me, there’s a secondary Black Swan that’s going to be caused by this primary black swan. And you can’t really call Cook County a black swan, right? I mean, there’s 500 articles written about the fact that their options are basically about when they’re going to declare bankruptcy and how to do that legally, because unfortunately, they have issues with how to declare bankruptcy. Right. But at some point, it just cannot happen anymore. And I mean, even economies like California, Aaron, I mean, the deficits that were piling up month over month are just staggering. It’s decades of deficits that were piling up in months. So there’s major challenges to deal with here. But I think major challenges mean major opportunity. I mean, right now we should be doing, you know, looking at buying, you know, foreclosures if foreclosures don’t exist. Maybe we should be doing these options, all that stuff that worked back in 2008. It’s going to start working in about five to six months. So there’s also a lot of opportunity there.

Aaron Norris [01:07:22] All right. Well, to round out because we’ve hit the hour mark. What do you like to follow? I’m just curious, what do you read your fate? A favorite data-driven sources. Where do you go to?

Neal Bawa [01:07:32] Well, on the macroeconomic side, I like to read John Mauldin. I think he’s he’s phenomenal. His newsletter that comes in every week is just an incredible place to go. There’s Real Vision TV. Those guys are pretty strong as well. So that’s I like to read the macro because it affects everything that we do on the real estate side. Obviously, I read everything that your your your dad has written. You know, that’s kind of he’s my go-to guy on the data side. And then I follow a guy named, I wish he kind of was more a little more flashy as names Engel Windsor. And he runs local market monitor. And Engel has now won the Crystal Ball Forecasting Award three years in a row. So we’re casting local market monitors very strong. So he just he’s not flamboyant enough, you know? He needs some lessons from Elon Musk. And he needs a Twitter account.

Aaron Norris [01:08:25] There you go. OK. Well, if people want to get in contact with you, how am I. How should they go about doing that?

Neal Bawa [01:08:31] I think the best way this two ways. They’re both symbols. First one is it is my extreme good luck and bad luck to be the only Neal Bawa on the worldwide Internet. So if you’re typing Neal BAWA, the first like two hundred articles are all about me. So if someone’s flaming me, you’re gonna find it very quickly. And then the second way is Multifamily University, which is multifamilyu.com. That’s multi-family by the letter you dot com. We do 40 plus webinars. You can like him. You’re going to like them. They’re different kinds. We just did one where we talked about how the real estate market in the last 10 years is being entirely driven by the banking system, not by fundamentals, but by the banking system and what it does. So that was a very interesting webinar. We got lots of kudos out of that. We do these kinds of crazy deep-dive things. So check it out. Multifamilyu.com.

Aaron Norris [01:09:18] I really appreciate your time today. This has been really fun. 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 that joined the community. And you’ll be forwarded to our community where you can even ask questions for upcoming guests, ask questions of current guests. We monitor there and we’d love to meet with you. Please don’t forget to like favorite subscribe and share on any of your favorite platforms and helps us out a great deal. Thanks for listening and we’ll see you next week.

The post The Data Driven Real Estate Podcast #6 – Multifamily Housing Investing and Trends with Neal Bawa appeared first on PropertyRadar.

Have questions or feedback? Each show is posted on the Data Driven Real Estate Podcast #5 in our community. Catch pre-show research and continue the dialogue online after the show.

Connect, subscribe and like on: YouTube, iTunes, Spotify, Stitcher, TuneIn, Google Podcast

Show Topics

• 01:05 How Tim Herriage was introduced to real estate
• 03:03 The real estate investing book that launched his career
• 08:18 How long has Homevestors and the We Buy Ugly Houses brand been around
• 08:57 How the we-buy homes franchise companies work and what to expect
• 10:50 For the We Buy Houses Franchises, do you own an area?
• 11:23 We Buy Houses Companies: franchise vs. advertising costs
• 11:52 The benefit of leveraging advertising dollars and experience of We Buy Houses franchises
• 14:19 The benefits of separate ad councils and making hyperlocal marketing decisions
• 15:12 Owning a territory for We Buy Houses vs commitment to advertising in the territory
• 16:15 The importance of learning about conversions and what We Buy Homes franchisees learn about mailers, billboards, and other forms of marketing 18:47 That one time a creative mailer to landlords had the cops called
• 19:38 The one kind of real estate investor the We Buy Houses brand might not work for
• 22:44 Why aren’t Homevestors and ibuyer brand like Opendoor best friends?
• 25:14 The genesis of B2R finance and Wall Street hard money at Blackrock
• 26:34 The issues Wall Street had understanding and working with Main Street investors
• 30:00 the biggest mistake Wall Street hard money made early on which led to financing less real estate investors? Hint: mission creep!
• 32:33 Will Wall Street hard money kill off Main Street hard money lenders?
• 33:22 Why Main Street hard money always has a place
• 34:39 The one thing Main Street hard money lenders should be focused on to succeed
• 35:18 Key features and services allowing local hard money companies to charge more
• 37:14 Where the first company to do property-backed, single borrower securitization
• 37:39 The journey to getting securitized pools of hard money loans was not easy for this reason
• 39:00 Wall Street didn’t event know that NARPM existed!
• 39:59 Did Blackstone and Wall Street real estate buyers ditch buying at the trustee sales?
• 42:23 How Invitation Homes got started
• 43:39 What changed for trustee sale buyers in 2013 and why the trustee sale buying business is so brutal
• 44:06 A new business model shaking up the hard money loan game
• 44:48 Who is holding the bag of hard money loan pools fail?
• 47:14 Has Covid impacted rentals? What might change that concerns Tim?
• 49:44 Are California investors moving to Texas?
• 51:52 Why Tim decided to slow down
• 52:33 The number one source for real estate deals in Texas in 2020
• 55:00 The call average response rate and conversion rates for real estate investor mailers
• 56:26 SEO strategy for We Buy Houses pages for real estate investors
• 58:00 SEO vs SEM for real estate investors and how to improve
• 58:39 The importance of defining your audience as a real estate investor and one of the worst mistakes investors make
• 59:29 An easy way to get better at identifying real estate investing opportunities in your local market
• 1:01:47 The number one data point real estate investors should be focused on right now that will be profitable for the next few years
• 1:02:19 The one urban trend real estate investors should be watching in 2020
• 1:03:00 Trends Covid-19 is having on the real estate market and features consumers are wanting

In Data Driven Real Estate Podcast #4, John Burns mentioned the Single-Family Rental Index. John Burns Real Estate Consulting is looking for real estate investors with at least five properties in an MSA. In exchange for a survey, you get insights into that MSA. Please see their JBREC Rental Survey Information and how to get involved.

Show Transcript

Aaron Norris [00:00:02] Hey, welcome, everybody, to the Data Driven Real Estate podcast, the podcast for real estate professionals dedicated to driving business success using data. I’m your host Aaron Norris. And with us today, we’ve got Tim Herriage. For nearly two decades, Tim has been on the leading edge of real estate all over the investor space, actually. This includes being the founder of 2020 REI Group, founder of B2R Finance, a Blackstone Company, founder of the REI Expo, where I met Tim, and a franchisee and development agent for Homevestors of America. So we get to talk a lot about a lot of different stuff today. Through his ownership in various companies, Tim has aggressively invested in the single-family housing space, primarily in northern Texas. Tim has completed over one billion in real estate investment transactions, including acquisitions of more than thirteen hundred houses. So hey Tim. Welcome to the show. Am I doing here? I am so good. I’ve always been impressed with the breadth of your experience in the industry and it started with REI Expo’s how I met you. But let’s go back way further. How did you even get into real estate?

Tim Herriage [00:01:05] Well, my grandmother would have told you I tripped into the business. But in all honesty, when I got out of the Marine Corps in 2001, I was looking for a job. And I posted my resume on a Web site called Military Hired Dot Com. And another former Marine actually hired me as his project manager. So I had a little bit of construction experience. I had a lot of experience managing people in combat, not really construction. But, hey, you know, sometimes there’s no difference. And that’s how I am. I mean, yeah. And that’s how I got started. The business I started out managing the projects, the remodel projects, and then just slowly morphed into acquisitions and then went out on my own.

Aaron Norris [00:01:49] So you didn’t even have any background with construction or no family and real estate. You just you really did trip and do it.

Tim Herriage [00:01:56] No, no, no, I, I didn’t finish the quote from my grandmother. She said I tripped into it, but I cut my teeth on it. So my grandfather was a real estate broker. My dad’s a real estate broker. My mom’s real estate broker. My wife’s a real estate broker. Real estate is very much a family.

Aaron Norris [00:02:16] It was in your blood.

Tim Herriage [00:02:17] But investing wasn’t there. There were no investors in the business. So were the family. You know, the glorious story of why I went to the Marine Corps wasn’t. Post 9/11, it was in some need to serve the country. It was because my family had no money to send me to a school and I had bad grades. So the Marine Corps, they and they did not discriminate against either of those issues. So they were an obvious choice.

Aaron Norris [00:02:45] Fair enough. I love hearing everybody’s path into the business. So. So that’s where you got your start. And let’s talk about how it evolved. I mean, you’ve been involved in so many things then over the last decade and a half or so. How did it transform?

Tim Herriage [00:03:03] I think it all got started. Three parts. One, when I got to the Marine Corps, my gunnery sergeant, who was the guy kind of directly in charge me, gave me Rich Dad Poor Dad the book. And it may have been the second book I ever read. Maybe third. I’m not sure. I didn’t read much for that book. Just kind of spoke to me because I wanted to be rich and I didn’t have a rich dad. And here was this, you know, Rich Dad Poor Dad thing. So that book kind of got me interested sitting at home late at night. I bought a Carleton’s sheets course, never opened this book. Pay the three hundred and something dollars. I actually did over there. But then when I opened it, you didn’t know what book to read or CD to use first. And there was a big pamphlet that said call for customer support. And as soon as you call, they want another thousand dollars. And then they would tell you which book or take to listen to far. So from there, I said there’s got to be another way to get in this real estate. I want to be rich. I want to be wealthy. I love real estate. And I think I did at least. So I went to a local networking meeting a REIA here in the Dallas Fort Worth area was called Aereo back at the time. And I just remember being struck that this is I was 21, 22 years old. We all see those kids walking in there now. And it was just amazing. People were willing to help me. People were positive, people…And there are all these resources and nobody wanted a thousand dollars or me to give them a credit card, it was just. Just really help of people, so, I mean, that’s kind of it was exposure through the book and desire through the infomercial and then opportunity through the networking group. And that’s actually had from there. That’s what got me to really put my resumé out. If I were really cause I hold the life insurance in the first of the Marine Corps, so I put my resume out, wanting a ruleset job, and that’s how I met the other Marine. So I started managing properties for them. And then about six months later, he taught me the acquisition side. And then I got to start buying. And so now I was buying and fixing and doing this. Owner finance sales. This was back in ’02. So what is that, 18 years ago? And then that was before Dodd-Frank or even the Texas lease option, Bill. We were still allowed to do contract four days back then. Yeah. I mean, after a year, I decided I wanted more. And that’s where I called a guy at Homevestors I’ve been buying wholesale properties from. And I said, I want to, you know, come work for you. And he hired me and I was number one in the nation is by acquisitions for him. And then I’d met his hard money lender that we had done business with over there. And I called him to be my lender. So that was going to go on my own. And then he offered me a partnership because he goes, I like the way you do business. Let’s partner. And so then we built a portfolio of about sixty-five houses in two years because, you know, and I feel I was making six figures a year, but I was like I had only like six bucks in my bank account because I was young and making a bunch of money. So it was really nice to partner with someone like Scott Horn, who was very well versed in the industry and had a lot of money at his disposal to kind of help me grow up over the next couple years. And then I got back home busters in ’05 when I met my wife, Jennifer. She had a franchise. I bought a house from her. The joke is that I made more in the house than she did. So we got married to keep it all in the fan.

Aaron Norris [00:06:59] So Homevestors is also a matchmaking company. I did not know that.

Tim Herriage [00:07:03] Yeah. Yeah. Yeah, it is. So you go from there. After the recession, we made it through the recession, you know, with our marriage and finances intact. The Great Recession, after the recession, all the real estate clubs have dried up. And that’s when I just decided that I miss Homeinvestors. I miss the annual networking events, and I miss the involvement with the local group. It wasn’t altruistic or anything, I wasn’t trying to give back to the community, it was just a great idea, I thought. So that’s when I started the REI Expo. And then through the REIT expo, I met a lot of people like yourself and other influential people in the industry outside of Dallas. That’s when I got to speak it along. How did I get here? That’s how I was invited to speak at the Five-star Conference. And then that’s where I’d met Blackstone when they recruited me to help start to ah. And then I ran that for two years and I said enough. And I came back to Dallas and grew a beard and stopped wearing a suit and tie.

Aaron Norris [00:08:14] And you went back to regular old real estate?

Tim Herriage [00:08:17] Well, yeah, pretty much.

Aaron Norris [00:08:18] Well, let’s unpack it a little bit for people who aren’t familiar with the Homevestors brand. Where have you been, first of all? Because the “We Buy Ugly Houses” has been. How long has it been around now?

Tim Herriage [00:08:30] They started in ’96, think so? Twenty-five to six years probably.

Aaron Norris [00:08:35] And they’ve never really given up on the sort of the outbound marketing experience between billboards and radio and TV. They’ve really been one of the biggest players in the space even during the downturn. I remember seeing their billboards in the Southern California market here where I’m at. They’ve always invested in those. So for people who don’t know how it works. Talk a little bit about a Homevestors and what being a franchise even means.

Tim Herriage [00:09:04] I think, you know, Homevestors is a really good ramp into the business. If you’re ready to go full time, you know, it’s they pay a franchise fee. It’s been a while since I’ve been on that end of it. It was fifteen fifty thousand. I’m sure it’s still somewhere in that range. You can do that like a full-time franchise of the part-time Associate’s franchise. And you paid these. You had to do this monthly advertising commitment because that’s a big, big part of the model you’re going to generate leads. Right. And I tell people, I’ll tell you, if you want to be in this business, you’ve got to be generating leads somehow because, you know, someone’s not going to come knock on my front door and offer to sell me a house right now that they’ve got to know about me somehow. So it is with Homevestors there’s some really intense training is a lot of support. Their technology is ever-evolving. With regards to these cool ipad apps that tell you exactly what to pay for the house and then you buy the house and you typically pay a fee, a transaction fee and a royalty fee when you buy and sell the house. So, I mean, that’s the gist of it. Typically, it was a five-year contract and a lot of people would leave after the use of fifth year. A lot of people, I’d say, if I remember correctly, it was between about a third would leave after their first contract or during or after their first contract and another third would stay for another period. And then, I mean, you know, you’ve got a good bit of people and some of the top guys in the system have been there for 15, 20 years.

Aaron Norris [00:10:50] And you don’t own an area, and I know out here in the Inland Empire, I think the last time I heard there is seven different franchisees. So if somebody were to call off a postcard or a billboard, it’s in an 800 number, if you will, and it sort of does the round-robin and whoever picks up the phone. So but it’s just so interesting to me because depending on what market you’re in advertising L.A. versus the Inland Empire or Dallas versus Galveston, you know, it’s it does the amount that you pay for the franchise vary depending on the market.

Tim Herriage [00:11:23] No it’s the same fee across now, where it’s going to vary on the market is the amount of cost per lead. Because like you just said, advertising in downtown L.A. or downtown Manhattan going to be very expensive. Advertising in the Inland Empire, less expensive. Homevestors has a pretty good, I mean, I love their system and I’m sure they should still do this way. It’s kind of every month, like thirty, forty-five days before the month, we would sit down as an ad council. And at one time the Dallas Ad Council had twenty-five people and we would all talk about our budget like. So this is you know, we talk about our budget. Forty-five days from now and we’d make a commitment. So I may commit to spend five thousand dollars in October. And you would commit five thousand dollars in those kind of part-time guy, would commit one thousand dollars and we’d all pool our money together and that’s how we would go out and buy the ads. And so then the call rotation software was kind of a weighted distribution. It is a round-robin, but it’s weighted off of the amount of money you spend rises. Picture Wall Street, where I know you have some experience right in your capital stack, right? And you own a slice. And so you may get the eight, fifty, and the twenty-second call. Right? I mean, that may be where you sit in the stack, whereas the big guy that was spending $20 grand a month, he gets the first, the fourth, the eighth, you know, and he’s really shrunk in the way this time. But he had to pay. Right. And he had to put the money up sometimes 60, 80 days in advance of when the final ad runs or when you’re going to get that phone call. So I always found it was when you don’t know, as you know, a lot of times investors that really have to make some harsh decisions between which advertising medium or which list or which message. And so the nice thing is, is that Homevestors literally for two to three thousand dollars a month. I don’t know what the minimum was, almost twenty-five hundred that you could really get a potential to get a lead from multiple, you know, from billboards, from TV, from Internet radios, print to the Yellow Pages, that kind of thing. So I think it lowers the barrier of entry for someone that’s interested in the direct sales approach of kitchen table buying because you’re able to let a national marketing four firm was almost 30 years of data, makes the advertising decisions for you based off your budget.

Aaron Norris [00:14:07] That’s what I always thought. It was really interesting and I just wasn’t sure at the model. So down at the local level, you guys are the ones making the advertising decisions that are more specific to the market.

Tim Herriage [00:14:19] Yeah. Yeah. So each kind of MSA would have it as ad council and everyone and every active franchise was a member of that ad council in Dallas, Fort Worth, we had the DFW Ad Council because what would happen is it’s the same TV market. So we had to agree to the ad company. Adbusters would come in and make a recommendation like we think you guys should spend one hundred fifty thousand dollars this month. And that sounds like a lot of money. But remember, you’re dividing that among 25 people. And let’s say we allocate this much for TV. But, you know, Fort Worth is its own territory and Dallas is its own. So you guys got to agree that Dallas is going to pay 60 percent of the TV. Fort Worth is going to pay 40 percent. So it’s a business. If it gets fairly complex. He would ask earlier, if you owned the territory, you don’t own the territory, you actually are committing to only advertise the business in that territory that you bought the franchise. So I wouldn’t have been able to advertise back in the day. And I haven’t seen the new UFO story in all franchises have a offering circular. So I haven’t seen it. I’m not disclosing anything. Insert legal jargon here. I don’t care. The way it would work is I would buy a Dallas, Plano, Arlington franchise and the MSA. And if I got to lead in L.A., I could buy that house. I was allowed to buy anywhere. I just wasn’t allowed to advertise outside of my territory. That’s the way it worked.

Aaron Norris [00:16:07] And where I found some of the franchises that I knew that where they got frustrated as they were also creating business on the side. And the only reason I bring it up, because you’re very familiar with Homevestors and I know there’s other ibuyer brands out there, but whatever leads you created outside of the brand, you were still paying a fee to the company, correct?

Tim Herriage [00:16:27] Oh, yeah, yeah, absolutely so in the franchise agreement back in the day, I think you could have one or two exemptions per year. As long as it was a personal property. Yeah, but it if it was any transaction, whether it was your mom’s house that you were buying from the family, you’re gonna flip. You owe the transactions fee.

Aaron Norris [00:16:51] I’m just really interested from a data perspective. I mean, with that much sophistication, sophistication at the national level. Thirty years of experience in the space. And then also that I didn’t realize that’s how I set up the ad council approach where you were getting some input from National and they would see across the entire country what was working and what wasn’t. Did you see them change a lot of what was converting as far as marketing, whether it was the mailers or the billboards? Any thoughts on that?

Tim Herriage [00:17:21] Oh, absolutely, because there was always a marketing fund that you paid into as well in the marketing funds, and that was like seven hundred fifty or two dollars per closing. But I love paying that money because that money went into this pot. Every franchisee nationwide would pay it. And the ad company was always beta assessing a letters. New lists, responsive landing page is different internet copy. Different… if you ever see the billboards, you can really go to Dallas. There’s always a new billboard being tried out. And they’re always tracked. And they’ve got Charlie Calise runs the advertising company that does Homestors. And that guy is a genius and is his ad science platform is something that I’m very envious of. And so. Yeah. So that was a nice thing, right. You know, many investors, they get into this business and they start all that new green postcard, yellow postcard, red postcard. What’s a… you know, and you did have someone from National coming to every monthly meeting telling you what they thought you should do and tell, and showing you the response rates of the beta says they ran in Sioux Falls or they run a beta test in Dallas and Atlanta and Jacksonville simultaneously to make sure that all samples kind of responded the same one time we sent out a, this one was not popular. We sent out a pill bottle to landlords like, “tired of the rental headache, call Homevestors.” Yeah. So they called the cops instead it was a test if it was not a good beta test. But, you know.

Aaron Norris [00:19:04] Creative.

Tim Herriage [00:19:04] It seemed like a good idea.

Aaron Norris [00:19:07] What was inside the pill bottle. Just the letter?

Tim Herriage [00:19:10] Like a pamphlet that, you know, you said, please call, “Tired of the rental property headache, call Homevestors.”

Aaron Norris [00:19:14] Just the wrong kind of conversion. OK. There you go.

Tim Herriage [00:19:20] Yeah.

Aaron Norris [00:19:20] Well, just to have that kind of insight, especially if somebody is new. It just it’s interesting to hear how it works knowing that there are several 1-800 Offers. But the We Buy Houses, We Buy how Ugly Houses brand has been definitely out here, that I’ve seen, in the market the most prevalent for the last decade or so.

Tim Herriage [00:19:38] Yeah, they’re training, support and resources… I haven’t seen a single platform that touches it. I mean, they guarantee you the financing if you buy along their numbers. They have his iPad app I guess they still have it, it’s been four years now where they just import your comps and you just walk through house and hit buttons and it tells you what you know is your maximum allowable offer and it never fails. You get a new franchisee that would go way over that because they thought they knew everything and then they get mad that they couldn’t get financing. So it is if you’re too creative, home busters may not be right for you because it’s a system you’re paying a lot of money, which fifty thousand isn’t a lot of money. But by the time you get an office, in part by advertising and things like that, it ends up being a lot of money. So you’re paying that money. So you might as well follow the system.

Aaron Norris [00:20:37] And to have somebody that really looks at the conversions and what’s seeing what is I mean. Fifty thousand dollars if you had to pay a full-time marketing person, that’s. Yeah. Anyway.

Tim Herriage [00:20:47] Right.

Aaron Norris [00:20:48] It’s just interesting to know how it works. OK. So you’re no longer part of their brand at all, right.

Tim Herriage [00:20:55] No, I was a franchisee and development agent, which meant I bought houses for the county with the come computer, the company. But I also had about 40 offices nationwide that I had sold them their affiliates, their small version of the franchise and I kind of manage the mentored and helped them. So it was, I guess late, 2016. I sold that franchise and my development agency. But that was, you know, again, it was about a year after I resigned from Blackstone. And I was just at a point where I was kind of ready to live that life that we all talked to investors about.

Aaron Norris [00:21:45] Right. Well, it’s a lot of work. I saw I saw you hustle. I was very impressed when you were working on REI Expo. You were great at the relationship-building side. You were very specific in your approach, REI Expo as an expo, that education expo that you put together. I think several spots that I watched you do it in California and you eventually ended up selling that to Think Realty. But to execute the kind of success that you did is not easy, especially coming into an area and finding the partners to make it successful. It’s not easy. I mad props to you driving numbers is not easy. And you were able to pull it off. And in the years to you’re right, real estate investment clubs really went down. I think we learned, we learned quickly who were speculators versus investors during the downturn. Especially in markets where we got hosed. You could be breathing and make a lot of money in there were right years if you were holding. But, man, if you’re holding in the wrong years, not cute at all.

Tim Herriage [00:22:43] Right.

Aaron Norris [00:22:44] I ran into the CEO of Homevestors at the National Association of Real Estate Editors. They have an annual conference and he spoke. And it was a first-year I had seen him on stage. And then ibuyers were on stage and I was just like, this is a match made in heaven. And I talked to I think it was Opendoor later that day. I’m like, why are you guys not partnering with the Homevestors brand? And they, at the time, were so they were spending so much money in the advertising space, they’re like, we can’t take the risk of handing this to somebody who isn’t going to back our brand into a close. They were being control freaks. And it’s interesting to watch how that morphs as they’re trying to vertically integrate, realizing, I can’t spend one hundred thousand dollars a month per market on advertising and not say Yes to every lead that comes through our door. So if I’m spending one hundred thousands dollars in the Sacramento market and I’m like, yeah, we can’t buy your house and I don’t have somewhere for that lead to go, that’s not going to work. So if you’re a.

Tim Herriage [00:23:40] Well, it’s funny. It’s funny you just mentioned, too. So I’m very familiar with OpenDoor. When we were with Dwell Finance and I asked in the Blackstone Company, we ended up giving them a line of credit. And obviously, I’ve done a lot of business with them and met with them here in Dallas. It’s funny you talk about two companies that blame not doing business with each other for protecting their reputation. And funny, frankly, it frankly, if they go online and read about their own reputation, they may give them some homework to do.

Aaron Norris [00:24:15] I understand where they’re coming from, but you’re right. The amount of money that they both spend on marketing is really good for Main Street to watch. I mean, they’re very sophisticated. They spend a lot of money on sophistication. Let’s go to B2R. You are, I mean, you transition into the Wall Street space. And it was so interesting to me to watch. I was invited in Las Vegas. to the American Association of Private Lenders, Apple, AAPL, had a conference where B2R came out and talked and you were the translator at the time. Wall Street was talking about Wall Street, and it was interesting to watch them speak and then sort of you in the room sort of talking to the rest of people, trying to get them to sign on. And the conversation when they first showed up was, we’re gonna take over the world. We’re going to refinance everybody and everything. So much to talk about. What do you think about let’s just talk about how so B2R it started with Dwell? Is that what you said?

Tim Herriage [00:25:14] Well, no. No. So B2R actually started out as B2R. We ended up acquiring Dwell from We acquired well from Gregor Watson out in California. So we got it all sorted out to B2R Finance and the whole idea would be to our finance was going to be we know we’d like you said, we were going to refinance the world and we tried. You know, we and we did a good job of it. But, yeah, I mean, my role there, I was head of acquisition. I was head of sales, marketing and business development. So my role was really to get the customers in the door and then get the customers to understand the products and get them all the way through the finish line. Then go to those and go develop strategic relationships to generate more customers. But yes, I was Kind of a Navajo code talker for a couple of years, because one is one example. I’ll never forget I’m talking to this guy, that was one of the, he was the chairman and I’m I will say his name, but they’re right. Everybody in the room is talking about Bips. At this point. I bought over a thousand houses and I had no idea what a bip was. So it’s a basis point. We all know that now. And they’re talking about DSCR off. And I had no idea what DSCR no idea in. They’re talking about LTV and I’m like, I know what LTV is. They’re talking about SS… yeah, well, hang on, though. And they’re talking about SFR and the SFR. I’m like a single-family residence. Got it. So I stop the conversation. And I’m like guys, I don’t really understand some things you’re talking about. I got it, SFR single-family residence. No, single-family rental. And, I’m like, you sure on that one, because like those of us who’ve been doing this for a while, a single-family residence and MFR is multi-family residence, not multifamily rental. But they changed that term like literally that acronym now, five years later, means something different now. I mean, according to Wall Street, SFR is single-family rental. And so then you can talk about that, then I go to LTV. Look, guys, I know what LTV is. LTV is just percentage of what the house is worth. And, they go no, LTV is a percentage of what they’re paying. And I’m like, no it isn’t, it’s loan to cost? And so literally in the commercial world and the Wall Street world, value was whatever you were paying for it. Whereas it a single-family investor world value is like what it’s going to be worth, you know. And so that was that I got out that I what’s a DSCR are there like, you know, the debt service coverage ratio. Yeah. You know, so I don’t know that you’re going to have to teach me. I’ve never they’re like, why haven’t you gotten a loan from a bank before? Yeah. Five hundred. And then they’ve never talked about a DSCR. It’s always been a loan to value in the loan to value. Had nothing to do with what I paid for the loan. The value had to do with what the appraisal was worth. And then I had this whole bip thing or you saying blimp up a bip? And they were like, you know what basis point? I’m like, no, I don’t know, basis point like I mean. So, yeah, I mean, it was I fit in well there. Because, they all got to laugh at me a lot. But also I was not afraid to say what I didn’t understand something because I’m a constant learner. And I learned a lot in that two year period. And I think I was able to teach them a lot about how to work with these customers, because if I didn’t know it at my experience level, the odds were, Mr. Joe, that had five houses or one house definitely wouldn’t.

Aaron Norris [00:29:29] Well, I’m a marketing guy, so I will tell you now, it changed markedly when you came on board and you really did act as their interpreter, because I remember seeing their very first booth there with their marketing materials. And like, this is terrible. This is a room full of hard money lenders. And we don’t even know, like we don’t speak this language. And sure enough. You came onboard, definitely help. So what did they. You said, you know, the goal was I mean, I remember them saying, oh, we’re gonna refinance the universe. What would happen? Why why didn’t that work?

Tim Herriage [00:30:02] Well, we were on our way. We had done a little over a billion in loans in early 2015 when Blackstone just hired this new CEO. And president, John Beachum, who now, I guess has probably bought more hard money paper than anyone ever in the United States was. He was running the company. I was a managing director. I reported technically directly to him, the chairman for a while there. We were on this mission. We were interested in other things, but we were really focused on making our product better and getting more people to borrow money. But the new CEO came in and we bought lending.com and we bought Dwell Finance and we bought Jordan Capital Finance. And there was this article, I think, in The Wall Street Journal, we were gonna start like financing dishwashers and like all the household goods that investors put in the houses of this customer ecosystem. And before, you know, there is this new CIO and this new CFO and this new CEO, this new CMO. And, you know, I’m getting put out to pasture. It is, you know, the founders always the dumbest person in the room. And, you know, they tried to just recreate the wheel and turn the company into something it wasn’t. It failed miserably. And now and now it’s all simply, Finance of America commercial. And now it’s doing great because it’s now it’s back to let’s just loan investors money. So they’re doing bridge loans. They’re doing new builds construction. They’re doing the old portfolio loans, are doing a one-off rental loans. They’re doing really well. And it’s nice that they had a residential mortgage company that’s kind of steering the ship because didn’t the leaders there, they speak our language. They’re not to say they’re not the Park Avenue office types that are going to really make it too complicated.

Aaron Norris [00:32:17] Mainstreet definitely, to me, has a very different feel from Wall Street. So it was, I was very interested you sort of word insider in the real estate space sort of showed up. And it was an interesting journey to watch. He definitely improve them. I just didn’t know what happened on the tail end of that. What do you think that they… Is there room for Main Street hard money? I mean, I don’t think Wall Street’s going to go away. I think Covid-19 is interesting. I know here in California, they disappeared right quick. But I don’t know how you start a, you know, a foreclosure division quick in states like California, where the state of emergency, you’ve got a problem because our governor pushed it down to the local level. So you can’t process a foreclosure. You’re not allowed to evict. If you do it wrong, you could be fined a thousand dollars. I mean, holy cow. A loss mitigation department? Overnight? Wow. I think they’re going to come back. Just because with interest rates being so low, people are going to look for yield. I mean, what do you think as far as Main Street versus Wall Street and the private money space moving forward?

Tim Herriage [00:33:22] You know, I used to tell the guys on Park Avenue that this is a relationship business. And just look at the PPP loans, that first round of PPP loans. Any real estate investor that had a good relationship with a small bank. They got right through, got their loan. Those that were in line waiting for Chase or Bank of America or Capital One, they got left out in the first round because they’re too small to have a relationship with that big of an institution. Now, Ruth’s Chris, they’ve got a big win from Bank of America because they were a massive company. So I think that Main Street hard money always has a place. I mean, at the end of the day, I think all this sophistication has taught us all something from leverage to warehouse lines to warehousing to selling loans on the secondary market. So I think it’s helped push what was a comfortable closet industry into a little bit of professionalism and probably. Probably normalized things a little bit. But I think as long as a hard money lender focuses on relationships with their customer, as long as they focus on not charging, I mean, you got to remember in ’09 oh 2010, the going rate for hard money was 18 percent interest in two percent origination in Texas.

Aaron Norris [00:35:03] 18 percent?

Tim Herriage [00:35:05] Yes.

Aaron Norris [00:35:06] Wow.

Tim Herriage [00:35:08] I mean, literally, like in now, you can get it for 10 all day long…

Aaron Norris [00:35:14] All day long.

Tim Herriage [00:35:15] As a newbie.

Aaron Norris [00:35:15] Yeah.

Tim Herriage [00:35:16] And so I think it’s helped the investors. And I think a lot of I also know some guys here in Dallas that are charging 12, 13 percent. But they close in one day. They don’t require appraisals. They always have the money. They answer their phone and go look at the house. And within 24 hours. So I think my answer would just be there. There’s always a place for Main Street in this business because Wall Street can never move fast enough for all the transactions. And then our people, right?. The Main Street people. My people are lazy. Right. We’re unorganized. And we’re ADD afflicted individuals. So if you make it easy for us, we will pay an extra couple points just to know. You know, I didn’t have to fill out my get my kids birth certificate to figure it out the next one.

Aaron Norris [00:36:22] Yeah, they still want a lot of paperwork, don’t they?

Tim Herriage [00:36:27] Yeah, I mean, and they have to because they’re warehousing the load. It is amazing the amount of due diligence that the warehouse providers do on every single loan that is put onto those facilities. I mean, it is just crazy. I’ll never forget we had this big warehouse line with Citibank and they were like, oh, no, we’re gonna need to see credit scores. And now they roll to the list of like, what? I mean, we’ve already done the loan. They’re already in. Blackstone is guaranteeing it. They got like five hundred billion dollars. Why do you need to see Billy’s credit score? You know. But that’s just. Yeah. And like when we were doing the first securitization. Yes, we did the first Blackstones Invitation Homes unit, did the first-ever rental property-backed single borrower securitization. We did that. Who are the first multi-borrower securitization. When we had, I want to say like two hundred and forty million dollars worth of loans. It was like one hundred fifty-two hundred borrowers, the average loan and it’s that was in April 15th. And I’ll never forget the year before that. We’re getting ready. We’re trying to get ratings from, you know, Fitch and Moody’s and Kroll and all Morningstar and all those painful individuals. And we’re sitting in the room, Beacham’s in the middle because he’s the president, right? I’m on the left because I’m the investor. Jeff Tennyson’s on the right because he’s a mortgage banker and directly across the street from Beachman is the managing director. Of sort of, you know, whatever rating agency. Well, that person’s left will be the Resi team, the residential securitization team. And to the right, will be the commercial securitization team. Because no one could figure out what the heck this was that we were asking them to rate. It’s commercial paper on a residential property, but it’s backed by commercial income. But we’re underwriting it’s like a residenial loan. Like what is this? Or an object. Those were some of the longest days of my life.

Aaron Norris [00:38:44] Got a few more gray hair than you wanted.

Tim Herriage [00:38:48] Well, I’m literally sitting across the table from this guy who’s never left Manhattan. Right. Well, I’m sorry he had to fly to L.A. So he’s flown over America. Has it ever really been anywhere? And he’s asking he’s like, well, what if this person in St. Louis, his property manager, quits? Who are we going to get to manage the property? They’re like really worried about that. There’s like probably 3000 property managers in St. Louis. We’ll just call one of them. Do you really not know that? I mean, you know, but they didn’t. They had no idea. They’re like, Oh my God. And I was like. Here’s Nakao, the National Association of Property Managers. Look look at all these names. And they’re like, wow. I mean, they were like, really impressive. More than one person in Missouri knew how to manage a rent house. Because of the arrogance Aaron, and they think it’s like they thought they created this b. They thought like nobody owned a rent house before Blackstone. Yeah. It goes back to the Babylonian times. People owning houses and renting them out. It’s not a new thing.

Aaron Norris [00:39:59] Well, and, did Wall Street get bored with buying at the trustee sales? And is that why they started the hard money side of the business or are both of those going full steam ahead?

Tim Herriage [00:40:12] They’re no different than any investor I’ve ever met that started loaning money. And it’s just a natural progression, and I bet your dad is this way. You know, they start out by and some houses. They like it. They start making more money. They like it. They start making more money. They like it than they realize with all these banking relationships and their knowledge of the houses. Damn people would pay them twice what they can borrow the money for just a loan of money and help them get a deal done. And. You know, Blackstone was doing well with the securitizations and the buying his trustee sales, obviously, as the sellers market started heating up, they were losing not only the good deals because you remember there were times they were paying par.

Aaron Norris [00:41:01] Oh yeah.

Tim Herriage [00:41:01] A lot of their acquisition criteria had to do with: what’s the replacement cost of the home? And as you know, probably from your data, almost always a house goes back up to the value before the last recession, before there’s another dip. And so they were just they were kind of marking it to market. They’re like, all right. This was $350k. Now it’s $250k. Everyone’s saying it’s worth $250k. You couldn’t build it for less than $325k. That’s a good deal, let’s buy it. And as that number got kind of up to the $325k and they figured that the top of that market was like $350k. Then they figured it wasn’t going to provide the long term yield that they needed. You know, they use these fancy term called the gross margin. I’ll never forget this billionaire is asking me all these questions about gross margin and what gross margin I buy houses in Dallas and stuff, and I’m over there on my phone Googling it because the billionaires in a room I don’t want to say I’m stupid. I’m like, what is the gross margin? I had to look it up. Oh, OK. Yeah, I had, like, figure it out like, OK, so that’s what it is. What do I know? I don’t know. So it was fun? No, I think that they are now just more opportunists vs. carnivorous. I mean, they saw the story behind the Blacktone buying thing is one of the co-founders of Invitation Homes ends up in a neighborhood in Los Angeles. And we’d like a flat tire. And one of the neighbors says any parts of cars may far proceed and park his driver, park some part of the house. And they’re changing the site in their struggle. I think they’re waiting for a tow truck or something out on the oil. Neighbor somes out and says, hey, if you’re here about the house you’ve already sold last week at auction. And the guy goes, Yeah, what for? He told him, he goes, well, what could you build that house for? The gays like, yeah, twice that amount it would cost to build. That’s simple. And so literally, this founder, like, ends up in an airport meeting room with John Gray from Blackstone. And they’re like, why don’t we buy a billion dollars worth of this stuff? And they’re like, OK. And they shake hands and they buy a billion dollar for the house.

Aaron Norris [00:43:23] Now, it’s interesting to watch the market mature. You’re right. Here in California, they went hot and heavy. I think it was 2013 and they were buying for almost full value at trustee sale. So knowing that they…

Tim Herriage [00:43:36] We all call them stupid, didn’t we?

Aaron Norris [00:43:38] We sure did. We sure did. Well, it definitely squeezed the trustee sale buyers. You really had to know what you’re doing is we joke on the podcast that it’s just a hard business to be in. If you’re an amateur, it’s really hard to show up. They’ll run you up just so you never come back. You better know what you’re doing when you show those cashier’s checks. It might not be fun. But, you know, they got out of the California market, so they’ve been moving. And then the hard money loan came up and now I. About a year ago, I was introduced to an intermediary. I talked to John at Toorak. And there was another one who approached me that was going around to hard money lenders and buying their paper. What they told me at the time is like, oh, yeah, there’s lots of people doing it. We’re very conservative. We only take on 10 percent leverage. Like, wait, you take hard money, loans and leverage it. He’s like, yeah, one of our competitors takes on 90 percent leverage and we packaged it up and sell it to Wall Street for bond rated paper as bond rated paper. I’m a what? So you’re telling me you can sell this pooled with leverage to pension funds? They’re like, yeah, everybody’s so desperate for yield. I guess I’m scared that, you know, I’m looking at Covid-19. I’m looking at the government. What they’re doing with evictions and moratorium’s right now, private money is not protected. We are not backed by a federal entity. So who’s holding the bag?

Tim Herriage [00:45:03] I mean. That’s… that’s a good question, Aaron. I mean, I went on record in March saying that I was predicting house values would go down at least 10 percent. A lot of that’s probably the scars I got. No way. Right. Really, in 07 when it all started. But. I don’t know. I mean, this is the most confusing time, the most when you read what smart people are saying, DOW is up. And. And we’re just Mark Dotzour said on that webinar I did, he said, helicopter money. We can’t just keep Tritton helicopter money flying around neighborhoods, dropping money out of the helicopter. But that’s what we’re doing. And it’s about to happen again. We’re about to spend another couple of trillion dollars. Aaron, I mean, have you heard that the news the EIDL, if you didn’t get the ten thousand dollar grant you’re going to get no matter what.

Aaron Norris [00:46:08] Oh, wow.

Tim Herriage [00:46:09] You’re going to come back and oh yeah, that’s what they’re talking about in there. I mean, like literally like. So like. Oh, and by the way, it’s for every company you own. So I applied for five companies for EIDL month and I only got like a thousand dollars for a company because I’m the only employee in the company.

Aaron Norris [00:46:26] Oh, that’s right.

Tim Herriage [00:46:28] So I’m like forty-five thousand dollars extra in grants. So I don’t know. They keep giving me free money. I guess people don’t have to pay rent. And, you know, my grandkids just live in Moscow.

Aaron Norris [00:46:42] It is very few. Well, tell us about the Texas market. How are you guys adjusting to covered and are your art? Do you only do flips? You also have rentals.

Tim Herriage [00:46:52] I got a lot of rentals.

Aaron Norris [00:46:52] oK. I had one tenant that I’m. I have real estate in Florida and California. As far as the hard money business, we’ve had two people ask for help as far as rentals. I’ve had one tenant ask for a little bit of a break. I mean, what’s Texas been like?

Tim Herriage [00:47:14] We’re 100 percent occupied. We have 100 set payment rates. Not one person has been like we’ve had. I think I’ve renewed seven or eight leases since Covid started. I think what you’re going to see is, except for those low-income people, you probably never should have run to anyway. People are really valuing where they live right now because we’re all being told to stay there a lot more. So if you’re the type of landlord that my wife and I are, we provide a quality product and we treat people with respect. We’re not slumlords. I think, you know, I and I’ve always said this is it’s never more true than now. Right. There’s three, they taught this in school. There’s three basic necessities in life: food, water and shelter. Farming is way too erratic and now is only for the big boys. I don’t know how the hell you sell water and make a living. But by God, I know how to provide shelter. And that investment, it’s an it’s the best place, an inflation-indexed annuity with an underlying asset. So I love my rules. We’re doing great. We just like you, we told everyone, if you’re having problems, let us know. So far, it’s just an amazing life. One tennis. We were going to up the rent. One hundred dollars a month. The backstory hasn’t been increased in eight years. And we were planning on moving out this summer. They wanted to stay anyway. They said, well, how about we do seventy-five and we’ll do a two-year extension> And I’m like, done.  So yeah. I mean. And we just replace air conditioner, stuff like that. So they’re really what we’re seeing is by being good landlords and treating people with dignity and respect and providing a good place to live. Our rentals are really performing well now. What happens when the six hundred dollars extra a week runs out or they start dropping money out of the sky? I don’t know. This whole thing, it’s like I’m in a movie that was written by a two-year-old. There’s no plot. No, I can’t even understand where we’re going.

Aaron Norris [00:49:39] It is very difficult to follow from the federal, state and local level. Are you seeing a lot? I know there’s a lot of Californians sort of diversifying out of the state, and I know Texas is one of them. Do you see a lot of investors coming your way?

Tim Herriage [00:49:55] You know, we have for 10 years now. And you just see expect to keep sitting there. The wall, we need to build these to be like around California. We need to keep you all there. And here’s why. Looks like we’re starting to turn blue. So the whole reason all y’all are coming here is about the change. You see, we’re going to have a state income tax. It’s just driving me mad. No. Yeah. I mean, obviously, Texas is a great place to be. The market still on fire. The last, so we flipped several houses during this pandemic, the zombie apocalypse. And I’m sure you watch the news this week and you know that Texas is a hot spot. It’s worse than New York. But there’s no one dying outside my house right now. We’re out and you’re selling above asking price in record days, still. Mortgage rates just dropped to, what, two and a half percent. So I think we’re going to see prices continue to climb until our government stops printing fake money and making everyone happy and just deals with this thing. I think you’re just going to see a continuation of the status quo. I’m just worried about the backside of it because eventually, they have to stop.

Aaron Norris [00:51:12] And are the appraisals coming in for those price increases?

Tim Herriage [00:51:16]  Well, yeah.

Aaron Norris [00:51:20] That makes me nervous long term. The same thing has happened in California. I’ve a lot of flippers that are reporting that, like, I’m getting fifty thousand dollars more than I thought I was gonna get. But you’ve got an empty product. You don’t have to deal with people now going to the house that aren’t qualified. Just a really interesting time. We’ve only got about nine minutes left. I want to get a little bit more into what you’re doing. You sort of slow down a little bit. You’re not doing the Wall Street thing anymore. The Homevestors thing. Why? Why did you decide to pare down?

Tim Herriage [00:51:51] I mean, it is kind of. I went around talking at seminars and things well. Be your own boss and spend time with your family and all. I spend a lot of time not with my family and other people, they could be their family. And then my oldest was about to graduate high school. He graduated last year. So just kind of late ’17 and early ’18, I said, you know, I’m to spend as much time with him as I can. I have a 10-year old that I want to spend some time with. I’m only forty-two. So we want to get rid of the 10-year-old. I’ll be in my 50s and maybe I’ll work hard again then. I’ve got a great team. Aaron, I mean, just an idiot and they don’t work for me. We’re all just kind of partners. So we actively send 5000 postcards a week. We spend eight to 10 grand a month on marketing. We buy anywhere from three to five houses a month. Typically keep one is a rent house. Take one is a flow. And then also the rest. And so I don’t look at houses. I don’t sell the houses. I’ve got a great father-daughter team that does all that for me. I own an insurance company. We insure houses for real estate investors across the nation. But I’ve got a great partner and that’s been an insurance agent for 30 years that has already sold two companies. We ensure a little over one hundred and seventy-five million dollars worth of assets across the nation. We’ve got about seventeen hundred customers. We’ve got the best coverage out there. It’s all replacement cost. It’s also Lloyd’s of London with earthquake coverage, wind coverage, water coverage, hail coverage. It’s great. It’s great. It’s actually the Home Busters preferred insurance company. And that’s where I knew from when I left home dusters I couldn’t use a product anymore. So I called the CEO and said, let’s make this available to everyone. And we did. So it’s great. It’s a great product. I use it myself. It’s always great when you own a business and you can say I’m a Men’s Wearhouse guy, right? I mean, not only a customer I’m also.

Aaron Norris [00:54:06] You’re vertically integrated.

Tim Herriage [00:54:06] I’m also more vertically than I was also customer number one. You know me because it’s all technology-based. And if I can’t figure it out, then my customer can’t. And I’m not telling my customer about it until we get it right where it’s easy for me to explain.

Aaron Norris [00:54:21] If I go back to your rentals… So your form of marketing right now, is all your deals are all coming because of mailers?

Tim Herriage [00:54:28] Yes.

Aaron Norris [00:54:29] What’s your response rate to mailers right now?

Tim Herriage [00:54:34] Um, I don’t know. Three to five houses a month.

Aaron Norris [00:54:38] We call those conversions. So good for you. OK.

Tim Herriage [00:54:42] No, I can tell you. I can tell you. I wouldn’t say I know the numbers, man.

Aaron Norris [00:54:48] I always get asked. This is the Data Driven podcast. So I know it, it’s going to come up. If people gonna give me a hard time if I don’t ask. But, you know, three to five.

Tim Herriage [00:55:00] We get about a one-point three percent response rate of some of those. Let’s just call it one percent to make easy math. Of those 50 to 60 calls a week, we get we go on anywhere from 15 to 20 appointments. We really screen we do a really good job of not screen. We just set up that. We set up the sale. And if they’re not really motivated, we don’t go, because if they’re not really motivated, they’re not going to sell at a number that I’m going to buy. So we just sold them. So if you were doing the sales fall, right. We sent 5000 postcards. We get about 60 phone calls. Let’s just call it 50. So it’s an even one percent. We get 50 phone calls. We go on 20 appointments. So what is that, Aaron? And that’s 40 percent. So then we go on 40 percent of lead-to-a-appointment ratio. And of the 20 appointments we go on each week, that’s 80 in a month. We buy five on average. Well, we bought four on average. So it just took four such as, what, 20 percent?

Aaron Norris [00:56:14] Yeah, yeah. OK.

Tim Herriage [00:56:16] And I could trickle that through a spreadsheet and tell you my conversion rate, but I just haven’t done it.

Aaron Norris [00:56:20] No, it’s good. So you don’t do any SEO or paid ads online?

Tim Herriage [00:56:26] So I’ve been working, and that’s actually money projects starting July eight. I’ve been publishing new Web pages every day, two new ones every day. Kind of. “We buy houses” in “blank city” in “blank county” kind of built a template. And I’m just optimizing it. I’ve been really happy with the, and I am so on Monday, marketing Monday, I sit down and I go through and create the new Web pages. I kind of thought about hiring someone to do it, but they just couldn’t understand what I wanted to happen. So it’s been fun. My impression is I’ll give you a no real quick. So after three weeks of consistency, I’m opening up the Google search console right now. They recrawled my recrawled, my site day, on performance. So on July 8th, I had one impression. On July 26, I had one hundred and fifty-nine impressions. So that’s, you know, my average present positions up to 52, which sounds horrible, but that’s again, three weeks worth of work. So I won’t have, you know, my quick.

Aaron Norris [00:57:38] Right. I going have to follow up with you next year because I worked for a company in the construction space where we almost had somebody not come work for us because we had a bad Web site. So, you know, if conversion if somebody gets a mailer from you and starts looking at you, looking for you on the Internet and you’re not there. It’ll just be interesting to follow the next year with you.

Tim Herriage [00:57:59] Yeah, so, I mean, you know, I’ve got several pages that are raking in the top 10 and position on Impressions, and that’s just in a couple of weeks. So that’s kind of not my little focus right now, is the bill at the SEO. And I’m running about 10 dollars a day and Google pace of foot and just letting analytics run in the background to really look at customer behavior, see where I’m losing people less the learning machine learn and then to go to my company and say, ah.

Aaron Norris [00:58:27] Nope, good way to do it. What kind of stuff are you looking at as far as trends? What do you look at as far as data in the business?

Tim Herriage [00:58:39] You know. People really have to learn to define their target customers and who they’re converting and then go chase that customer. Don’t just market to zip code because that’s the zip code you are. You can make money on. And I’ve seen a lot of people really honing in on kind of their farm area and picking an area that they convert well in and really trying to exploit that area. You know, data trends, obviously now you can overlay demographics and even financials underneath the tax parcel data. You know, I that’s getting better and better every month. So you can really look at LTV in the last time they refinanced and how long they owned the house. And, you know, what people should do is even if they’re just not that active in the direct advertising, get on the bunch of wholesalers lists.I tell people this all the time. Look at the properties that there are marketing and then go research the underlying characteristics of that property and figure out because that’s you know, it’s a subject it’s a target case of someone that sold to someone really cheap. So even if you don’t have a large enough sample size by observing the marketplace, you can start doing your research and you can form the datasets that can then kind of build yourself a smart list and you can do less with more help.

Aaron Norris [01:00:15] Love it.

Tim Herriage [01:00:16] Or more. With less. Yeah.

Aaron Norris [01:00:19] Yes. Thank you. More with less.

Tim Herriage [01:00:23] I do less with more because I’m lazy and I have money.

Aaron Norris [01:00:27] There you go. Well, if you want to connect with you. Where should they go?

Tim Herriage [01:00:32] TimHerriage.com.

Aaron Norris [01:00:34] Very good. One final thing. Just because if you had to start over from scratch. Brand new. Where would you start?

Tim Herriage [01:00:46] I would have got… I’ll tell you where I would have started in this business, when you’ve gone along long enough, there’s all these neighborhoods in your town that you drop by. You never neighbor house that you sold. And now that house, the dirt would be worth 10 times what the house is worth ten years ago. I would have kept one more house here. That’s it, one more house a year, because this is a marathon, not a sprint. As I know your dad would say. And if I’ve just kept one more house a year, I did the math the other day. I’d probably be worth about three point five to four million dollars more.

Aaron Norris [01:01:27] Coulda, shoulda, woulda. I hear that a lot. I’m the same guy. Wish I would bought more in ’09, but hey Tim, I really thank you for taking the time to do this. It’s been a fascinating journey through so many different facets of this business. Any ideas on trends coming up? Technology that you’re excited about?

Tim Herriage [01:01:47] Yes. Yes. You’ve got to find the bottom third of the market. You’ve got to use leverage PropertyRadar, or whoever. Whatever market you’re in, find someone that can give you the data. Find the bottom third of the market. The bottom third of the market is going to be the hottest segment of any market for the next two to three years. Interest rates have made it super affordable. They have there it’s going to be price way below replacement cost as construction prices are going through the roof. And I mean, I just that’s what people are going to want to live. And the other trends start looking at data for vacancies in urban areas. And I think people are going to work more from home. So all this technology allowing people to be remote, you know, if you really want to find a good market and get your image now, you can get out of L.A., you can go way up into the Inland Empire and you get to have the same job, make the same amount of money, but now you don’t have to go to work. Well, actually, in person.

Aaron Norris [01:02:45] You can move to Texas and still work in California.

Tim Herriage [01:02:49] Yes. And you can as long as you’re in Dallas County where all those Democrats are. You can say that. But no, I mean, like literally like this technology is going to allow people to live in places that are more afforable. And I think the priority is people are going to have some consciously on where they live is making sure that they have a yard with some personal space where they don’t have someone, where they don’t have to wear a mask, you know, walking down this stupid sidewalk. I mean, hey, I live on three acres. I don’t have to wear a mask when I go outside. And I live in Texas. So it’s actually still optional, even though it shouldn’t be, probably.

Aaron Norris [01:03:29] Probably, but. All right. Well, no, that’s a good point. We’ve got. We’re watching that trend as well. Migration trends. But now covered related migration trends even within the same state, county to county. It’s going to be really fascinating to watch. All right. I had to sneak that one in. TimHerridge.com. I’m going to post all the links on our community. And if you’re on YouTube, you’re going to be able to link through that. And I really appreciate you doing the show, buddy.

Tim Herriage [01:03:54] Aaron, it’s good to see you again, man.

Aaron Norris [01:03:57] Thank you for listening to the Data Driven Real Estate show. 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 our community where you can even ask questions for upcoming guests. Ask questions of current guests. We monitor there and we’d love to engage with you. Please don’t forget to like favorite subscribe and share on any of your favorite platforms. It helps us out a great deal. Thanks for listening and we’ll see you next week.

The post The Data Driven Real Estate Podcast #5 – Wall Street Hard Money, Homevestors and Real Estate Investing with Tim Herriage appeared first on PropertyRadar.