Brandon:
This is the BiggerPockets Podcast, show 550.

Tommy:
My preference right now is with all the overhead that I do, I’ll continue to flip however many houses are necessary to feed my rental addiction, and I want to buy, stabilize, and hold stuff while debt is low, replacement costs are irrationally high, and the rents are high.

Brandon:
What’s going on, everyone? It’s Brandon Turner, host of the BiggerPockets Podcast, the show where we believe real estate investing is the greatest path towards financial independence and wealth and freedom ever known to mankind. Here with my co-host, Mr. David Greene. David, what’s up, man? Awesome to have you once again on the show. How’re you doing?

David:
Yeah. We were just blessed with a little cameo of Josh Dorkin poking his head into the shot there. Looks like he came over to use your pool.

Brandon:
He was, yes. Josh is actually sitting right outside my office right now. What’s up, Josh?

Josh Dorkin:
What’s up, everybody?

Brandon:
He says what’s up everyone. Because the next episode that comes out, this is not episode, this is actually 550, but 551… Here’s Josh. Come on over, Josh.

Josh Dorkin:
What’s up people?

Brandon:
There we go. So Josh and I and David are going to be recording episode 551 when this gets over. So yes, you heard it here first that Josh Dorkin and will be making a guest appearance on the next episode, but not today. But first, let’s talk about today’s show. Today, we’ve got an amazing interview with a good friend of David and I, his name is Tommy Christie. Tommy’s been one of those guys that is super humble and you talk to him and he is like, “Oh yeah, I do real estate.” And then you find out he buys hundreds of properties and has bought thousands of properties over his life. And he just kills it.
So we talk today about scaling, what it takes to beat hedge funds at their own game, because there was a time where Tommy actually worked with the hedge funds to buy a lot of properties. So we’re going to learn about how you can get around them and find good deals even if there’s those big buyers in your market. We talk about how important it is to have a good criteria or a buy box, is what Tommy calls it, and so much more. So all that and more to come. But first, let’s get today’s quick tip.

David:
Quick tip.

Brandon:
Quick tip is simple. Listen to this whole episode, because it’s going to change your life and then listen to the next episode, 551, because it’s going to be a very special episode. So that’s the quick tip. I think now it’s time to jump into the show. Anything you want to say before we bring Tommy in?

David:
Make sure you listen all the way to the end because we get into a really good conversation about all the strategies that are available and how to pick the one that’s best for where you are at this stage in your financial and your personal life, as well as how you can expect it to evolve as your wealth grows, as your family life changes, as your work position switches. Different strategies work better at different phases in life, and I think we do a pretty good job of explaining, painting a picture of what that look like as someone’s career progresses.

Brandon:
That’s true, man. It’s true. So that said, let’s bring him in. All right, Tommy, welcome to the BiggerPockets Podcast, man. It has been many years in the making and I’m excited for you to be the last guest that I get to interview here on the BiggerPockets Podcast. What’s up, man?

Tommy:
Wow. This is the honor. And man, I am excited to be here. Thank you for having me.

Brandon:
Well, thanks. For those who don’t know what I’m talking about, this is my last guest interview, for at least quite some time. We’re actually promoting David to the host of the BiggerPockets Podcast. So, crazy times, but I’m excited to go out on top because you guys, Tommy, it’s some that I have for years looked up to and got bits and pieces of his story and I’ve never heard the whole thing. So I’m excited to dig into that. But I know one thing about you, Tommy, and that is you love houses. Tell us about that.

Tommy:
I adore them. They make me so happy. I love houses. That’s an ice breaker for me all the time, especially when you’re calling utilities and they’re wanting your email address and you’re asking them to waive like an $8,000 PG&E bill or something like that. That was the old dude, I’m just some guy that loves houses.

Brandon:
Yeah. Well, you literally have that on your shirt, “I love houses.” And your company’s what, ilovehouses.com or something?

Tommy:
That’s one of my brands, yeah.

Brandon:
I like it. Well, tell me this-

Tommy:
I bought iloverentals.com and then when I went to one of the GoBundance events, I was talking to one of the guys and then I bought ilovetrailerparks.com.

Brandon:
Did you really?

Tommy:
I started buy iloveeverything domains. And then I had to buy the heart domains that go with them, which cost me more money.

Brandon:
Oh man. Before we get into your story, tell us, why do you love houses?

Tommy:
That is a really good question. I’ve actually never had that question. But I think the simple part of it is, I spent a very reasonably large amount of time of my life working. And you take on a percentage of your identity comes from what you do. I’ve always used my personality to knock on doors and to do everything about the houses thing. And the ilovehouses.com brand just took on the fact that I kept telling people I love houses. And I went to the website and I bought it, which I paid it pretty bank for, but I just love them. It made me happy.

Brandon:
All right. Well, let’s get into your story, and we’ll learn more about your love affair with houses. How did you get started in this world of real estate? What were you doing before and then how’d you get into it?

Tommy:
So I was knocking doors trading and selling coupons in a management training program from which I was recruited for. And I was the only person there that lasted, I think, longer than three weeks. You quickly get promoted. And I learned how to make 10 bucks a door knocking on 100 doors a day. And my brother was a banker at Wells Fargo and his biggest client was a Trust ECL guy, a foreclosure guy that would be in a hurry at all times. Got to make checks, got to bounce to the next auction. Always had something going. And it just turned out that when my booming career of selling coupons door to door did not pan out, that he was looking for someone like myself to set appointments for him and learn the foreclosure business.
I told him I had a PhD from Chico State, and he went to Chico State, which is like the Harvard of the west. And his wife looks at me like, “You have a PhD.”

Brandon:
I don’t think that’s true. I’m going to go with, that’s not true.

Tommy:
No, I’m poor, hungry, and desperate. I need to learn about real estate, and I was willing to do it for free. They picked me up and they taught me for a couple years before I went out and figured I could do everything on my own without having to learn the rest of the business. And then I just figured it out from there.

Brandon:
All right. So what was the job, you knock on a door? They gave you a list of like foreclosures and you knock on the door?

Tommy:
Great question. It was pre-foreclosures. They actually had a data system where they would… Back then, you hand-pull the leads off microfiche and you would get the Trust ECL before someone else would. They would just go door knock stuff and say, “Trust ECL is scheduled for such and such date, have you guys got that taken care of?” And the people who said no, it was everything from probates, which owners had passed away, to job loss, to everything. They had a program where they were able to keep people in the homes because they could afford to keep the homes as rentals in an appreciating market, early 2000s.
So it was easy to say, “Hey, we can keep you in the home.” They just had this endless supply of money, it felt like. I didn’t do anything really, but set the appointment and then maintain the relationship should shift during the contract. It’s like a unlicensed real estate agent type thing going on at the time.

Brandon:
Yeah. All right. So you started by knocking pre-foreclosures. Maybe we can set some terminology terms for those who are terminology terms. What’s pre foreclosure? How’s that different than foreclosure? How’s that different than REOs?

Tommy:
Yeah. That’s super relative to anybody at any level, whether you’re in Wyoming, whether you’re in Texas, whether you’re in California, each of these systems are governed by the foreclosure process, which changes state to state. So there’s a mortgage or there’s a trustee sale. And in California, it’s a trustee sale system, which they’re delinquent, and then they send you mean letters, and then you figure out that the bank’s not going to stop sending you mean letters until you pay. And if you don’t pay or the house is vacant, the mail’s just going to nowhere, then they eventually set a trustee sale date.
So there’s a notice of default, then a trustee sale, which is that 28-day warning that just says, “Here’s your actual date. No more warnings, here’s your date of the auction?” And then we would work within the confines of that default system. And then the mortgage dates is done judicially, so people will go in front of a judge, a judge will say, “You guys got to be out on such and such date unless you meet these terms.” And occupants or the owners, you know there’s a difference between the tenants, and the laws are just different state to state. Here in California, the volume was so high late 2000s that I didn’t have to go out of state until I started doing, after the crash, Vegas, Phoenix, all the major markets that the world had fallen apart in.

David:
I think one misconception for real estate investors is just the word foreclosure, is becoming this all-encompassing word that we use to describe… So can we maybe divvy up the stages of the foreclosure process, which would probably be more accurate way to describe it?

Tommy:
Yeah. And I think that to go down the road, you’re talking about, it’s really applicable for realtors to understand it and it’s really applicable for investors to understand it. And it’s the lending side, the private money side. So, agents that have this dual threat, they say, “Hey, my client wants to make an offer on this foreclosed property.” Or they know I’m a perfectly capable agent willing to take my own advice as to how I make money in real estate, and they’ll go door knock, they’ll send out mailers, propertyradar.com is that pure source of national foreclosures where people can get a general address and an acknowledgement that there’s a distressed lead there of any kind, whether it would be a notice of default, a trustee sale, a judicial foreclosure notice.
I don’t think that they sell the blight lists, that it’s maybe a code enforcement lead or other, but the word foreclosure goes super vague because an REO, which is now a bank owned property, is considered a foreclosure, but the foreclosure has actually already occurred. So that word foreclosure for me in California is that notice of default time period, somewhere between three and six months, and then the trustee ECL month that they tag on there where they set the sale date, take it to auction, and they either give you a number and you sit there and bid with your number.
In Texas, it’s Super Tuesday. I think Atlanta and Georgia, they’re a Super Tuesday state. In California, it could happen any day. The volume’s really low compared to some of the distressed markets, but foreclosure is a really vague word right now.

Brandon:
I like that David, you brought up that fact that different people say foreclosure and it means different things to different people. So David, how do you-

Tommy:
When the neighbors say the word foreclosure, it’s amazing what that word means to an investor, what it means to an owner, or it means to a neighbor.

David:
I remember being a kid and my dad who had no idea how… He wasn’t an idiot, but he didn’t know how real estate worked. I remember he was talking to my mom or me or somebody, and I remember him saying, “Yeah, it’s really hard to get a good deal unless you find a foreclosure,” or something like that. And so I had that in the back of my head for my whole life. And then when I got into real estate sales, I realized that a foreclosure is a process. The way that I understand it now is, I own a house. And if I stop making the payment, there’s laws in place so that the lender can’t just take title the day after I miss my payment, “Oh, my house, too bad.”
There’s things in place that give you an opportunity to catch up, and one of them is that they have to legally issue a notice of default. That’s where they tell you through public forums so that I can’t come back and say, “They never told me.” Like they post it in a newspaper, they put it in these public places that, “Hey, David Greene is behind on his mortgage and has X amount of time to catch up.”

Tommy:
Or his HOA, that’s the super hot one.

David:
This is what I love about you, Tommy. You’re giving us good details. So HOA.

Tommy:
When you borrow money from the bank and you sign on your deed of trust, it says in there, “I have now selected Placer Title Services, First American Title Services.” And what they say is they’re the trustee of that note. It’s that specific note that’s foreclosable, which was that whole, be of aid and have possession of my note, you can’t foreclose on me. You read about those 10 years ago that people are still in their homes. We saw one in Tennessee this week, they haven’t paid in 10 years, they’ve been there. The system’s so big, and the word foreclosure is so big, it just applies way differently to who you’re asking about.

David:
So you get the notice of default and then if you don’t respond in time, the holder of that note now out typically says, “Okay, we have to sell this property to get paid back what we’re owed.” That’s when you have the foreclosure, it goes to the courthouse steps in that area, and that’s where people like you and our friend, Aaron Amuchastegui will show up and you can buy the property there for what is owed on the note or whatever they’re selling it for. But it’s typically an all cash offer, you’re not writing a contract like what a realtor writes that gives you contingencies, you’re not getting clean title.
All the things that protect a buyer during the home buying process are not applicable. This is why the big boys play there, and I believe BiggerPockets wrote the book, Bidding To Buy that details that process. If it doesn’t sell on the courthouse steps, nobody buys it, now the bank will hire a realtor to go sell it, put it on the MLS. And that property is considered REOed, meaning real estate owned, because it is now on the bank’s books. The bank has taken title. I say bank, it’s really the lender. The lender has taken title back to that property. And now they go find the David Greene team and they say, “Okay, sell this house.”
The problem is, once that, what we call foreclosure, hits the MLS, it’s no different than every other house. So even though it will say foreclosure or REO, that does not equal great deal, you’re just comparing it to all the other homes. And that’s where I think the misconception comes in, is people, they’ll see a house on Zillow that says foreclosure, which means foreclosure process. It’s going to be sold on warehouse steps, and they don’t have the means or the intestinal fortitude to get into that world and try to buy it. And then they’ll see it on the MLS, they’re like, “Oh, look, it’s REO. This must mean a great deal.”
Well, in 2010, it did mean that because there was a billion of them, there was just a ton of them.

Brandon:
All my early stuff was all REOs.

David:
Yeah, that’s all we looked for. But that gets stuck in people’s heads. Now, they think REO is synonymous with great deal. But now when there’s not much supply, it’s just like every other house.

Brandon:
Let me ask you two a question. Foreclosures have been obviously almost nonexistent since COVID because all the governments shut down all the foreclosure stuff, but now that that’s coming to, or at least we hope, coming to an end, are foreclosures coming back, Tommy? And are they coming back hard?

Tommy:
I want to say it’s still regional and it’s actually product specific. For instance, you’re going to see private money stuff that comes up. A buddy of mine lives in Colorado, they don’t do a lot of second mortgages there, it’s a different bee. So whether it’s a first mortgage going to sale or a second mortgage, a private money note, what it has stopped is Fannie, Freddie paper. That’s that at least 50% of the market is on that homeowner based, the cheapest money you can get, but you have to check 100 boxes to get a mortgage. And once you’ve checked all those boxes, those foreclosures, they’re on payment plans or they’re in some stage that allows them to delay or postpone really.
I think what we’re seeing right now, and I would say right now, still in the next one quarter to two quarters, is reverse mortgages, deceased owners, private money, and non-owner occupied mortgages are going to be coming back. That’s the stuff that’s coming through now where someone’s not paying and there’s a distress that’s been caused out of that. It’s hard for me to get that crystal ball out for the home-owner-occupied stuff for Fannie Freddie. So David, do you have a different opinion or are you seeing it differently in your market?

David:
I think that there’s a lot of people that were hoping for that, and there was a lot of gurus that we’re telling people that, and it isn’t going to happen in my opinion. And I think what you just said, Tommy, there’s payment plans in place, first off, absolutely true. For anything that makes it through that, the reality is, there’s been so much equity created in the last couple years when prices go this high, it won’t go to foreclosure. You’ll just put it on the market and someone will buy it, and you will make more money even though you fell behind on your mortgage. And so that’s why we’re not going to see all this inventory happen, last time, because housing prices were going down and so you couldn’t sell your house, foreclosure was where you ended up.

Tommy:
Significantly. Yes. I’ll sell you one thing that I think you’re going to see in the next four quarters that is a game changer for volume that may never hit that irrationally low amount, is that there’s so much money available to buy these notes. Before, we were seeing stuff going to sale for 550,000 bucks and the opening bid was 100 grand. They dipped, they cut bids and you would have to be there. And you show up at the auction expecting the opening bid to be 550, the auction opens at 100K and you buy it. It was a process where they were getting rid of distressed real estate. They didn’t have a system for the middlemen that were going to mow the lawns and board up the pools and take care of the…
What I’m seeing now is people are buying these notes before… Eventually, if it goes to sale for face value and the owner of the note takes it back, and which a lot of people associate me with my Invitation Homes days, is that if the note holder can afford to put that into a portfolio or they can have a platform that allows them to stabilize the asset with the occupant as a tenant or a new tenant, they’re going to lever those right up and they’ll never hit the distressed real estate world. They’ll just become asset or platform owned houses. I think that that will be a big portion of what we’re seeing from heavy, heavy. the really big money, are people that are buying the notes.
And then if they revert, it’s just stabilizing, they’re not taking a loss on the stuff. It’s like cap rate based single family, which is not a world that I fully understand yet.

Brandon:
That makes sense, man. Obviously none of us have a crystal ball, so let’s go back to the crystal ball we do have, which is our past. What did you do after this door knocking thing? What was the next phase for Tommy?

Tommy:
Yeah. So that was 2005-ish when I left, and I still had three years left to think that the amazing real estate market was how good I was. In reality, I think 2008 proved I may not have known everything in the world, but I did three years of terms deals. And I think that that’s really applicable to anybody listening to this show, is, buying it subject to the loans that are on there, you don’t need to go get the debt, the credit, whatever it is. If you only have 70,000 bucks and you know 35 of it is going to cure the mortgage and 35 of it was going to the owner, stabilizing that as a rental and then putting into the BRRRR platform. The terms deals is where I made my volume increase of what I was buying pre-2009.

Brandon:
Let me get this right. So you’re saying you find the property that they haven’t paid their mortgage, you buy that subject to, which is something we talked about recently with Pace Morby on, I don’t remember what episode it was, I’ll see if I can find it. But you buy it subject to. So you just bring the mortgage current, and now you own a rental. Is that what you’re saying?

Tommy:
Now, you own a rental, that’s it. And it’s also, there’s an equitable piece, there’s a value trade that you have with a homeowner. Sometimes the value you’re offering is them not leaving at all or it’s cash or a reduced rent and they get to stay in that school district in a place when we have constrained… Like people would call and say, “Hey, I don’t want to move. It was my mom’s house or it’s emotional,” or whatever. They’re going to keep it. And it’s really just one-on-one, one deal at a time win. How much do you want for the house? Some people have a price, or we are able to come to terms.
And growing my portfolio on someone else’s credit, which, deceased borrower or not, going to that level, you cure it, the note, the deed of trust says you’re allowed to pay a current, unless it hasn’t gone to sale already. And we do buy one at a time. That was pre the world falling apart. And then after the world fell apart, I was able to start buying it at auction again. So it’s a matter of quadrant, where are you right now in that process? Is there enough distress. And door knocking is all quadrants at any given time, any one person in Utah or Midland, Texas, or wherever you are, there’s vacant houses, there are properties, there are lists available that you’re buying these things.
And that was my niche, was I just choose… Actually, I chose Thomas Brothers coordinates. You know old school Thomas Brothers Guides?

David:
I have no idea what that is.

Tommy:
Oh man, there it goes. That just tells that dates you on how old I am. You’d get a Thomas Brothers Guide. And I would go to all of a certain city and just look at all the houses in that city, shoot photos and keep track of them. Door knock. Just going where people don’t want to go or don’t need to go, but on the vacant houses, you do all that by the phone.

Brandon:
I love that you brought up this point and I want to stress this for a minute, there are different parts of a market cycle and different things that work at different parts. So there are strategies like Subject-To may work better in one market versus other. Foreclosure could be better in one versus other, BRRRR might work better in one versus other, I think house hacking works good in pretty much every market, no matter what, but most strategies work in this type of market. So just something for people to be aware of.
You might watch a YouTube video or hear a podcast, we’ve been doing that now on the BiggerPockets Podcast, this is going on the 10th year. The shows that we did 10 years ago were drastically different market than we find ourselves in today, so people could go and listen to early shows and it’s like, “Oh yeah, just buy them at foreclosure,” or whatever. Yeah, foreclosure, I’m like, “Well, right now there’s no foreclosures.” Now, that might come back so it’s not a bad idea to learn that stuff, which is why we’re talking about it today. But just interesting that that happens. What came next? Market crashes, you start buying to get at auction, is this when the world of Invitation Homes comes in? Is that when it happened?

Tommy:
Almost. I actually got to recreate. It takes a long time, it’s very personal. That house is worth 500 grand, according to who? It was worth 500 grand, now you could buy it for 200. So people held on and the market was shooting up 30% a quarter sometimes or 30% a year. But when houses that were 300 grand, you could buy for 30K, that is where my next… So my 2009 through like ’11, my niche was anything in California I could buy under 60 grand, I could get financing on it immediately. So I would buy four of them, five of them, six of them and I would group them together and get cross collateralized financing.
I would just get a private money lender to give me 360,000 back of the money I spent at auction. And that’s the hamster wheel, but there was so much distress. So I was able to build enough rentals, have enough team and have the ability to scale that. And then I was on a short list of people that would be candidates for the Invitation Homes thing as it came up, meaning invitation homes comes in town with a fidelity national title representative and says, “Who in your market would be a candidate to be able to lead our Invitation Homes office here?”
They were going to grow Tampa, Vegas, Seattle, all of these markets all at the same time. So they would group us up, fly us out to New York. And then I was on a list of five people. Aaron was on that list too.

Brandon:
Oh really?

Tommy:
And for other reasons that I think he’s disclosed elsewhere how it didn’t work out for him.

Brandon:
Yeah. Crazy. Aaron Amuchastegui who was on the show a number of times and wrote Bidding to Buy. What is Invitation Home? First of all, I want you to answer that question, but let me give a summary here. So you were door knocking for somebody, learning the business, then you started buying them for yourself using creative strategies, like Subject-To, then the market crashes, you get into buying foreclosures again, you could buy them for super cheap.

Tommy:
Lay down BRRRR, like the BRRRR of $60,000 BRRRR, which were just this easy, easy, easy lending product.

Brandon:
All right. So you buy these properties, you’re building up your portfolio, before we get into the Invitation Homes things, that was your portfolio like at that point?

Tommy:
Great. The best thing that I love so much about my portfolios is just went and did a move in this last week at one of my houses that I bought for 30 grand. I bought it for $30,300 in California. And I pull up a three bedroom, two bath house with a one car garage and I move in, my occupant is now paying what would be the equivalent of, if I’m looking at my purchase price, like an 80 cap because you bought it for so cheap versus what it’s renting for. But at that time, I was the highest bidder for $30,300. That means 30,400 was too much.
Somebody thought that that thing is not worth more than 40 in the world. And Invitation Home did not. They were like, “If you’re buying assets for 20% of their replacement costs, I’m in.” And that was the Warren Buffett thing that basically said he basically came out and said, “If I could buy 100,000 houses right now, or 300,000 houses right now I would.” And then dudes who have a billion dollars are like, “Oh, I can do that. I just need some boots on the ground.” And then they came into Fidelity and Fidelity came to us and we partnered up, myself, Daniel Clayborn and I, and we partnered up on NorCal, which had two markets. The Bay Area was its own market and Northern California was considered a market, which was anywhere I considered in our buy box.
But the Bay Area, the average, man, Oakland, the average age of the house is 110 years old. It’s a different maintenance model, it’s a different purchase, it’s a different appreciation.

Brandon:
Invitation Homes is like this giant, basically, would you them a hedge fund? Is that what they are?

Tommy:
Yeah, they are.

Brandon:
So multi I’m sure billion dollar well backed hedge fund that we all hated, we still hate. We hated you. You wouldn’t partner with the enemy to buy a lot of houses. Now, I don’t fault you for that. That’s great. Good on you. But you’re the guy that was out there buying just everything, representing the hedge fund.

Tommy:
The world says, everything, but we were buying in our buy box. We had a very specific buy box of what we were allowed to buy. And I actually bought a 50 acre ranch in Fairfield at auction as a rental. So when I flew into Dallas for our national meeting, they gave me like a cowboy hat, like, “Really? You couldn’t just let that dude have one deal.” But when you go there, there’s this sense of, it’s like you live up almost to that. We bought it for 30 cents of what was owing on it at the time. And it worked out as a rental, but we have a buy box. You buy within that.
And the very first day we hit was August 9th, 2012. And they gave me a stack of cashier’s checks and they said, “You got to go to auction.” And we bought seven that day in Sacramento County. And my buddies were texting me, they’re like, “Some dude just showed up here and bought seven houses in one day.” I’m like, “That guy sucks.”

Brandon:
Yeah. Who is that guy?

Tommy:
And then the Cryer, he’s like, “That’s Christie’s mailing address. That’s Tommy, He’s involved. Oh no.”

David:
Basically you were a henchman for Thanos at one point in your career?

Tommy:
I was that guy and I got cover of the front page on Sacramento B, which is by no means New York Times, but I got to frame that, and now I’m on the BP Podcast. It worked out.

Brandon:
It worked out.

David:
Sometimes crime pays.

Brandon:
How many did you buy then in your time working for the hedge fund or working with the hedge fund?

Tommy:
I did about 2,720 in 25 months.

Brandon:
Oh Dang. And how long?

Tommy:
In about 25 months or so? By the time they released me, I had like a 60 day leash before I was out of my vesting before I had to leave. And I was only doing bulk for them then, which sucked because they told me to pass on houses and now I end up… Like if David Greene gets this fund together, he’s like, “Hey, I’m going to buy these 50 houses.” And they’re just crap, they weren’t in my buy box. And then I buy his whole company and bring it in under like “Dang, I could have bought all that for 50 grand. Greene’s going to make a killing on this deal.”

Brandon:
All right, fine. Here’s what I wanted to bring up. You mentioned the buy box, and this is something that I talk a lot about in various books that I’ve written. It’s an idea of having a very clear criteria of what you want. Can you explain, because this is something that obviously people listening this are going, “Well, I’m not going to buy 2,700 houses for a hedge fund.”

Tommy:
Absolutely. Yeah.

Brandon:
But the concept of what you were doing applies to people buying their first house. Can you explain what is a buy box, why is that important and how do you even know what you want to buy?

Tommy:
The buy box, it’s the title of all the last few books you’ve personally written? Like, why am I doing this deal? Because I only have 13K I and I get a free 10% down loan from the city and I get a loan from the David Greene team’s mortgage company for 97%. And out of that comes, I own an asset with three units that I occupy one bedroom in and it’s like, “That’s my product.” You got to figure out, who am I? I can flip three houses at once, I can flip one house at once. I don’t want to flip at all, I just want to buy rentals.
And when you figure out your buy box, it’s going to be based off of check in boxes, like when I put out 150 grand cash from the line of credit that I have, how fast can I get that back? Or I’m going to leave it there in a nine unit building and get a commercial loan and this market is just through the roof, I expect a 10% appreciation and a 10% return on my investment. I’m going to buy any property that meets that criteria. It’s a blended return. Are you going to get a higher blended return? So your buy box becomes like I only want to do 120 miles, it has nothing to do with the economics around my house.
I never want to drive further than two hours in order to be able to do a flip or you start to define what works for you as an investor and what your product is. And I encourage people to step a little bit out of their comfort zones and even ask them, there’s like, people call me up or message me after these and say, “Hey, this vacant house has been in my neighborhood for so long, what’s the next step in doing this?” It’s like, “That thing’s free and clear. It’s vacant and not boarded up.” And you can get a deal like that done on terms, and that’s your buy box. You can use the only 30K you have as you give them that 30,000 bucks, then you borrow against it for the rehab or you partner up with someone and you’re bringing in money or you bring just the deal and someone puts up all the money.
That’s a lot of those middle of the night type, you don’t have to put any money into the deal type things as, “Hey, if you have a really great deal and you want to be a percentage owner in this deal, or you can have the boots on the ground, or you’re a contractor that could just dominate, that’s one of the world’s we’re struggling in right now is I don’t do restorations, that’s a certain product. If you’re going to buy 115-year-old house in downtown Sacramento, you’re going to have to go to the historical society and get the cores approved and the type of window and the type of glass and everything approved.
If you just figure out I’m going to do rehabs, I’m going to do remodels, I can do additions, you’re a contractor, or if you have your own money, you can completely dominate an auction, you just don’t understand the data side of it, you just create your buy box. And it could be complete side hustle, one deal every 120 days, three times a year and here’s my ROI expectation on my money, or here’s my ROI money expectation on David’s money. He’s borrowing it. David’s here doing his job, he’s got a partner, you borrow money, what can you afford? What kind of deal can you afford? Not just really creating your box.
And sometimes it just takes a coach or it takes reaching out to someone saying, “Here’s what I think I want to do.”

Brandon:
Yeah. Well, this is why this is so helpful. Having the buy box makes, one, you get really good at something. Rather than trying to be good at everything, I’m not going to be good at foreclosures and these 150-year-old renovations and buying farmland, and doing new construction, oh, and I’m going to throw in some cell storage. You just cannot be good at all that stuff. Even within a niche, I’m in mobile home parks, that’s primarily what we buy. We only buy a certain type and condition, I call it the crystal clear criteria in my book. So basically stands for like what strategy you’re going to do? What are you focusing on? What location? Where? What condition? You want to fix it up or you want to complete tear down? You want something that’s already nice?
Property type, what is it? Single family house, do you want to buy multi price range? Where are you buying in? Two to 400,000, four to 800,000? And then finally, I like to say profitability. It basically means you should define what would make it worth you buying it so you can work backwards to find that number. And so when you have these six things like figured out, like this is strategy, location, condition, property type, price, range, and profitability, now you can get really good at that thing. And then you can become the best at thing and you can become known for that thing. And you know how to analyze it right, you know how to bring other people, you can get the financing for it.
Like you said, rather than trying to do everything out there, get in, pick your buy box, go sit down with a mentor, listen to a bunch of podcasts, start defining what it is you do. And it’s going to make your decision making process so much easier too. When I look at a mobile home park, even though it’s a pretty stupid complicated analysis, at the end of the day, it’s like, does it have over 100,000 population within 20 miles? No. We won’t buy. It makes it super easy.

Tommy:
Does that matches your money? That’s a different part of this, is that, “Hey, because of these criteria, it doesn’t work.” And there are people that are listening to this show right now, they’re like, “It doesn’t work for me, but it work for this guy’s fund.” And the relationships of having an operator, like right now while you and I are on this podcast, someone on your team is trying to maximize elite. That is their job inside of that. And I think that most of the people maybe that are watching this podcast right now is like, “How does that affect me? I don’t have a fund. I don’t have it.” But if you find that lead, I always tell people to call me like, “Hey, just so I can get this clarified ahead of time, are we working on your deal?”
Because you just need some advice, or are you working on a deal you would like to sell to us or you would like to partner up on? You really got to clarify what it is because if it turns out that, “Hey, I’m like 90% sure I want to buy this thing, but I could really use some advice as to why what are the gotchas?” Or like, “What do you think of this type of market or this type of product or whatever else it is.” I just love giving advice and I want it to be as personalized as possible. And I find that in the world of realtors that see a fixture on the market and they immediately think of a client that will fit for that product, like, “Here’s the product, it’s in Brandon’s buy box.” I want those realtors to be engaged enough to say, “This could work for me. I’m going to buy my own research really. I’m going to trust in my own opinion and mentality of this is a deal.”
And then when those people run out of their own capital, it gets whole sealed out, it gets partnered, there’s joint ventures that grow out of it. But to know your buy box right now, it’s this huge opportunity to know that a corner lot is the perfect ADU lot. And you can add a unit and convert a garage. And that’s my product. It’s always occupied during construction, the risk of downside is so low and they’re an engineer by trade and they know this is my buy box, I’m comfortable with it. And then at the end of it, I’m gainfully employed, I get a long-term loan on it. And I didn’t have any vacancy during that, now I have significant income. It’s like getting the land for free on a deal.
You just figure out what motivates you and what your buy box is and what your commitment to time is. I’m willing to do 60 hours this year committed to this thing in order to do two more deals or one more deal. For some people it’s the next deal. It’s exactly how they’re making the leap to be self-employed. So it’s super motivating to be part of other people’s growth.

David:
When I first spoke with Tommy and you explained, “I work for Invitation Homes and I bought,” it was 2,400 homes in 24 months or something like that, I remember, this doesn’t happen to me very often, just freezing with my mouth open as the little speeding wheel on a Mac was going on. My whole brain was trying to recalibrate as far as, how do you do due diligence on a deal like that? My whole model is based on find individual property, look at the details of that property, turn those details into numbers that would cost to fix them and then say like, “Brandon, is there profitability that I would want?” Whether it’s cash flow, appreciation, whatever the thing is.
I’ve traveled that path many, many times, it’s well worn. And for the majority of investors, that is how we teach them because most of them are buying one house at a time.

Tommy:
It’s a pointless need.

David:
Yes. And when you said that, I’m like, “How could you do that without being reckless?” Because you don’t seem reckless. And I’m sure Invitation Homes is not stupid. They have people much smarter than me working for them. You explained well, there’s math involved, X amount of them will be good deals, X amount of them will be okay, and then you’ll have some dogs and we have a plan to get rid of the dogs. Can you just down how you were able to do that much volume responsibly so we can see what nuggets we can take out of that for our own business?

Tommy:
Yeah. And I think it’s more important, and I look at the people who are listening to the podcast now it’s like, how is that one person who brought us one of those deals, those 2,400 deals? We had to have a lead source. And the foreclosures were one of them. And the two of the guys who had recruited me were British and when they speak, it’s like in Britain, a flashlight is a torch, and he’s like, “Is there stock in the market?” And I’m like, “What are you saying? I don’t even understand what you’re saying.” He’s like, “Is there stock in the market? Can you even get product right now?” Was the question like, “Should I put my money in Sacramento?”
And it came down to one deal at a time and realtors would call us and say, “Hey, I want to be part of the team and here’s my area.” They would bring us stuff direct, all we had to do was add it to a list and start the diligence into that specific deal. So we were able to take volume and have a system in place in order to be able to turn that into a yes or a no, like how soon can we make that a yes or a no? And I love it because people that had wanted to do this all on their own, if the deal didn’t work for them, there was suddenly this dude who could just buy it on gross rental multiplier, like it rents for $1,200 a month, it rents for 1,000 bucks a month, which is a $12,000 a year in gross rent.
And then you divide that by what you’re paying for the asset. It was so simple to say, “As long as it’s a 10, just say yes.” The Blackstone went to the major investors and said, “I can acquire 1,000 houses below their replacement cost. And at one point in time in the world, replacement cost will catch up and these will be worth more than their replacement cost. And then during that time, I can also afford to pay a mortgage because we’re going to rent them out.” So it was an appreciation plate. And when I saw the biggest spreadsheet in the whole wide world, which was ridiculously long, if you just scroll, I’m like, “Nope. I’ll be part of this, but no chance will this house be worth 350 again, I’m buying it for 350 grand. You’re telling me it’s going to be worth six times what it’s worth today.”
And some dude, apparently who went to a better college and has a bigger brain than me, he was right.

Brandon:
Right. Because today, those hedge funds just cleaned up, they made a… I remember thinking back in the day too, like, “I think they’re making a risky bet here.” Maybe they were, but here’s what’s interesting is a lot of people might be thinking, “Oh, well, we missed those times.” No, the hedge funds are still buying. They’ve just maybe moved out of California. Maybe, I don’t know, maybe there’s California.

Tommy:
I think more of them. There’s more of them.

Brandon:
They’re still buying. I know guys that are wholesaling deals, we might be bringing one of them on soon on the show, I’ve been talking with them, but they’re doing 10, 15, 20, 30 ounces a month, they’re wholesaling to these hedge funds, still in these other markets.

Tommy:
That’s buy box. It’s simple. I only buy in school districts that are greater than a six. You can go to Zillow, type in any given address and find out, “Hey, this school district’s a six or greater? And it’s in a major market like our Charlotte market for Invitation Homes.” And you bring product direct to them. These are people who are incentivized to bring on more product. They have just as much like, “Hey, if it fits in this buy box and we believe in this market, buy this.”

David:
So that’s who we are competing with and that’s why I want to be talking Tommy about what goes on behind the scenes with Thanos. Now, we’ve got you and we’re going to interrogate you and we’re going to find out what is the enemy doing. Because I think as we see the shortage of inventory that everyone is complaining about, there’s not a connection being made, and that’s because a lot of these markets that have groups like Invitation Homes operating in, they are sucking those homes into their inventory before they ever make the format that you and I would see the house by going on Zillow or something else.

Tommy:
But I encourage people to look wider. If you really know your buy box, I bought one in Somerville, Oklahoma this month. And Somerville, I am so tempted to be able to just keep this thing in BRRRR, but I bought it in my IRA as a buy, fix and sell. But it turns out that it was such a good buy like that. I would do this product every single time I could. It was a $73,000 purchase of a three bedroom, two bath, 1972 built, 1,500 square foot home, RV storage and a pool. Nobody’s building that for 70 grand ever again. I was injured, but if you know your buy box, which BRRRR is the most motivating part of this for me right now, I only flip houses to feed my rental addiction, which my rental company is called, iloverentals.com. That’s because I had a problem.
And I bought and through that process, my buy box, if you went to LinkedIn two years ago, I would say, “I’m a foreclosure professional, let’s build something together. Do you want me to be part of your team? I want to do something that I can add value to with you guys.” And I’m now a distress free real estate professional because there’s no more foreclosures and distress is as vague as it gets. There’s foreclosures around, just the volume’s not there to dominate in that world. So it doesn’t matter whether it’s a redevelopment deal or a BRRRR deal or other, as a distressed real estate investor, I can do condos, we have a cannabis play.
It doesn’t matter what it is. If it comes through the distress world and it touches my desk, I underwrite it with or without the extra zero, $100,000 house or a million-dollar deal.

Brandon:
Clarification, from my opinion, I’m curious if you agree with me, both of you two. So when a hedge fund has their buy box, like when you were working for them, or even honestly the three of us, if we have a buy box or we’re like, “This is what it is,” almost 1% rule. The thing’s going to rent for 1% of whatever you can get it for, buy it. Let’s just say that’s a rule of thumb. Here’s how it’s been my argument. If you’re a hedge fund buying 2,700 homes in 25 months, you can afford 10% of them lose money, not that they did, but you could afford to do that because you’re a hedge fund.
If you are a new investor trying to buy your very first deal and you’ve been saving up 30 grand for the last eight years at your job, I don’t believe you can afford to make that rule of thumb risk of just like, “Oh yeah, rule of thumb works out. I’m just going to buy it.” I hear a lot of advice people buying the 1% rule or buying the 2% rule. And I’m like, “In the beginning, I think you need to actually do the work to underwrite those deals.” Do you guys agree?

Tommy:
It’s just like a normal mortgage. Can you check 10 boxes in a row? Because if you can, you get the best mortgage, but if you can only do seven of those, what kind of mortgage do you get? If you know what boxes it is that you’re checking, it takes something out of being a gamble to making it an investment. A gamble is the difference of saying like, “I feel very confident that when I do this deal, all 10 of these vacant units are going to rent for $900 each when the rest of the market says it’s 600.” I think the market’s going to be 50% over what you’re trying to gamble on the… what it looks like inside or other.
But if you’ve walked all 10 doors and you know what the rehab is and you know what the stabilization costs are and you can check all these boxes, it’s an investment. The can afford to lose their 30,000, but is it likely that when you’re buying something for 80 bucks a foot and you have significant market demand for rents and there’s a massive shortage of places that are worth living in… I think there’s a major risk in the market with the age of these homes and the inability to rehabilitate them to the standards that’s going to make them last another 50 years or last another 100 years.
So it’s just less of a risk. It just becomes, “I checked all these boxes, it totally fits in my buy box.” If it’s on a sinkhole, you didn’t see that coming. It’s any given thing.

Brandon:
Yeah, it makes sense.

David:
Tommy, what’s your advice for how the layperson, the average investor, that I got a W2 job, I want to buy enough real estate to get out of that job. I don’t need to be the next Grant Cardone, but I need to get some properties and it’s really freaking hard right now. What’s your advice for how they compete against these hedge funds?

Tommy:
I actually don’t see the hedge funds as being a competitor. That’s the biggest part of the advice there. They’re buying and their buy box is so tight. I’ve been out of that deal now for seven years this year, and I’ve only sold them three houses. And if you live in Charlotte, if you live in Vegas or some of these markets, they really see the appreciation in Phoenix, is a great one. You could still sell them a ton of product. And I look at it as, it’s a value… Hope it works; you hear stories about how people sold stuff to Zillow when they took it. And of course, later on the end of selling the whole portfolio elsewhere.
The one person, one deal at a time is competitive if you’re competing on their buy box, but they’re not buying ranch homes and they’re not buying multiple APN stuff like duplexes, triplexes, fourplexes all that Fannie product. And that really works for someone who only has 30 that’s going to do a house hacking deal. You’re getting the cheapest money ever, most of the time, depending on how they’re buying it on a product that cannot be replaced for its same cost, and your rents are significantly higher than what your mortgages are. If your product, I don’t think that the hedge fund model right now is a competitor.

Brandon:
So in other words, yeah, like you said to summarize, find out what they’re buying and just buy something different, because they’re a very tight buy box.

Tommy:
Or sort through them.

Brandon:
Or if you’re going to go in their buy box and sell to them and make a quick profit and go dump into something that’s not in their buy box. So those people who are really struggling with that right now, I love that idea. What’s a little bit unique niche that not every hedge fund in your market’s going for, and then just get really good at that thing. I really like that.

Tommy:
We love the ranch product. I think about it right now as, everyone wants their own little space. The bigger pieces, the dirt, the redevelopment of a property and adding units, just buy and fixing and flipping. The stuff that has one acre or more, these large lot flips are super motivating to young families or other. It’s like this, I just want my own little bit of space.

David:
That’s what I’m looking to buy right now.

Tommy:
I tell people, “Just tell me what you’re looking for. I’m not an agent, I’m not a broker, I can supplement your professionals that are searching, and I’ll just tell you what’s coming through the distress world.” And I find these deals that come through that I can’t make work. It’s like, they’re not going to take 590 for this thing when it’s probably worth 700 on MLS today? You know, but for someone that you know that’s looking for it, it totally works. And that’s that wholesale mentality like, “If it doesn’t work for me… ” The first checkbox is, “Can I make money on this? Can I flip this? I have 40 hours a week commitment as a civil engineer, but I also have great income, and here’s there’s my ROI expectations.”
There are just people who are gainfully employed that feel stuck or other that this is genuinely that easy, it’s just that easy to be able to do deals.

Brandon:
You bring up a really good point, then I’m going to move back to your story. But I love this idea of, if you have your buy box and a deal comes across your plate because you’re just doing marking and you’re out there in the market and it doesn’t work for you, it doesn’t mean it’s a bad deal, it just means it’s a bad deal for you. So if you can flip that to somebody else, great. It’s one thing, I opened our capital the last couple of years, we bought a lot of very type of mobile home park. I think we wholesaled one ever. But I look back and I’m like, “That was a huge missed opportunity. I could have probably made millions over the past few years for all the leads that came in and that just threw away.”
We just said, “Nope, it doesn’t fit our buy box, we’re not going touch it.” And so, going forward, we’re going to get a lot more heavily into, “Well, it’s a little too small for us, we don’t buy anything under 100 lots, this one’s a 75 lot. Who wants it?” And then if I can make 50 or 100 grand, shoot, why not?

David:
Yeah, every single time. And that’s that win. And I think going back to David’s question really was, how does that work for me? We’re planting seeds. You don’t get to harvest until you’ve planted. I bought another business this year and I levered up on properties that I only owed like 30 grand on. If you’ve planted that seed and it matured its way through and you can lever that or you can roll…. A good friend of mine has like four of his properties are like 30% loan to value. But what if a deal comes through right now and you got to cut a check, are you lined up with a regional lender that could give you a line of credit and you could cut that check immediately?
What I love hearing about David telling about some of the deals he does, sometimes he’s just a credit guarantee or even talking with Greene about stuff he’s got going in Indiana or whatever, you’re like, “You can still get a fourplex for that amount?” And people call Greene with that because they know that’s his buy box or, “Here’s a city I’ve done a ton of deals in.” I’ve got flips going in five states right now and maybe 10 California counties. We flip 30 houses at a time. Does that mean I’ve touched them all? Nope. Some of them, I know the street name, but not the house number. And some of them, I’ve never even been in them.
So, it doesn’t have to be this emotional connection to your rental, which I love mine, they make me happy. But it is you’re first planting that seed, and you can’t compare it to, “Oh, if I would’ve done it two years ago, yeah.” Well, the best time to plant a tree was 10 years ago and the second best time is right now.

Brandon:
There you go. That’s one of my favorite quotes.

David:
So before I move on, that is what I want everyone to hear, I keep saying this because it’s that important, the people who bought these houses five years ago, they were like, “Oh, they crushed it. I wish I could go back five years.” Nobody was saying five years ago it’s a guarantee they’re going to crush it. Many people were saying, “This is stupid. You’re paying way too much.” Blah, blah, blah. I don’t know a human being that ever bought a property unless they got some like significantly under the appraised value. Throw those out, everybody thought they paid too much, everybody thought the market was going to turn. It never goes away.
And I don’t know anyone that bought a property 10 years ago that isn’t like, “Man, I’m glad I did that.” Or that isn’t saying that. Even people in 2005, the worst time to buy ever, by 2015, they were making a lot of money and they had made a lot of money. So I just want to encourage everyone who’s listening, the emotions you’re feeling when you are afraid are normal. We still feel them today.

Tommy:
And don’t let the neighbors or your uncle’s neighbor’s sister nag you out on your own deal. I had a lady come out in her SpongeBob pajamas and say like, “Why did you pay $50,000 for this? Everything in this neighborhood just keeps going down.” And I’m like, she’s negative on her own house that she owns next door. There is an opinion to all of that. And if it was like a, “Hey, by the way, I promise and I guarantee this is worth 100 grand next year,” everybody would have that and it wouldn’t matter whether it’s in a major job market. You can’t get supplies in Alaska because there’s this natural floor, or in Maui. How much does it cost to build just one house in Maui?

David:
All right. You learned a whole bunch working for Thanos, you became an evil genius, and then your conscience hit you and you decided, “I’m going to become a good guy. I’m going to love houses instead of take them all and sell them to… ” I’m being super hyperbolic right now. But you got into buying for yourself. So I want to ask, how did you take that information that you gained at that time in your career and apply it to building your own wealth instead of the hedge funds?

Tommy:
Yeah. I would say that I always wanted out. I didn’t want to ever have 70-plus employees. I actually have great relationships with some of them now, and if I could start my own gig again, I would poach talent like a mofo. I know if somebody to turned on the pain again, I could press go and our volume would be great. But, my daughter was due October 15th in 2014. And our COO, she came in and she’s like, “When’s your daughter due?” I said, “October 15th.” She’s said, “Okay. I’m exiting you on the 17th.” And I’m like, “Okay.” I knew I get to keep my stock, I get out, I get to go back to what I love, which is one deal at a time. You just don’t get this billion dollar fund ever buying shit-tons of real estate.
You planted a bunch of seeds one deal at a time. I just love making the deal. And that’s what I was really looking forward to. And I came back here and I just got back in trustee sales.

Brandon:
All right. Over the last seven years or whatever it’s been since leaving there, what are you buying? How much have you bought? And what’s your current buy box like?

Tommy:
Well, the cycle talk we were talking about before is real. Our cycle is different than Springfield, Missouri, it’s different than Dallas. But what David was talking about is, there’s just a supply constrain of product that’s out there, and I think that’s national. So the stuff I’m keeping, I still love irrationally low priced houses. I’m not making a ton of money buying $30,000 houses in Arkansas, but I buy them, I buy condos. We have a trailer park that we bought at sale. My preference right now is, with all the overhead that I do. I’ll continue to flip however many houses are necessary to feed my rental addiction.
And I want to buy, stabilize and hold stuff while debt is low, replacement costs are irrationally high and the rents are high. It’s a three-two. In my world right here in NorCal, if it’s a four-two, single story, reasonably newish, on a court with a three car garage in the right school district, then you start taking those away. Well, it’s not in the right school district. Well, it has a two car garage, it has no garage. You start taking stuff away. Can I still get my money back out and get back on the wheel, find the next transaction? I love the stabilized ones. It’s one deal at a time still for me. Every deal we work on is fully independent, it’s just a flip,

David:
What I love about what you’re saying is you are focusing on, I don’t want to just make it as simple as the positive, but things like, “I can build it or I can buy it for less than what it would cost to replace it. It will pay for itself. I can borrow the majority of the money from somebody else at the lowest debt ever.” Those are sort of macro concepts. As opposed to, “I don’t want to buy a house because the fence might fall over,” which is a micro concept that we all get tripped up on.

Tommy:
Toilets.

David:
Yes, there you go. Toilets are the perfect example of a micro concept that stop people from taking action. And I think you had that unique perspective because you operated in that world where you had to buy 24 houses in 24 months and you could not focus on those little details. But if you look at real estate from a macro perspective, it always ends up winning. Look at what Brandon is doing, he’s another guy like that amazes me where they bought 300 million of real estate. Brandon could never tell me what’s happening on lot number 68 of the mobile home park in this area at any given…
He does not know, he probably will never know, but the fund is crashing it because they have the fundamentals in place. And so that’s what I love about the mindset that you two are bringing, is it helps you override that fear of the, what if, what if the toilet clogs? What if the tenant doesn’t pay their rent on time, or something like that? Instead, you’re focusing on these big factors that can’t change quickly.

Tommy:
Yeah. Brandon also hit on the fact that, “Oh, I can make 20,000 bucks just moving this lead over inside of the brokerage.” I’m sure you’re like, “Hey, I can’t do a lead in Modesto for you, I’m not going to show property for you in Modesto,” but you trade that over. Every lead that comes through offers value to somebody else in some different way, and you want that to come back. I have specific loan officers and the goal is not, can I get at $500? It’s, will you call them back? Will you act like their tail’s on fire and you’re the only water to put this thing out until it’s closed? Can I trust you to do your part in this referral work?
And then people reach out and they grow their one deal, one seed you’re planting at a time, one at a time and that’s it. And you build your portfolio that way. It’s one fourplex at a time because you’re never going to have four units at a time vacant or it’s one single family in a certain market where you know you have a contractor you can trust or you have the agent who has genuinely looked closely at this deal and a property inspection report that you can rely on. And you just get one deal at a time done.

David:
So Tommy, when you’re looking at a deal or creating a possible strategy, you’re at the beginning stages of whatever your endeavor is. I have my own criteria for, there’s all these different ways that real estate can make you money. I have a priority that I put those in based on my personal position in life. For instance, cash is not as an important to me at this stage in my life, because I’m still working and making money. But headache is, I don’t want to buy in a D class area that’s going to pull my time there. Can you share with us how you prioritize the different aspects of real estate with what you’re looking for first, and then second, and then third, and why?

Tommy:
Yeah. And to make it relative to the people listening that are exactly like you, it’s that that can I get out of management by authorizing my property manager to make any decision under under $500, then they have to ask me past that? Do I even want to know about it? Can I assume that the only major employer in this community is just going to stay there forever? No, you cannot assume that. If you understand the risks that’s the one by one, by one, Brandon said, is the MSA 100,000 people or more? How are all these people going to make money to be able to afford rent?
For us, I think it’s easy for any single new investor, any current investor or other to turn on an advertising lead through a Carrot type system and get leads that come through and just start checking some of those boxes. For me, I put it in the buy, fix, and sell box as often as possible. But the one that warms my heart is the BRRRR box. Is it the right product? Is it a one bedroom, one bath on a lot four times its size that I could redevelop the lot? Then I don’t mind losing $300 a month while I break it out into four lots. Or I can buy something in Oakland that has this a significant job market, it’s 100-year-old house and play the appreciation play, and you end up making $120,000 on a $60,000 down payment in two years just because the appreciation’s there.
So you know your markets that you’re willing to go in. Some people personally want touch them and I don’t really need touch it as long as I’m paying someone that’s a licensed professional to touch it or someone I can trust to be able to touch it.

David:
That’s funny that you keep mentioning Oakland with licensed professionals. In 2021 at one point the David Greene team was responsible for representing the buyer on 25% of the houses that were selling in Oakland. We were. We were buying like all the best inventory and helping a lot of house hackers. That’s such a good point because our clients didn’t have to worry about hardly anything because every question they had, we already knew it, we already did it. We understood that buy box very, very well. We knew these are the neighborhoods to avoid, these are the type of houses to avoid.
And I think that’s a great point when you’re trying to scale, is you need to be looking for, how do I get something off my plate? How do I get the property manager doing that? How do I get my agent doing that?

Tommy:
You just don’t have to do it all. I get jealous of the people who are gainfully employed. I pay myself money and go have to tell the truth like, “Oh, I’m a manager.” “Of what?” “Of a company that I own.” Ah, well, shoot, you pay yourself. I go out of the normal loan box. Can you stay within that? So if you’re dual income working professional in Sacramento and you’re buying homes in Lawton, Oklahoma, or you’re buying homes wherever you’re buying, you could buy turnkey product. There are people on Craigslist advertising turnkey product, and they’ll give you a warranty. You use their property management company, you’re putting 30% down, and it’s tax strategy from that point forward.
There’s just so many benefits to just getting out of your own comfort zone and getting over that. Really, the toilet thing, how often is that really the problem there?

Brandon:
Well, let’s get into a few specifics here of where you’re at today. I’ve got a list of like five questions there. First one, how many flips are you doing a year right now at this point on average?

Tommy:
I would say 2020 really slowed us down. The type of product we were buying, that actually paused us into 2021. But what it did change is it changed this selling season. Before, you’re like, “Oh, well, from Christmas until the end of January, no one really goes out and sees these houses or whatever.” We can sell anything year round now. And I would say that we’re probably only getting out of three a month now, so we’ll probably flip 35 to 40 houses this year.

Brandon:
I love how that’s a pause. The average person listening in was thinking like you did like one last year. No I did.

Tommy:
No. We did in 2010, we did 200 flips, and it just went down. And sure, I could do 50, I could do 60, but they’re going to be thin margin deals which become a bit more of that gamble, is this an investment or is it more of a gamble? Do I think the market’s going to be just fine in March? Well, I’m buying flips that prove I can’t get out of these things in at least 90 days. But I have probably 20 flips on the books right now.

David:
For anyone wondering, Tommy is not saying the S word and we’re editing it to be ish. He just says ish at the end of everything, it’s his style-ish. Tommy on those little flips you’re doing, are you guys paying the full capital gains on those or do you have some form of tax strategy that is helping you save money on that?

Tommy:
It’s a matter of whether you’re licensed professional or not. The tax strategy I do, I feel a little bit more of like an equity protection strategy. I don’t really flip houses in my rental company, it’s unnecessary to have people. If you’re building up this equity A, inside of our rental company, whether it’s an LLC or an S-Corp or other, you’re a product of the market, it’s a 90-day turn. That’s the efficiency. And that’s what I think people really want to know is, can I make a 10% net margin in 90 days and do that four times a year, and I’ll get a 40% ROI. And of course, I’m paying time, I’m also paying staff on that and interest on that. So what’s the net to me at the end of the day?
And most of that stuff I can’t get around, it’s just short term capital gains or it’s realized as individual income personally.

David:
I’m curious if you set up your or flip company underneath your rental company or maybe vice versa. Could you take your flip income, pay it into your rental company and then use the depreciation from that rental company to offset the money?

Tommy:
I think from the standpoint of at the end of the day, I’m the tax payer and it’s coming up or down, it’s whether you have retained earnings inside of that company, that you’re either working against at the timing of the year versus when you’re closing out your fiscal years, in the end, it all rolls up as ordinary income.

David:
And you can offset your ordinary income by purchasing real estate in your own name and using accelerated appreciation?

Tommy:
You can. And the tax strategy is that huge like cost segregation stuff that you’re looking.

David:
Yes. I did a lot of that this year and if people want to know more about it, message me and I can share, and that goes for you too, Tommy, if you want.

Tommy:
My hindrance there, my concern for people to really educate themselves on it a little bit is make sure that they understand how it’s affecting their personal lending and the lending inside their entities. Because they’ll put back depreciation, lenders will take out the depreciation or they’ll put the depreciation back in when they’re taking that into account. And that’s what makes the world go around.

David:
Oh, you’re so right. What you’re describing is that if you show a loss on everything, you can’t get a loan. It hurts you more than it helped you.

Tommy:
Like our boy, Brian. Brian I would be asking with him, buying a house, he is buying a house and you can show more than what you’re going to borrow in a private account, but they won’t loan you money unless you can show you have this whole W2, you have this, you check all these boxes for that kind of lender.

David:
That’s one of the nice perks of me having my own mortgage company is we can find the programs that work around that and we can help other people. But I love that you’re pointing out that fact that it’s not always a win to avoid all taxes.

Tommy:
Hey, good news. I will steer you around that problem prior, you get the right education about it and then you pull the trigger.

David:
There you go, and you build backwards. Thank you. Brandon, I will allow you to continue with your line of questioning of the witness.

Brandon:
All right. Number of rental units, what are you buying in terms of rentals right now? I know you said that you’re buying a lot of different types of stuff, but what’s that look like in terms of rentals or BRRRRs?

Tommy:
I did slow down the rental purchasing here and near the end of the year, the BRRRRs, just for purposes of us sharing knowledge, I’m having trouble with people doing a 90-day BRRRR, a seasoned BRRRR where I’ve owned it for a minimum a period of time because I can turn them so much faster. I bought one in Sacramento this last quarter that was a four two, single story. It’s just the perfect rental product and the rents are so high, but I have to wait now until, I think I can technically close on December 18th, this is my sixth month or something like that.
So if you know your lending partner, says about the BRRRR stabilization, it changes what you can buy and how long you can hold it for. I encourage people to understand, here’s my $100,000, at the end of the year, how much is this going to be worth? And if that’s simply, I’m lending money to a guy, I trust with it, and I made 10 grand, that’s 10% interest. I got a 10% ROI way beat the market, so I’m probably growing… My goals right now are pretty reasonable, I want to grow by another 10 to 12 rentals a year. Because I love rentals, they make me happy.

Brandon:
Yeah. They are fun, man. So what’s your current portfolio look like in terms of, and not necessarily dollar amount to the penny, but what does Tommy Christie got right now?

Tommy:
I take pride in some of the fun ones like the terms deals or deals you’re just like, “I cannot believe I got this deal.” And a lot of people count doors or they count properties. In the end, David and I were just talking, you talk this thing through like, I want the horizontal income. I’m just not relying on it now as I’m still making money in my vertical. So I’m willing to take on a deal that’s losing money every month that has a significant equity position that I can buy. I have rentals to bring in $300 a month in California, I lose $600 a month owning this thing? I probably have 20 properties in my IRA that I don’t have any debt on, because you put a vehicle together and that thing just grows. You can flip inside of it with the right vehicle.

David:
I just love that you’re saying that, it’s good for people to hear. It doesn’t mean if you’re someone who is living paycheck to paycheck that that is a good idea for you. And I’m about to use a sports analogy, which I’m committed in 2022 to using less everybody. We’ve heard your feedback. So I won’t be submitting, but if you’re a really good team and you don’t need a player in any position, you can draft a young person out of college and develop them for a couple years so that when you need them, they’re ready. And that’s what Tommy is describing. If you’re a terrible team and you just need someone who can contribute, you got to go for a person you can plug in and play right away.
At different stages in your investing career, different strategies work. I don’t need cashflow right now. Remember the bald guy that used to be on the BiggerPockets forums? Was it, Jeff Brown, I think he was.

Brandon:
Jeff Brown. Yeah.

David:
He had a conversation with me like 10 years ago or eight years ago, it was really insightful. He just said, “David, you’re working, you’re working a lot of overtime. Why do you need cashflow? You have plenty of cash. You need a plan for retirement when you won’t have cashflow, when you’re not working anymore.” And it just a light bulb went off and now there’s absolutely deals, you can get a $500,000 property for $400,000. That will be worth 10% more every single year in one of these markets. If you’re losing two or $300 a month on that, but you’re gaining 50 grand a year in equity and you don’t need the cashflow, that’s not a bad buy. And people have been hearing for so long, cashflow’s the only reason to buy.

Brandon:
Great point. I don’t want people to miss this that you just made. If you are losing… First of all, obviously you have to be able to afford that, I’m not saying go buy deals that lose money. But if you were losing two or $300 a month on a million-dollar property, that is very different than losing two or $300 a month on $100,000 property, because the appreciation on a more expensive property is going to be 10 times what it’s going to be on the little one.

Tommy:
But exposed as a niche here is this, occupied homes where tenants have another 12 months on their lease and you can’t get these tenants out. That stuff is trading, especially it’s your primary residents, you’re taking advantage of it. And you don’t have to move out of your house for six months and you’re buying something on the market for a 10% discount that in the end, you get to move into that thing at its 13th month, but you’re losing some money on its rent. But you got to take into account depreciation, you got to take into account the amortization too, as you’re paying that.

David:
It’s why you need to understand that as an investor you’re a business owner because there’s different buckets you make money in business. The appreciation is a bucket, the loan pay down is a bucket, the cashflow is one bucket. Just like if you are a business owner, you have accounts receivable, accounts payable, you have deals that you’re working on in the future, but you have money that you have to spend right now to prepare for that. Maybe your salaries are really high as you’re training people so that they can make more money later. Cashflow is one important area in a business.
If you run out of cash, the whole business can die, just like if your body runs out of blood, it’s going to die. But it’s not the only reason the body exists. It’s not the only reason real estate exist is just for cashflow. And that’s all we’re trying to talk about is Tommy set up here where you’re in a luxurious position where you can make long term decisions that might lose a little bit of cashflow short term, but are they going to be bleeding you dry in 10 years, in 15 years? No, they’re going to be crushing it. My rents in California have more than doubled than the eight years that I’ve bought here. And so those are some of my best cashflowing properties, but when I bought them, they were some of the worst.

Tommy:
Yeah. And you also have to have the right guidance in that too, because you can’t go bumping rents over certain amounts of percentage in California. And in other states, it’s completely different, but you can bank on the fact that one point in time when someone moves out or you do an owner carry deal to someone or you do a lease option or other. There’s so many creative ways. We’re looking at buying a note right now against like 17 houses in the Midwest. And it doesn’t mean I get to own those houses at all, which just means that there’s some income protection there, there’s equity protection there, and then either there’s a delinquent borrower or a willing borrower to pay. It’s just a distressed asset. I look at anything that people are coming through.

David:
Which states do you own a property in now?

Tommy:
My favorite states, if I could continue to buy are the international states. I love like Orlando, Florida. I love Florida in general right now. And buy block houses in Florida by the way, that’s different, every strategic, there’s strategic advice.

David:
Well, what do you mean by block? Are you talking about cement?

Tommy:
Yeah. Cement block, stick-built homes versus block homes there’s just little-

Brandon:
Like the hurricanes or what?

Tommy:
Yeah. Actually it’s just the weather of how they age for block homes.

David:
There’s a lot of rain and rain affects wood more than it affects block.

Tommy:
It very much does.

David:
Yeah. I’ve learned that lesson too.

Tommy:
I love Oklahoma. We’re doing Tennessee right now which has just significant population growth. I love Tennessee. We’re doing Arkansas because it came through the auction and I liked the price. We chose the product there. It was like 1990 or newer under 20K, you could just make your buy box there and the stuff was working. So I bought three in Arkansas too.

Brandon:
Crazy, man. Hey, last question before we move on to the Famous Four, how are you finding deals today? What’s your primary lead sources?

Tommy:
My primary lead source is people, relationships and wholesalers. There are times when I go on a plane in Memphis and we buy houses signs, and the people that are marketing stuff on, you just tell them what your product is and what your buy box is. Brokers have on market and off market deals. If you specifically, especially commercial brokers, if you specifically know what it is you’re looking for like, “Hey, any multifamily deal with a minimum of 20 units, preferably something I could do 100 units or more on,” they know what’s available. I find it’s coming right now for people. We do some advertising, but relationships and people reaching out, just offering us stuff is really the greatest source, we’re qualifying right now.

Brandon:
Awesome, man. Well, this has been a lot of fun, man. It was cool hearing in your story. You got a lot of wisdom, a lot of knowledge over the years, but we’re not quite done yet. So let’s move to the last segment of the show. It’s time for our-

Speaker 5:
Famous Four.

Brandon:
The Famous Four is a part of the show where we ask the same four questions every week, 550 episodes in a row. Actually, I don’t think we did it for the first few, but whatever. We added it in at some point. These questions you’ve heard before, but we’re going to throw much anyway. Number one, Tommy, do you have a favorite all time or current favorite real estate related book?

Tommy:
I think it’s called 52 Homes in 52 Weeks, because it was a mindset change for me, was that it’s really easier than you think it is to buy. I think it maybe buy one deal-

Brandon:
Yeah. Dolf de Roos, 52 Homes in 52 Weeks.

Tommy:
Yeah. It was a mentality change for me. I can’t tell you that chapter seven was the best chapter ever and changed my life, but I can tell you, it was that if I could do that for two years, I got 104 doors? That was that, if you have the funds behind you to do it, or if you have the rehab to be able to turn those things over, t’s really not that difficult. I’m not doing anything significantly different than the rest of the world’s doing. It’s doable.

Brandon:
Awesome, man.

David:
I don’t know if I’d say that’s true, Tommy, there’s not a whole lot of people doing what you’re doing out there in the real estate space. Maybe because they don’t all have the love for homes that you do.

Tommy:
That’s it. But people who are doing four deals, they can do eight, and people who are doing eight deals can do 16 in a year.

David:
It’s like talking to Brandon twice. You look like me, but you sound like Brandon. All right. What is your favorite business book?

Tommy:
Man, that is a great question too. So I’m on the struggle bus with systems right now and I’m into trying to get our EOS stuff positioned into each one of these companies and I just I’m halfway through and I’m actually really enjoying, what’s the Integrator versus-

Brandon:
The Rocket Fuel.

Tommy:
Yeah.

Brandon:
Rocket Fuel is the sequel or whatever to Traction.

Tommy:
Yeah, exactly. You start Traction and then Rocket Fuel and just trying to get… I’m trying to get myself spread appropriately into the parts of the business that I really enjoy the most. So that’s really got my mind frame change.

Brandon:
We just had Gino Wickman on the podcast. Hasn’t come out by the time we’re recording this, but by the time this airs, it’ll be have been released. I don’t know, look back a few episodes, Gino Wickman, the author of Rocket Fuel, we had on. Some good stuff, man. Both traction and that were a game changer for me. Cool man. Well, next question.

David:
Next question. What are some of your hobbies?

Tommy:
Actually, all of us are all part of GoBundance, and that gets me the only chance… I think after I had son, my first born, I didn’t get to snowboard for four years, he was five before I hit the hill. That’s my so easy to get out, get in the hills and get lost on the snow. It’s really hard to hold a phone. And I really feel like the detach, the further I can get detached from anything electronic, it really held helps me get lost for a while. And my oldest is now 13 and him and I did the top Yosemite. If I could get as vague as possible with it, it’s getting out of my cute little cubicle. It’s like getting out of my own way and just getting out outdoors, but for the most part, it’s snowboarding and going to Costco because I feel like that’s where you just dominate.

David:
Costco dominator? Can they make that into a sport? There used to be a TV show. What was that called, where they would run into a different store thing and they’d have to pick items? I know our listeners would know what I’m talking, it was like shop till you drop or something like that.

Tommy:
Supermarket Sweep.

David:
Yeah. Supermarket Sweep. And they’d have to go fill a cart up with the most expensive items.

Tommy:
That is a bucket list item right there. I am adding on at the end of this, I have random bucket list items.

David:
You’ve been training for that your whole life.

Tommy:
One of my bucket list items, which I think I was BS with Nigel about, what I told them was someday when I pay off my primary residence and pay off my house Tahoe, I can check some boxes, I can spend some irrational money. I want to have Morgan Freeman voiceover on like a two, three minute about real estate career. Or if he’s unavailable, I’m going to use Samuel L. Jackson.

Brandon:
I was hanging with Nigel actually at the airport restaurant and we talked about this and we were sitting there looking up what it cost to hire Morgan Freeman. Oh, we were having a great conversation about this. Apparently, you can do it, but it is significantly cheaper to hire a Morgan Freeman impersonator.

Tommy:
I did not know that.

Brandon:
For 500 bucks you can get a Morgan Freeman impersonator to say whatever you want.

David:
But how much can I pay to get Dave Caliendo? Or was it Frank Caliendo?

Brandon:
Frank Caliendo, yeah.

David:
To do Morgan Freeman. Is that cheaper than-

Brandon:
That might be more expensive than even Morgan Freeman.

David:
Oh, that’s really funny. They’re making a movie about Kurt Warner and he was bagging groceries. And then the Rams came and that’s going to be Tommy’s story, he was just out here buying houses and then one day Supermarket Sweep had a resurgence and they found him and he became the gold medal winner.

Tommy:
I’m so glad you said that. I got to add more random on my bucket list. I was like, “I just want to have that, did something different than anybody else in my real estate world.”

Brandon:
So good, man. All right. Well, last question for me of the day, if you had to really narrow it down, what separates successful real estate investors from all of those who fail, give up or never get started?

Tommy:
The separation factor, that is really furthering the question. I would say, the question of digging into it is inside of real estate or other, before you can diversify, I think you got to dominate one section of that. If you have a goal to grow your real estate team and you want to have 50 people on it, or if you really want to have 50 doors or 50 single family residences or other, what separates a lot of people who actually do it is taking the first step. There’s random parts of that too like journaling and sharing it with people, are you able to tell someone what your goals are? Are you really aimed at it to be able to accomplish those goals?
And what I found was when Miracle Morning became a game changer for me was I needed to accomplish more in the morning with Miracle Morning, without setting aside my faith, time and things like that that I needed to have this connection and losing connection to my family in order to dominate in real estate. It’s like, the better my business did, where did I go with my personal health or others? So it’s just the balance and understanding that your goals are very personal. If you really genuinely feel like you can’t live life without $100,000 personal cashflow, you might be living above your means or you might be just misguided on really what’s separating you from the rest.
So that’s a great question. I think that it really does start though with someone who actually makes the first step, that says, “Hey, I hate to bug you with this, but you seem like someone I can ask about this, this transaction or this deal or this goal I have.” And don’t stay surface level, really digging in and making it reasonable, making it personal.

Brandon:
No, man. No, it’s great. It’s perfect. It’s really good stuff, man. This has been a great show. Thank you for coming on today and I’ll let David ask the last question. Get us out of here.

David:
Our last question, where can people find out more about you?

Tommy:
Go to ilovehouses.com. That’s pretty easy. And in the super cute little background here, that thing I bought, that phone number, 916-BUY-SELL if someone gives me a buzz. Email’s probably super easy on reach out, just [email protected], but I would love to add value to whatever people are working on. So I do encourage people in your own home markets, if you find someone in your home market to reach out to, and if you want to just talk shop or wholesale something or partner up on something, joint venture wise, I’d love to talk to people about anything. So I love being on the show. I love you guys. I really appreciate you guys having me here.

David:
All right. Well, this has been a fantastic show. Brandon, anything you want to say before we get out of here?

Brandon:
No. Just that this was a great interview to end my 10 year at BiggerPockets with. I don’t know if 10 years are-

Tommy:
I’m going to advertise that. I really appreciate that. And to very specifically give props to David, congratulations brother. He called it like a promotion, it genuinely is a promotion to be able to lead something this big and I’m in awe what you guys have accomplished together. And I’m just looking forward to seeing how good it goes for both of you for the next chapter.

Brandon:
Well, thanks man. Appreciate that. The final episode of the year comes out on December 30th. That will be my last episode officially as host of the podcast. So everyone, go listen to that one now. If you listen to this in the future or wait until I think Sunday, I think it is when it comes out or is that Thursday? I don’t even know the dates, but it’s coming out next episode. So episode 551 will be my last one, so go listen to that. David, Tommy, thank you guys.

Tommy:
Love you guys.

David:
Love you too, Tommy. This is David Greene for Tommy, “The Costco King” Christie, and Brandon, “The Legend” Turner signing off.