The buy, fix, and sell foreclosure business is the space Tommy has been involved in for the past 17-18 years. Having lived through the time when the world’s market was falling apart to now, he has reached a peak of buying 200 houses a year and operating across 5 states including California, Nevada, Florida, Montana, and Missouri. Due to the current pandemic, Tommy now buys only 1 house every 3 months. Today, we get to know more about the foreclosure business and how Tommy’s real estate journey pivoted to working with a hedge fund to building his rental portfolio
Tommy learned at a young age how to sell coupons door to door. Later, his brother got him a job where he would do door knocking to make appointments for somebody else who had the money to buy properties.
Despite not having any relevant experience working in real estate, he had one skill that worked for him, his charisma. By smiling, making eye contact, and showing enthusiasm, he was able to open a lot of doors for his employer and got paid handsomely.
Tommy’s start at actual real estate investing in 2005 didn’t work well. He didn’t understand investor management and property management. But he did realize the advantage of door-knocking over sending postcards or putting up websites.
Door knocking always works anytime and in any frame. Since it’s one-on-one, it becomes more personal and allows for the acknowledgment of each other’s needs during the interaction.
In 2006, he hired someone who eventually became his business partner in 2009. Since then, he has kept adding more members, a construction manager, data manager, comptroller, and bookkeeper.
Tommy was running a sort of trustee sale wholesale model for his business where he would buy anything $60,000 or less in California. This led to him getting more and more deals and required that he get his own team.
Tommy later got an offer from Invitation Homes to work with them. As a Blackstone funded company, they were interested in acquiring a large pool of properties.
Working for a large hedge fund enabled Tommy and his business partner to work with a larger resource. When he came in, he hired 90 people and in 2 years, he bought 2,500 houses. There was even one day where he bought a total of 43 houses.
Generally, most people see that working a job means that your salary may not match your activity levels. But with Invitation Homes, the company made it worth his while with the salary and bonus he received.
As Tommy was leaving his job, real estate companies were redefining themselves as tech companies. So he started to think about the longevity of his portfolio and realized that true value is in rentals.
He has since purchased a property in Evansville, Indiana for $8,000 with $30,000 put in rehab. The property now brings in $725 per month. Currently, he is underwriting for a 10-unit commercial property in Daytona Beach, Florida.
His strategy is to use his qualified funds to buy out-of-state properties and achieve 24% gross yields.
While there are a ton of distressed sites where one can find deals, the best deals come from relationships you’ve built. Since people know what he’s looking for or they want to split a deal, he has been getting deals from people he has connected with in the past.
Building those relationships takes time and effort. You have to be calling people and be genuinely engaging with them. Most would have to start somewhere, but the best is to start with agents and stay in constant contact with them.
There is value in connecting with the agents and referring them to business.
Tommy has never cold-called people. At the moment, he has paused their direct mail. But he is starting to do more joint ventures. He finds that he can get a better return on investment getting ownership of the half side instead of taking full ownership.
Because of how he has maintained and built up relationships, people are motivated to call him again for the next deal. With the joint venture deals, the people who offer him part ownership usually just shell out $8,000 of their own money. This way, they don’t have skin in the deal and become eager to get Tommy involved again in future deals.
Tommy does weekly meetings and uses the best communication tools so that their stagers and agents are aware of the scheduled dates.
Systems are critical when you’re doing more deals. But for those getting started, even just using Google Docs can be enough.
It’s also necessary to take before and after photos of the property during construction so that you’ll have a comparison.
Tommy is keen to grow his horizontal income. Horizontal income is what Tommy considers as the money he earns when he’s sleeping and not working.
With that goal, he’s been building his capital stack to be able to buy more rental properties. For every 10 flips, he would buy 1 property that he would hold onto.
To finance his deals, he’d usually make commercial loans as they offer reasonable rates.
While Tommy loves doing the creative, heavy upgrades, his end goal is to get 100 free and clear houses. The political climate is going to make it harder to own a house in general, so Tommy believes that rentals will continue to appreciate.
Tommy always thought he had the secret sauce for foreclosures. Turns out, he was just at the right place and at the right time when people were ready to sell.
The greatest value in real estate investing is providing value for other people. Tommy loves hearing from people who were able to close deals. This is why he makes the sacrifice to always take his calls.
His belief is that if you don’t take their call, then they’ll call someone else. Plus, his conversion rate is higher if he gets on the call himself instead of passing it to his analyst.
The most important part is to do deals, so go out and find a deal.
If you find a deal, call Tommy and they’ll be able to help you because they already have the systems in place.
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