Wall Street Institutional Investors and Scaling Business with Tommy Christy, ILoveHouses.com #DDRE42

Episode Transcript
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Aaron Norris (00:05):
Welcome back to the Data Driven Real Estate
podcast, the podcast for realestate professionals dedicated
to driving business using data.
I'm Aaron Norris along with SeanO'Toole with PropertyRadar, and
welcome to Episode 42. This weekwe have Tommy Christy. He is CEO
of Alpine Holdings, Inc, andowner of ILoveHouses.com an
acquisition company nationwidewho buys through digital
advertising and online mediaplatforms. Tommy has over a

(00:26):
decade's worth of real estateexperience $500 million in
investment activity, and evenacquired, renovated, and leased
over 2700 homes as part ofInvitation Homes back in the
day. He's also done over 1000foreclosures and distress flips,
personally. So, Tommy, welcometo the show.

Tommy Christy (00:43):
Thanks for having me.

And you still, after all of that you still love
houses. That's amazing.

I adore them.
They make me happy. I loverentals. I love houses.

I sort of want to, what's interesting, as I've
talked more about the InvitationHome sector over the last couple
years, and I thought I wouldthere's a lot of misconceptions
of what they did in the marketat the time. I know a lot of
Main Street real estateinvestors, we were going to the
courthouse steps, and we're veryupset with you guys, because you
guys were buying under verydifferent formula that we could

(01:12):
do on Main Street. Can we talk alittle bit about that experience
and how you've been ended upthere?

Yeah, I uhm...

Sean O'Toole (01:19):
One second, I just want to back up for because
we've got lots of people outthere watching, like most people
don't know who Invitation Homesis or why it was important or
the impact they had during theforeclosure crisis. So, let's
start with that if you don'tmind Tommy?

Yeah, no problem.
I so, starting there, invitationhomes was, you know, a player in
the institutional space oftrying to create what
multifamily hadinstitutionalized and
single-family world. So, whenWaypoint, American Homes 4 Rent
there was quite...What's that?

Colony.

Quite a few players there that ultimately
saw a clear opportunity. Andthat opportunity could be
quantified, as you know, highyield rent, higher, the
multifamily became very, veryscheduled, like you can take
stuff down to a LA for camp, youknow, because they know, nothing

(02:19):
really changes inside, you gotmaintenance schedule, you have
everything inside your lending,single-family never had that was
a very, very sparse, you know,separated markets. So, I think
Buffett first said it, he said,'Hey, if I could buy 100,000
houses right now, I would'. Andthat sparked just enough for the
people who have that kind ofmoney to say, how do we organize

(02:41):
talent? And how do we organize amodel and institutionalize that,
and there was a lot of fearbehind that. And there's a lot
of excitement behind that andout of Invitation Homes being
funded by the largest privateequity firm in the world. It's
kind of like an easy target kindof approach to it. Like they
were like, a lot of articleswritten about Invitation Homes,

(03:02):
when in reality, it was moreabout an industry. So, they
created, you know, there's asingle-family rental industry as
it is. And that is, really whatquantifies Invitation Homes is,
how can we build, manage,maintain an organized and
capitalize on this opportunity?
Which was the 2008 recession.

Yeah, that didn't exist, right. Like large scale
ownership of single-familyhomes, as rentals, as an asset
class for institutionalinvestors did not exist before
that.

No.

So, you got to be right in the front lines of
that.

Yeah.

But yeah, let's let's go back to you know, how
you got started business beforeand then how you got that
invitation?

Great point.
2002. I got a job sellingcoupons at a college and then
management training program. Andthen I learned how to, knock-on
doors. And that added a lot ofvalue to sales in the generality
of how personal real estate is.
And, and then I was picked up bya local foreclosure company to

(04:10):
do that, essentially setappointments for people who
understood what they needed todo once they got the
appointment. And so, fastforward into 2008. I had begun
doing my own buy, fix, and sellstuff and I was on a list of
people, that you know, reallydoing enough volume that they
can be recommended by FidelityNational Title Company, fidelity

(04:33):
was the major title provider forthe Invitation Homes model at
that time. And all those powersthat be said, I'll refer you to
the people I think that couldreally help you guys build this,
and I was on that list withDaniel Claiborne and the two of
us interviewed for it. I thinkthere's probably at least five
of us that had done that. Andthey were looking for...

In Sacramento region?

In Northern California. Great point

Northern California. Okay.

And there were, the Bay Area was its own region,
Sacramento was its own region.
And but at the time we just, wehad, they had already, we're
driving it was like, you know,flying and flying the plane
while you're building it. So,the, the immediate need to place
capital was just so evident,like they're like we have to get
product inside of this buy box.

(05:21):
I think that's where you startedAaron, was like how and why is
that nobody's going to build ahome for $80 a square foot,
including all impact fees andall of the, you know, horizontal
infrastructure, you don't govertical in Southern California,
Northern California, or some ofthese other markets. So, we're

(05:42):
buying assets under thereplacement cost, easily
financed, and the demand forrental housing was shooting
straight up. So, three easyfactors there. And they
basically said, and it actuallywas less about me, it was like,
'Can I not lose my money inNorthern California?' You know,
like that was almost like theangle of because everybody got

(06:05):
hurt in 2008. It doesn't matterwhat level you are at, you got
hurt some one way or another.
And then you bounce back, youknow, so I think there was a
fear part of that I saw Waypointwas a great company and they
were building before we were andI got scared. I'm like,
'Blackstone's coming, and I'mgonna be out of business.' So,
we worked it out. And it was waybetter, bigger and different

(06:28):
than I ever had anticipated.

What channels were you buying in? Was it
foreclosures? Trustee sale?
Would you buy anything in anychannel?

Yeah, so that was... That's a really great
question. I, I had immediateneed to, I had an immediate
ability to take down to trusteesale files. I think that's what
really appealed them. I've hadpeople in five counties, some
guy started a program calledPropertyRadar and level the
field. And, and I had noweverybody was there because data

(06:57):
was so available. And I lookedat it from, they were swimming
in a pool that I was not. I wasnot buying 1990 or newer stucco,
tile roofs, like the easy ones,we're going to people that were
better financed than I was, Iwas doing the you know, rurals
or fixers and, you know, dirtytitle stuff, anything, but our

(07:19):
volume was high. So, 2009 and'10, we were into Vegas,
Phoenix, California, we wereable to place capital,
relatively competitively, youknow, like, meaning the margins
were still very reasonablebefore they had compressed. And
so, when I, they they said, 'Canyou get us product? Is there

(07:41):
stock in the market?' And theanswer was, yes. So, we were
locking up short sales, peoplewere closing on short sales, you
know, that were six months, andthe market was advancing. And
we, they would close like, 200,we would close it like 250. And
then we'd be so afraid thatsomeone's gonna write an article
about how, seven days later,we're paying $50,000 bucks more

(08:04):
for a short sale that took sixmonths to negotiate. Very PR
unfriendly, you know, for us,like, like, we're overpaying for
something when in reality, likewhere we started at 80 bucks a
foot. We are not overpaying forthis product right now, you
know, like...

Well, having competed against the likes of
you on the trustee sale side,you know, a lot of local Main
Street investors were scratchingtheir heads, like these guys are
going to get hosed. They don'tknow what they're doing.

Yeah.

Pissing everybody off. Because your formula was so
different. Because, you know, atone time, we had to calculate
how much it was going to go downin the amount of time that it
took us to rehab and flip theproperty. So, that's a really
weird formula. It's not...

...yeah, a great point.

70% minus repairs.
Oh, yeah. And every month theprice is going to go down. 3%.

That is so yeah, it's very relative. And, and I
think that's what changed forme, I spent investor management
is at least 15% of any flipbusiness, you know, you're like,
let's just say a deal camethrough. How am I going to
finance that? You know, Is itfor me? Is it a partnership
deal? Are we equity sharing withsomebody else? Like, what, what

(09:10):
works for this deal? Not everydeal. They're all deals and some
of them are cheap, and some ofthem are expensive. You're in
the Bay Area, you do a $700,000takedown and a million dollar
exit. Those are completelydifferent than buying a $70,000
house. That you mean, we wereselling condos in Vegas for 25,
for 25 grand that tells you thatthere was enough margin in that

(09:31):
but I made money somehow buyingit cheaper than that and selling
it like you could buy just likeyour data set more than 100
times like you can buy condos inVegas for less than a Honda
Civic. That was 2010. So...

Yeah.

The world came back and full cycle and as you
know, it was different.

I definitely remember all the calls I got as
as Invitation, Blackstone, youknow Colony, Waypoint started to
operate in these markets. And,you know, people are like these
guys are overpaying. And it'sshutting down the opportunity.

(10:12):
And I have to admit, at first, Ididn't understand it, either.
Once I understood that they werebuying to rent, and I went, wait
a second, you know, right now atthese prices, the, the rent was
10, 12, 15% return oninvestment. And I believe, I

(10:34):
think most of these guys had atarget of 7% or better. So,
they're like, bid it up untilit's at 7%. The markets at 12%.
That's all it's, it's tens ofhousnads of dollars more the
100,000 more than anybody elsen the market would buy to flip
t. But their their goal wasn'to flip it. And all these

(10:57):
uction investors had beenuying the flip, versus buying
o rent. And I just, it wasike, once that light bulb went
ff, it went I went, 'Wow'. Andou know, it also told me, I
hink I wrote a bunch ofrticles right at that time
aying prices are about to goay up.

Yeah. And what year would you say that was? Was
that that 13, 12 kind of mark 14range?

I think the first started getting the first signs
of it in 10, 11.

Yes.

Because it was in, it was in April of 2010. That I
said, the foreclosure market isgoing to come to an end. And I
need to start working onbroadening beyond foreclosures
to all properties and otherthings. So, that was in April

(11:47):
2010. But our foreclosurebusiness didn't peak until 2013.

And that was like ours, that my 2012 was our
biggest year I, I'd created asimple product that was anything
in California under $60 grand,I'll buy it, it didn't matter.
Like I don't care how ugly itwas, or where it was, I was
financeable and the rents wouldalways cover it and that I have
private money lender that wouldtotally agreed and I would buy

(12:16):
6, 8, 10 of those, put a$600,000 loan on it get all the
money moving back at trusteesale.

And yeah.

So, Invitation Homes came and they're like, oh,
no move the combo. Like we coulddo $360,000 rentals. And my
mind's like, that doesn't makesense right now, you know, I'm
smarter than you, you know, butturns out they were right. And
they gave me a giant spreadsheetthat said prove this biggest
spreadsheet headache thingyou're gonna have to do every

(12:45):
single day to prove this iscorrect. And that was the model,
the model was at one point intime. Everything that is going
to auction today will be worthwhat it was worth when they did
a loan on it. And so when isthat? And so they told me three
to five years, and you betterbelieve I kept looking for

(13:06):
articles. But what are we goingpublic? What are we doing this
like because in my mind, Ithought, three to five years,
the whole world to be turnedright back on again, perfect.
And I thought people were lateto the market and I could name
100 funds started after 2015that half a billion dollar net
worth, you know, the world hasshifted. And there is a hoarding

(13:26):
effect that are going on tothese rentals. And the news
feels like it's this percentageof the market but it's still you
know, this small percent of therental market it's people's move
out of their house to keep itand though they're doing the
rental laws in California, Idon't know what it is
nationally. kind of similar tothe fact that people want to be
able to keep their home and notbe held to the same standard

(13:48):
that a large rental fund is heldto like it's just about the
dollar like when you're doingone rental to one person or one
family it's, it's, just it's adifferent models financed
differently. It's and it'screating wealth for families
and, and the small investor.

You have so, many different interesting things to
talk about. I definitely wantedto cover that I think I want to
make sure we spend a lot of timeon you. But maybe we can do that
by saying what did you learnthat Invitation Homes that you
carried over into your ownbrand?

So, you know, Invitation Homes is like moving
the comma twice, if not threetimes, like so for the small
investor and other you find yourniche and, and sometimes you're
not working enough on yourbusiness to know that your niche
has expired. Like ohforeclosures are going away.

(14:41):
Like I'm still here at thebuyers there no one else at the
auction right now becausethere's nothing going to sale.
You know, you show up now andthere's 10 of us of which Sean
let the secret out. There's onlyone today like and everybody
knows where it is and what'sgoing on and where it's being
posted. And I think when Italked to Sean before about this
was that you saw some prettycrazy stuff going down the
foreclosure world. And peoplehad different niches and ways to

(15:04):
do it. And it's still very, youcould be an attorney trade at
your auction, an auction at youroffice if you wanted to be or
the sheriff's office or whereveryou want to try a sale. So, the
foreclosures kind of went away.
And I now classify myself as adistressed real estate investor.
And..

...you still do that, but you have started
seeking other... right, whichis what in April 2010, I said
is that's what we're going to ned, we're going to need other w
ys to look for properti

Yeah, you're right.

Well...

I hope.. Aaron, I kind of got off track there.
What was your question?

Well, it just, it's interesting to come from
that background, you probablysaw some things that helped them
scale, and you sort of learnedon their dime. So, what did you
learn from that experience andbring over into I Love Houses.

So, I would say that inside of the larger
institutional model, the feargoes away. When it's your money,
and it's one deal at a time. Youdon't worry about where the
money is coming from. I mean, Ihad treasury management to do
every night. And when we wouldlose cashier's checks, which any
foreclosure guy understands youdo, like, I can tell you

(16:16):
competitors that are washed themin their pants, you know, like,
you just watched $400,000, didyou forget you had $400,000 in
your pocket?

Cashier's check, right? It's not, yeah, it's
cahsier's check

You have some bond out of that. And I would
have to at night, I would haveto say you gave me 400 cashier's
checks to go to five locationsat three different auction
times, you know, and if thestack is this big, and it's $8
million, you know, like, how didyou spend that money today, and
then I would have to spend moretime, we actually had people

(16:48):
that were treasury managementinside of our, like, from the
bookkeeper side, we had a localCFO, you know, and then it goes
to national and the, you know,the brand shifts, and it's
significantly different. So,when you're a dude doing a deal
and one deal at a time, or fourand a quarter or other, you

(17:09):
learn, like, what is my buy box?
How do I live within that buybox, still find stuff, manage
the cost of money, you know,because that becomes super
relative. And when I was atInvitation, people would call
you they will read an articleabout you and say, 'You guys
want to buy my house.' And so wehad a sheet that was, and then
people called Blackstone peoplecalled BlackRock, because they

(17:32):
didn't know there's BlackRockand Blackstone, and Blackstone,
and they were like, Well, how dowe capitalize on this, and maybe
they funded you know, Colony orother I don't know where their
money came from but I, it was,it's just a, it's a completely
different mindset, when youdon't have that fear factor and
our fear, you know, in my buddy,Dan, and I, we, because we were,

(17:52):
we would get there and we wouldhave to have the money out by
4:45, in order to get a drivelist in the morning to the Bay
Area, and you can get SolanoCounty still in time, we can get
the money back to San JoaquinCounty, and we, we would just be
rotating the bodies. And we hada phrase called use, buy, buy,
buy, don't buy that, you know,it's like this whole like this

(18:12):
vague, you know, you feel likethey're going to hold it against
you for what you're going tobuy, like, and your job will be
judged based off of that successor that failure. Because we were
going so fast. So, in October of12, we had a day where we bought
over 40 houses in one day, youknow, and you're like, Okay, so
let's, you know, we have peoplethat change the locks, and then

(18:37):
you have vacant houses. Now,we're so afraid of the world
writing an article about howwe're mismanaging our houses
that we've now owned for 72hours, you know, like, it was
vacant for seven years or fouryears, you know, and so it was a
different model. And it's I lookat how the rent is bonkers here

(18:59):
in Sacramento right now. We'regetting a giant Bay Area effect,
which goes all the way up intothe Tahoe region of people
affecting the prices and therents and the other. And I
Invitation home said it's goingto be worth this one this much
someday, and it'll rent for thismuch someday. And when you see

(19:21):
that on a spreadsheet times 1000it's not relative to any thing
you and I will do if you'reyou're just you don't you never
think about borrowing a billiondollars against your portfolio,
you know, so it's just it's notrelative when you're looking at
it, and they hire analysts,right. And that's the approach

(19:42):
as if you had a person goodenough that they can go out
there and flip 12 houses at atime. They're not gonna be an
analyst for $40,000. You know,so that's why the model,
maturity, you got a lot of goodpeople and then people they
actually the salary startedgoing up, too. So to get a great
acquisitions guy into get it,you know, some of that it's

(20:02):
totally worth their while thatwhen they turn off their phone
at five o'clock, you know, likeit's off, you know, the it's a
standard HR. By the time I leftI had 90 employees and I was
they basically said you got tohave maybe 75 by the time you
were gone and because you buildup to deal with problems you
have much like multifamily, youhave a person dedicated Hoa and
dedicated to you know, the, thetaxes and the issues of code

(20:27):
enforcement and go along withit. And other sorts, it was way
different and way better.
Wait worked on the managementside, not just the acquisition
side, you actually manage themand rented them and ended the
property management side too?
Yeah, and I, I would have to getinto the dirty evictions, and I
would have to and, so peoplewould come in and be very upset

(20:49):
about you name it bugs in therentals, or, and they would
surface up to, you know, like asurface level of, I had to get
involved. And at the same timeI'm on, you know, two-hour
conference calls to New York ortwo-hour conference calls to
Dallas, our home office andtrying to deal with everything

(21:10):
comes up with being a propertymanager, you know, the
responsibilities of spending,you know, millions of bucks and
trying to find product and thatwas can you get enough? How do
you incentivize people on MLS?
You know, how do you managepeople bring you stuff direct
and the conflict of, you know,not being your own broker yet?
How do you lease stuff? It wasreally interesting, it still is,

(21:32):
like, all of those companies, Ithink, have appreciation to run
I don't, I think they're gonnahit a, they're gonna hit a real
issue with their yield targets.
Now, they can't keep buyingforever. That's what builder
rent is just blowing up.

So, you mentioned earlier it was buy, buy, buy,
buy, and then don't buy?

Don't buy that.
Don't buy that house, like youcan't buy...

You have a story you've shared there with me
before? I don't know if you'rewilling to share it, but one
that you bought and it got youbranded a little.

Yes I... There's a very reasonable amount of ego
that goes into the auctions. AndSean had mentioned a guy that
almost sounded like, you know,it's like the gamble right? You
know, some people look at as aninvestment and some people
really love the chase and thedeal and you know, Trustee sales
are a riot for that. Becauseyou, if you go the extra mile,

(22:28):
if you're following 20 salesversus 200 and you door knock
everything you know their baconand other people don't or you
know, the people in there havealready broken every fixture in
there or other you can kind ofmake some a lot more educated
decisions as you go.

So, on and it's get it is feels like gambling
down there.

It does and people. So, so the very first
week we did this, it was it wasthe best week for us. Because
nobody knew it was me. I didn'ttell anybody. And they're like,
'Christy, somebody came to theauction they bought seven
houses', 'That's rude! Thosepeople are rude. They did not
come here at all'. That's me. Ijust bought those. So, you
didn't notice the mailingaddress on every single one of

(23:08):
those is the same. Like I stillget mail from our California
entities here. I'm justforwarded over but so I bought,
the guys in the Bay Area orrunning us up just because they
knew we would probably just keepbut they felt like if I overpaid
they would, I would leave.

You'd go away.

Yeah, like it's just numbers on a spreadsheet.
They don't understand that likeit was it's a three bedroom, two
bath 39 square feet and you'repaying $330,000 bucks. Like, and
in our world, it's a $550,000house. It's, it's not worth
$330k you think it's worth $330kbecause you're looking at in the
next 90 days standard foot modelwe're looking at...

You're looking at the cap rate worth 550.

That's worth 550 I get it should never be worth
330 like there are people aregainfully employed in the Bay
Area or jobs. And there's ashortage of housing and it's
impossible to develop. So, andwe weren't looking at it as 550
but we just knew I could pay 7%of its value and not offend our
model. It's, it won't be aproblem at all. As long as I can

(24:15):
stay within 'Can I pay themortgage? The yield?' And so one
of the guys is running this up,and he was bidding on a 50-acre
single family in Solano County.
So, I rang him up and I boughtit. I bought a single family
55-acres and I want to say likeand the rents were high the
purchase price was low, veryreasonably close to developable

(24:38):
land.

But we always heard about Invitation right?
Like it has to be like a three,two, single, single story like
rying to keep that really tighty box.

Yeah.

This is way outside of that buy box is way

It is way outside of the buy box. So, I nobody I
would so we had regional guys,some of them were the founders,
you know, and these guys wouldshow up and they just need to
say I was in their region, greatpeople, great, you know, great
organization. They, they'rehiring well, they're building
this model well, that was theirjob and...

...well run company.

And we would they, we would audit the
purchases. Like, you can't buythis, you know, like you can't
buy this product that was alwaysthe, the look you're expecting.
Well, when they found out abouta 56-acre or 55-acre ranch, you
know, home, what if they didn'tgive me crap about at first,
they're like, you can't buy thatit was just simple. Then they
moved on to the next issue we'redealing with. But when I went

(25:33):
out to Dallas one time, well,the guy gave me a cowboy hat.
And I was like the rancher nowlike, and in my world, I'm like,
these guys are running us uplike I, from just not like a
back off. But like, I can buywhatever I want. You know, so we
bought a 4500 square foot rentalhere in town. And those guys
want to it's not your buy boxes.
What's my buy box? Like if Ihave $5 million in an envelope?

(25:56):
You tell me about the buy box?

How did you decide to end up leaving?

It was perfectly time, they, I was buying. And
then property management whenyou bought so. And so if I
wanted to stay, they would havefound anybody who wanted there's
still Atlanta is still there.
Alicia is still there inAtlanta. And she took on I just
saw an Invitational , but she'snow got a national role. And I
was second to go. I want to sayVegas was first they timed out.

(26:30):
You know, they had a very tightbuy box. Maybe only 1200 houses
their total. And like, forinstance, Tampa was Tampa and
Orlando. And they were stillbuying and we weren't like it's
just the mortgage cycle wasdifferent than the trustee sale
cycle. So, she, we got a new COOand she said 'Your wife's

(26:53):
pregnant?' And I said 'Yeah,''So when is she due?' I said
'October 15'. And she says,'Okay, I'm going to exit you on
17.' And so my five-yearvesting, I got to shave almost
three years off of it still getall the upside all but majority
of all the upside thereon andshe just knew they were

(27:14):
converting to a propertymanagement company now, they're
just, they still are anacquisitions company, but it
could be run national and thevolume wasn't there to support
my salary and bonus structure.

So after your exit, you know, did you
immediately launch I LoveHouses?

You know what I did, but I didn't do anything
with it, I launched it, I tookthree months off to be a Dad and
just try and figure out what Iwas going to do because I had a
major identity crisis. Like,I've just reached a level of
success in a growing region. Andlike, I could apply that I could

(27:51):
jump on, I think Blackstone waswas launching a multi, a
single-family rental loanbusiness at that time. And they
were you know, there was, therewere...

Aaron knows them well.

Yeah. And, and each of them I remember, you
know, kind of looking atOpendoor thing, you guys are
late to the model? You know,usually, and then of course,
they're a technology companythat's growing like crazy. And
there, I want to say the otherguy, multi-billion dollar
valuation recently, and muchlike, I don't know, everything

(28:28):
in the world, I didn't see...

...there's a perfect fit for going out and
helping acquire homes and, andgetting them through that
process. And the rest, right,like, yeah, yeah, so for sure.

So, I didn't know what I was going to do... I
still didn't know I, I stilldon't know, like, I guess it's
a, you know, I get the shinyobject thing going. But doing in
volume is really fun. You know,like, it's just but buying a
single-family housing, you candecide whether you keep it for
the rest of your life, or youflip fix, and flip it or other
was, and being self employed,and you know, kind of

(29:02):
controlling your time and beinga dad with, with young kids. I
felt like getting back into, youknow, the 65, 70 hour week of
trying to build something biggerwas not a good fit after doing
that, you know, my wife gave meX amount of grace. I think I've
used up all my husband points atthat point in time.

Well, kudos to you. I mean, it's not always an
easy transition to go fromtrustee sale buyers and in my
experience are very differentfrom sort of what you've gotten
into going after equity sellers,things like that. So, can you
talk a little bit about whoyou're targeting these days? And
how?

Yeah, great point. Recently, I found that,
you know, being in, I think it'smy 18th year or so doing it. So,
I've got a lot of greatrelationships. And the biggest
difference for me and what we'retargeting now is some regions
are actually getting far betteryields for us like Tampa and

(30:01):
Orlando and places where we wecould partner with people or we
can get reasonable product tojust, you know, work off of
previous relationships we havebuilt to move and do the same
thing in other markets, but getthe necessary yields we need or
more of the velocity of becauseyou can turn a house in six

(30:21):
months and have a day job and dotwo deals a year and make a
great site, a great living agreat income, you know, out of
that and our volume right nowfor what we're targeting with
the digital ad spend in theGoogle, Google AdWords and
creating that funnel is a bitmore about spending money on

(30:46):
building the funnel, you know,less, less on buying, sell your
house as is or less on buyingthe words about sell your house
faster. I mean, everybody'slooking at how you diversify
yourself from it. But if youknow your, if you know your
thresholds of what you canspend, and what you can manage,
currently, the constrictions onour market are do you have the

(31:11):
staff? You know, do you have acontractor that will allow you
to do an extra 10 deals a year?
Like, do you have the finance,you know, behind you backing you
that you can afford to do thatare you able to so we target
right now we're just targetinghaving houses at all, you know,
things that we would usuallycall a $50,000 flip, if you have
something available, and themarket tells you they're not

(31:36):
willing to pay you what youthink it's worth as is, you can
always flip it. So, we targetjust wholesale stuff that's
coming through, a lot of peopleare able to make a buck off of
bringing us a transaction,bringing us a deal, pre market
stuff. We've put out some mostrecent free stuff, you know,
Facebook ads and other thatpeople used to post what you're
looking for. And people say,'Hey, I have a client looking in

(31:59):
the following zip code in SimiValley' or you know, whatever it
is, you can actually make moneylooking at wholesale deals
differently. Because they have aclient that's going to take it
off your hands, or, you know,the yields start to compress to
a point where you have that fearkind of kicks back in. But this
market is very forgiving rightnow, like you don't have...

...prices are going up plenty of buyers. And
so it's kind of hard to make amistake, you're not catching a
falling knife. Like we can inother markets like 2006, 2007.
So, it sounds like it's aninteresting idea there of like
finding, you know, becausethere's so little inventory on

(32:44):
the market. Right? There's quitea few buyers.

Yeah.

Buy for those. I mean, you're a great at finding
off-market deals. Right? That's,that's what you've you've found
1000s and 1000s of deals thatwere not on the MLS. And so, by
knowing what people are lookingfor, by having those buyers, you
can go out and look specificallyfor that.

Yep.

Fill that gap and, and make something in between...

and the agents too. The agents are so great...

Very fast.

Yeah, the agents are such a big part of that
agents and brokers who knowexactly what they're looking
for, you don't have to explainto them the dynamics of the
market or, you know, the buyersthat are really just
uncomfortable with losing andyou know, I think that
politically it will change. Ithink that the key here is
liquidity and lending you know,if for some reason the FHA flip

(33:39):
changes deals like do I want towait 90 plus days to close this
house when I can sell it rightnow? Like there's a big, that,
that actually matters inside themortgage industry too. So,
that's how the 3% downconventional came about...

FHA has a rule that you, they won't fund a
property that was purchased lessthan 90 days ago. But basically,
it's kind of an anti-flip rule,because they're worried about
flippers making money, I guess,or or trying to defraud the FHA.
But I think it's a ridiculousrule in, in a market that's
moving quick and in in, in aworld where folks go out and

(34:17):
find hoarder homes and otherthings that FHA wouldn't finance
anyways. And then they willclean them up and get them to a
point where FHA can actuallyfinance them because they're now
cleaned up and title issues arefixed. Why does it matter was 90
days suddenly some magicanti-fraud number?

Yep. And then you you take a buyer, and you trace
them through the model, okay, wecan't go FHA. You're not a vet
can't go VA. Now, you know, youdon't have the down payment. And
then there's that, you know,it's like it becomes it we're
incentivizing people with payingyou $6000 bucks or 6% of the
purchase price. You know, whenthat goes away, there's this
huge fear like oh, no, likewithout the buyers, you know, no

(34:56):
one's gonna buy houses from usif they don't get a free 6% tax
write-off for credit. And so,the financing hasn't matched the
emotion of the market and kindof where this stuff is going.
And you know, HOAs will squashdeals because you have to get
into stuff and you have to bepre approved by the HOA, there's
a lot of weird filters that gointo who gets to buy these
things. But for right now, youknow, if you understand how

(35:20):
you're buying it, or how you'regoing to exit out of it, we're
taking really tight deals rightnow that are not penciling
tight, like we are making greatmoney on because the markets
giving us gifts, but has nothingto do with us. We know the
product. It's a four two singlestory 1600 square foot house on
a court. But when the market isfull hiking, it could be on the

(35:42):
busiest street, you know, thefourth bedrooms upstairs, and
it's at a seven foot ceiling.
And people are like, I'll takeit. It's got four bedrooms. I
want that house. That's my dreamhouse like and suddenly the
market's making investors feellike we know we are the best
investor the best flipper that'sever live. You know, like...

Which markets are you working in right now?

I would say so we have 35-ish flips going right
now. So, that includesstabilization of rentals. I
started buying in Memphis inArkansas and Tulsa, you know,
places where I found people thatwanted to work with us, they

(36:26):
just said, You know, I got thecontractor based on this, if
you're buying rentals or I got,we can flip stuff together or
other like when we when we kindof vet it out. And you use a
Evernote or WhatsApp or whateverto communication, send photos
and have a great process. It'sit really brings a tight like a
lot of people are worried aboutbuying out of state they're

(36:47):
going to you can't drive by itor so we are probably
stabilizing maybe another 10rentals out of state right now.
That's Tallahassee, Tulsa,Memphis, and all the supporting
communities into Arkansas thatare surrounding Memphis, and I
love that stuff. And then I havemaybe a dozen full-time flips

(37:08):
and flips are at any givenstage, waiting for occupancy in
rehab, pending sale, you know,inside of California, and then
we have some in Missouri andFlorida and Texas, but actively
at least 20 of those are inCalifornia right now from San
Joaquin up to you know, NorthernButte County.

Yeah, it's interesting, you know, the, we
see so many folks like yourselfthat have gone and said, you
know, I'm gonna expand and go toother places besides California,
because the model that they wereusing wasn't working. And then
you see folks like AaronMazzrillo, who we've had on the
show, who I saw a post from himon Facebook this morning is

(37:51):
like, you know, I'm now notbuying it if I can't drive to it
in five minutes or somethingridiculous, like, or he's like,
oh, he said, If I don't, if Ihave to look at a map to see
where the city is, I'm notgoing. Like I'm not buying it.

I'll take those stuff. I'll take that stuff.
Like it's a trailer and it is a90 minutes that way, and it is a
windy road and fire insurance isreally challenging, I'm like,
'How much is it? I'll take it'.
We've got some amazing deals,rural because people are like,
'I'm not driving all the way outthere.' You know, like...

Right, right, right. And you're just like,
you're the guy willing to go andthat makes the difference.

Yeah.

Yeah.

And it is, you maybe I haven't graduated, like,
you know, I told Aaron untilthat point where I have enough
volume that I can eliminatethose. But I really like
stabilizing stuff like that,too, when you get a lower
purchase price, it's a loteasier to get lending done,
because you can leave less inthe rentals. And I just feel
like even the manufactured homeindustry is not delivering these
amazing, affordable productsthat people would hope they are,

(38:56):
you know, it's a matter of timeyou get a foundation underneath
it and a porch built on it andattach the see to it and
covered. It's like it's faster,and they have so many benefits
they offer in the world. But...

There's so much demand, you can't blame them for
not taking the cash, right? Liketo the promise was there. I
think the promise still is therethat it could be a lot less
expensive. But you know,somebody's looking at, okay,
I've got I'm going to spend $300a square foot for a site-built,
right? Oh, but I can get thisproduct over here and I can get

(39:29):
it in half the time. I'll pay$300 for that. And so, if you're
the, if you're that modularbuilder, right, you're gone.
'Yeah, I'll take your $300 itonly cost me $100. But sure,
let's go.

Yeah, buyers are finding them that way too. They
find out that someone else isselling their manufactured home
online that the lending laws aredifferent. And there's just so
much that goes into just buyers,you get a lot more savvy on what
they're trying to find. And Isee a major change in shifting
there that, not that we'vereached a level like, I just
think that within inflation andthe cost of materials and some

(40:06):
of these other things, we have aconsistent floor that's going
with replacement costs thatreally won't be changing. And I
really like that sub $250,000market, because it's $30,000
wire money...

It's going to be very hard to get back there for
any of that less expensivemarket. Yeah.

So, that's kind of I found a niche. And in doing
that too.

Before we came on the show, I think you mentioned
you're doing land development aswell?

Yeah, so as a distressed real estate investor,
you don't really get to choosewhat you do, like, you know, you
look, I like, I like that deal,I'm gonna do that deal, I'm
gonna buy this house, you know,put an ADU in the backyard, I'm
gonna sell it or I'm gonna splitoff a lot and keep the lot or,
you know, I have a trailer parkthat we bought on sale, I, I'm
not a trailer park manager byany means. You know, like, I
love it. I love the park, I lovethe rents, I got a FEMA lease on

(40:57):
it, you know. So, when, when theland came through, we do tax
sales too. And it was perfect,it's an L-shaped lot and the
property next door was boardedup. So, if I could acquire that
and get more density, it was areasonable purchase price. And
I, I really have the opportunitynow to exit out of stuff I
bought for 30 grand, 1031 intosomething better. And it's just,

(41:20):
it's a perfect opportunity tokind of build the rent. But if I
can't afford it, I can at leastbuild the pie, cook it and sell
the slices and keep my ownlittle slice of that. And I
that's how I see the developmentplay is. I'm not going to be
competing with a $5 millionpiece of land for the builders,
but I can bring 4, 6, 8,fourplexes to market. And there

(41:41):
are people who will take thatscheduled rent, get a simple
Fannie, Freddie, you know, loanon there and get a brand new
rental. And I, you know, it'seasy to be part of that when you
can, when you're when youunderstand the costs associated
with it, when you have a teamyou've built that'll help you
make an educated decision.

You know, and I think coming almost back to
invitation homes, I think thisis one of the things that I
think so many people missed backthen and probably still missed
today, right, is and I think tosome degree, the politicians
miss this too, right aroundlike, Why are these big these
folks are coming in and stealingthe opportunity for
homeownership and the rest. Andit really is kind of a simple

(42:25):
equation, right? Like, so. Ifyou're, if you built a business,
and you own your building,right, and then you retire,
you're 70 years old, 65 yearsold, you retire, you sell the
business to people don't wantthe building, right? You sell
the building. And you just wantsomething that is super easy.

(42:48):
And you know, if you get a 4%return...

...warranty.

...that money, it's probably, you know, my mom
just sold some property. Andlike, I did an analysis not on
her purchase price because itwas forever ago, but, but on the
current market value, she hadlike a 1% return. And I took
that property and sold it andput her in a new property that's

(43:12):
like a 5% return. But it's a nobrainer whatever. It's five
times the income for her.

Yeah.

Right. People go, 'Oh, I'd never pay a five cap'
and you're like, you're notunderstanding where this other
person's coming from?

Yeah.

So, if you can, if you can recognize, but there's
the issue there is, they want itto be perfect. They don't want
to have they can't rehab, mymom's you know, 84 but she's
not rehabbing a property, righ. She's not doing anything. I co
ld do it for her maybe but I din't. I'm busy. I don't have time
to do that either. I just wantto buy something perfect, done

(43:47):
easy, tenants in place, readto go turnkey, right? For her
nd that if you look for thosthings, that's a big oppo
tunity. And that's what I keephearing from you. Right is you'
e seeing these gaps.

Yeah.

And when you find those gaps, whether it's right
now these buyers that can't findanything, well, let me go find
something that maybe theycouldn't buy because it's not
financial until it's cleaned up,or this issues taken care of or
this title things taken care of.

And it's not a level playing field. Because if
you look when Florida keptrunning on trustee on auctions,
California we were done. Youknow, like there was just not
the volume there and now themortgage states needed at 18
months to catch up to that. So,when you look at the jobs going
to Huntsville, Alabama, and yousee conforming multifamily

(44:39):
there, which, that's my free tipof the world. I love Huntsville,
Alabama. You look at thesefourplexes that were built as
fourplexes and you're like, 'Ohyeah, that here is $800k' that
you know that product there isstill $325k and then as a
scheduled rate of return and youlook at it from the cost
segregation study that you'regoing to do on that and get a

(45:02):
giant off, you know, offset ofyour taxes up front. bonus
depreciation. It's differentthan your mom's like bonus
anything, I get a 10 yearwarranty on a brand new, you
know, fourplex, I look at it asI'm going to take a, you know,
I'm taking a existing product,and I'm playing a cost. I'm
actually adding value to mypersonal income taxes by doing a

(45:24):
cost segregation study. And Ibuy a new rental and I upgrade
out of a single family in areasonable area. And now I got a
four family multi unitdelivering return, and you get
the tax abatement that comesalong with cost segregation
strategy.

Yep, yep.

How do you scale?
I mean, you do so many differentkinds of properties all over the
country, how do you scalesomething like that? You're
doing some volume.

You know, it's transactional. You, you, you,
grow slowly. And people, somepeople grow too fast. And I
would say in 2008, the peoplewho in my, in my industry who
got hurt are the people who hadunlimited amounts of money, and
it was purely speculative. So, Ibelieve that you're right now I

(46:14):
bought a four two single storythis week for in, Sacramento, in
Sacramento for $350k. I thinkit's worth $450k. So, as is and
we're rent I could do you know,I can get a Fannie Freddie
friendly loan on that thing, Ihave a dual exit on this
property, when stuff was worth$500,000 at $500 bucks square
foot, you know, a new build insome no somewhere bill. And the

(46:37):
rents are only $2000 bucks, youdon't have that, you know, that
luxury. So, by scaling up slowlyand not taking on unnecessary
risk, you remain an investorversus in, you know, a gambler,
like if you're like, 'Hey, Iforesee the jobs are going to
come and they're gonna come hereto California', like, okay, you

(46:58):
see that, right? And whenTennessee and Texas are doing
campaigns to pull our businessesaway, you know, like it's, it's
a supply constrained marketwe're dealing with here. If you
are gainfully employed, and youwant to do a first your first
rental, your 10th rental, yourfifth rental, Fannie and Freddie
are like, that's fine. Do youhave reserves, and how much you

(47:20):
putting down? It's so simple.
Have you hired a propertymanager to handle that for you,
they take all the science out ofit. So you buy it. The most
important I mean, the mostmotivating model for me right
now is the BRRRR model to buyit, rehabilitate it, rent it,
refinance, repeat model, theburn model, you hear a lot of it
on BiggerPockets, and withDavid, and then, and then

(47:42):
Brandon. And if you can live inthat world and do one deal at a
time, you're scaling up yourrental business, or if you can
get with the realtors, theagents and the brokers and say
this is very specifically whatI'm looking for. If I have to
look at 25 deals, before we makeone offer, or make 25 offers
before we get one deal, are youwilling to work with me on this

(48:05):
and the agents and the brokerswill facilitate that growth, and
you meet people, and you tellthem the truth, this is what I
love to do, this is how we dothis, and people will bring you
stuff. So, scale is builttransactionally unless you are
building a business to scale, ifyour goal is I got to get 200
flips. That's a different levelof scale. For the relative

(48:28):
investor who wants to be anoperator inside of this space.
Do I have the people surroundingme there to help me succeed at
this construction managementfinance, you know, the finance
side. It's, it is a big part ofrehabilitation and cost of money
that will affect your business.

(48:51):
If it's all your money, and therisk is way less. That's not
really you know, something I'mlooking at from scaling from
that standpoint. But for thepeople who can do one deal a
quarter or who are gainfullyemployed, they want to do one
rental a year or one rentalevery six months or something
and the BRRR deals. That stuffjust you build on your current
success and you build on yourcomfort level like I'm not

(49:12):
buying 100 year old remodels orrestoration projects. We're
buying, In Arkansas, we're doing1990 or newer, single-family
houses sub $20,000 bucks. Andthey're out there if you like...

What? Yeah.

Like, did you say $20,000 bucks like you... 90 or
newer.

Yeah. Wow. One of the things I think a lot of
people especially that go Oh, Iwant to buy distressed is they
don't understand on this is ascale issue. They don't
understand how many propertiesthey have to look at to buy one,
right?

Yeah.

And I used to say when I was in the trustee sale
business, I'd look at 50properties to buy one. Where are
you now in that kind of how manythings do you look at to buy
something?

The season we're in, in real estate, it's higher
ratios. So, I would say in theMLS world, I toward 25 to 50 for
one that I get it is, but itdoes not mean there are no deals
on MLS that is one of the overthe objections, you hear people

(50:23):
like 'Oh, there's no deals onit.' Like, there's just stuff
that can't be financed or hashair on it, or people just don't
understand the dirt valueunderneath it. There's so much
there that if you're looking atit, but that is a grind, right?
The KPIs..

That's a perfect example, though, right? All
these people that say there'snone of this...
Yup.
Right? They're just notunderstanding the work it takes
to find them. I mean, that's soawesome. And it's, it's such a
such a thing we deal with everyday with folks are like, I
called two people and both saidthey weren't interested. I'm
like, call me back when youcalled 50, right?

Yeah. And so, when you buy your, you buy a
house on MLS and you beat thesystem, right? You were the only
guy who got a deal on MLS thisyear, they think you're right,
you're fixing it up, neighborswill come to you. Like I'm
talking a $6 vinyl sign in yourfront yard is like this, hey, we
buy houses and like, people willcall that phone number because

(51:24):
they're the neighbor they wantto how much is it gonna be sold
for? How much did you pay forthat and if you put inside of
the data that even the Radargives you it's like find out who
all the neighbors are sendingthem a postcard for 50 cents
each and say, just bought thisyou know, we paid $250,000 bucks
for it as is with the problemtenant, whatever you want the
you know the, the message to be,people will acknowledge that

(51:47):
you're doing it and so you youget the ball really starts
rolling on, you know peoplethere in front of you, they want
to work with you, they choose towork with you. And the MLS thing
is like it is a grind the KPIsfor advertising in Indianapolis,
it's like 1250 a deal. Like ifyou pump $3000 bucks into

(52:07):
advertising, you're going to geteither one or two or three very
reasonable deals out of that,from what a buddy of mine who's
got it season out there issaying and, but do you know what
a deal is in the first place?
Like 'Oh, Zillow says it's worth160', 'Oh, well, what's it
actually worth?' You know, like,you know, have you are you
working with someone on yourteam to do that. So, we get
inside of advertising, it's morelike 80 calls, eight offers, and

(52:30):
it gets you one to two deals.
And you know, the KPIs there foradvertising. It's more like it's
a real win would be $2500striking price, you know, per
lead that you close on orsomething but it's kind of
advertising, it's kind ofranging between $3500 and 5k

(52:50):
depending on, are you payingmore for advertising based off
of who else is buying and whenthat's a real fluctuation of how
you do it or strike...

Do you do direct mail? Like I found five to
10,000 pieces per thing, perwhat purchase? What about, what
do you see in there?

Inside direct mail, I haven't done it in
years. But I very, I loved Iwant to go back there because
the digital buyers click on farmore websites or other before
they find you. The direct mailis, they may have gotten 10
advertisements 10 days in a row.
And the one they got that day orothers the one in your hands
that speaks to them for whateverreason. They're not shopping for

(53:29):
more use, sometimes some peoplewill sell the mail aside,
they'll have 10 to look throughthem and decide which one they
want to call. However thathappens. I think there's a few,
there's a it's more of a levelplaying field. There's not like
they're actively looking at 10other people doing exactly what
I'm doing. I really had successwith working with that mail, but
we just haven't been doing itlast couple years.

Oh, how, when it comes to the KPIs on the digital
marketing side? How importantare really good lists? Or are
you sort of just targetingspecific terms that people are
searching?

It's, it's, it's really personal to the investor.
Ours are distressed. So, insideof the data of if I only did
mailings and property drove,drives and NODs. If I'm in that
same area, the lists thatoverlap become really important.
Like, do you have a codeenforcement blank list that you

(54:25):
could apply to that? Can youapply the USPS vacancy list to
that? It'll ring three bells,you could probably surface 30
houses out of a list of 300 thatare on all three lists. And that
becomes the science behind thedata is like how many more can
we you know, like if I only hadto look at these 30 like could I

(54:48):
target those personally, thenyou have no cost? You know, can
I do those drives or can I payfor those drives? There are
companies right now that you canpay for a photo of a house there
You know, they'll go in and openit for like, there are rental
companies and listing companiesthat will let you list your
home. And you can pay a realtorto show it for you. You know,

(55:10):
it's like a $35 fee or somethingand someone will go open the
door. And so, you don't have toleave your desk. Even if you
understand the data better. Andyou, or you line the data up
like that, it, it just becomesso obvious. You're like, oh,
man, I had 300 leads three ofthem, you know, these, these
ring, ring the bell three times,there's my focus.

List stacking, Hurray!

Right.

..I'm just kidding

What everybody else called List Stacking, we
just call criteria, just keepthat criteria.

Yeah, just keep adding criteria, and you can
eliminate that point time. Youknow, stuff over $600,000 bucks
and I have a stellar resumebreaking even on flips over
$700k like it is a, it's not, itis not the Bay Area market here
in Northern California likethat, like $700k last few years,
people are like, 'Oh, that looksa little, that's a little
pricey', now like our move upmarket is now like at $700k but

(56:05):
you look at something like oh,it's worth $750k I'm buying it
for $450k, you put $150,000 intoit and carried it for nine
months you know, like the marginjust aren't going, started
dying.

That's a surprises in the supply chain for doing
repairs. Not fun.

Yeah.

We are about out of time. Is there anything
you're really excited about thisyear as far as opportunity?

I think it's a real game changer for me as tax
strategy. I really feel like forpeople that are getting into why
you're buying it, you really canthink indifferently people that
need the write off that arebuying their first commercial
property they're they're gettingout of residential and
commercial buying their firstrental or other what you buy

(56:52):
really matters like and how andwhat its price point is and how
it cash flows according,according to seed you're
planting you know people reallydon't see the fact that you can
sell that duplex in five yearsand buy you know 10., 15 units
out of state you know or otherthat are cash flowing even

(57:12):
higher or better or different.
You graduate piece by piece bypiece by using the tax strategy
for your portfolio it's muchmore than one single-family
rental you own you get to driveby or other when you if you can
take the emotion out of which Icannot sometimes I'm like I
bought this thing so cheap, Ilove the tenants and have a
great dog and your kids aregoing to the high school or like

(57:34):
if you can sell something justlike what Sean had mentioned.
It's it's operating like a fourcap if you consider what you
paid for it or whatever, if youcould unlock that $250,000 in
equity you have now in propertyand how's that working for you
also, there's really a strategyto doing that every two years or
five years or other so I'm youknow, I'm looking for people

(57:58):
people that invest in me andother than get the benefits of
that when we co-invest or peoplethat loan us money some of the
stuff we're doing so well rightnow is choosing what we're
keeping and how and why we'rekeeping it and can you tell that
story to people that want tounderstand it and tax strategy
is something that is just reallydeep right now like for how much

(58:21):
of a benefit you can get out ofit that you proactively instead
of reactive tax strategy is somuch different.

Okay, well if people would like to reach out
to you where would you like themto go?

You know, I email is best and my LinkedIn is
great, you know for there's nota whole lot of Tommy Christy's
in the world. I'm not a JimSmith or anything, but you'll
see my, my shiny face on therewith my cute little shirt. But
we're Tommy@ILoveHouses.com.

Okay, I will make sure to post all the links.
Really appreciate your timetoday, Tommy.

All right. Thank you guys.

Thank you for listening to the Data Driven
Real Estate Podcast, you canfind show notes and links to
some of the resources mentionedin the show at
datadrivenrealestate.com. Clickthat join the community, and
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(59:18):
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