Data Driven Real Estate Podcast #42 – Wall Street Institutional Investors and Scaling Business with Tommy Christy, ILoveHouses.com #DDRE42

Tommy Christy is CEO of Alpine Holdings Inc. and Owner of ilovehouses.com, an asset acquisition platform aimed at facilitating property purchases nationwide through digital advertising and online media platforms. Tommy has over a decade of real estate investor experience and over $500 million in investment activity. He helped acquire, renovate, and lease over 2,700 homes in Northern California working with Invitation Homes. He's also done over 1,000 foreclosure and distressed flips personally.

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Show Topics

00:00​ The Data Driven Real Estate Podcast Welcomes Tommy Christy, CEO of Alpine Holdings, Inc. and owner of ILoveHouses.com

‍01:19​ Who is Invitation Homes?

‍03:41​ How did Tommy started in real estate?

‍12:25​ What were Wall Street institutional investors, like Invitation Homes,  chasing during the foreclosure crisis

‍14:07​ Key lessons from Invitation Homes that transferred ilovehouses.com

‍29:20​ What key markets is Tommy focused on

‍40:29​ Land development, flipping, and rentals?

‍45:45​ How can investors scale their business? What role is the BRRR model playing in his business?

‍49:50​ What data is important when selecting properties

‍53:52​ What KPIs are important for digital marketing? Why Tommy may be going back to direct mail marketing.

‍56:22​ What opportunity is ahead in 2021 for real estate investors?

Show Transcript

Aaron Norris  0:05  

Welcome back to the Data Driven Real Estate podcast, the podcast for real estate professionals dedicated to driving business using data. I'm Aaron Norris along with Sean O'Toole with PropertyRadar, and welcome to Episode 42. This week we have Tommy Christy. He is CEO of Alpine Holdings, Inc, and owner of ILoveHouses.com an acquisition company nationwide who buys through digital advertising and online media platforms. Tommy has over a decade's worth of real estate experience $500 million in investment activity, and even acquired, renovated, and leased over 2700 homes as part of Invitation Homes back in the day. He's also done over 1000 foreclosures and distress flips, personally. So, Tommy, welcome to the show.

Tommy Christy  0:43  

Thanks for having me.

Aaron Norris  0:44  

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

Tommy Christy  0:48  

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

Aaron Norris  0:52  

I sort of want to, what's interesting, as I've talked more about the Invitation Home sector over the last couple years, and I thought I would there's a lot of misconceptions of what they did in the market at the time. I know a lot of Main Street real estate investors, we were going to the courthouse steps, and we're very upset with you guys, because you guys were buying under very different formula that we could do on Main Street. Can we talk a little bit about that experience and how you've been ended up there?

Tommy Christy  1:18  

Yeah, I uhm...

Sean O'Toole  1:19  

One second, I just want to back up for because we've got lots of people out there watching, like most people don't know who Invitation Homes is or why it was important or the impact they had during the foreclosure crisis. So, let's start with that if you don't mind Tommy?

Tommy Christy  1:33  

Yeah, no problem. I so, starting there, invitation homes was, you know, a player in the institutional space of trying to create what multifamily had institutionalized and single-family world. So, when Waypoint, American Homes 4 Rent there was quite...What's that?

Sean O'Toole  1:58  

Colony.

Tommy Christy  1:59  

Quite a few players there that ultimately saw a clear opportunity. And that opportunity could be quantified, as you know, high yield rent, higher, the multifamily became very, very scheduled, like you can take stuff down to a LA for camp, you know, because they know, nothing really changes inside, you got maintenance 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'. And that sparked just enough for the people who have that kind of money to say, how do we organize talent? And how do we organize a model and institutionalize that, and there was a lot of fear behind that. And there's a lot of excitement behind that and out of Invitation Homes being funded by the largest private equity firm in the world. It's kind of like an easy target kind of approach to it. Like they were like, a lot of articles written about Invitation Homes, when in reality, it was more about an industry. So, they created, you know, there's a single-family rental industry as it is. And that is, really what quantifies Invitation Homes is, how can we build, manage, maintain an organized and capitalize on this opportunity? Which was the 2008 recession.

Sean O'Toole  3:25  

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

Tommy Christy  3:36  

No.

Sean O'Toole  3:37  

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

Tommy Christy  3:40  

Yeah.

Sean O'Toole  3:41  

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

Tommy Christy  3:49  

Great point. 2002. I got a job selling coupons at a college and then management training program. And then I learned how to, knock-on doors. And that added a lot of value to sales in the generality of how personal real estate is. And, and then I was picked up by a local foreclosure company to do that, essentially set appointments for people who understood what they needed to do once they got the appointment. And so, fast forward into 2008. I had begun doing my own buy, fix, and sell stuff and I was on a list of people, that you know, really doing enough volume that they can be recommended by Fidelity National Title Company, fidelity was the major title provider for the Invitation Homes model at that time. And all those powers that be said, I'll refer you to the people I think that could really help you guys build this, and I was on that list with Daniel Claiborne and the two of us interviewed for it. I think there's probably at least five of us that had done that. And they were looking for...

Sean O'Toole  4:54  

In Sacramento region?

Tommy Christy  4:55  

In Northern California. Great point

Sean O'Toole  4:57  

Northern California. Okay.

Tommy Christy  4:59  

And there were, the Bay Area was its own region, Sacramento was its own region. And but at the time we just, we had, 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. I think that's where you started Aaron, was like how and why is that nobody's going to build a home for $80 a square foot, including all impact fees and all of the, you know, horizontal infrastructure, you don't go vertical in Southern California, Northern California, or some of these other markets. So, we're buying assets under the replacement cost, easily financed, and the demand for rental housing was shooting straight up. So, three easy factors there. And they basically said, and it actually was less about me, it was like, 'Can I not lose my money in Northern California?' You know, like that was almost like the angle of because everybody got hurt in 2008. It doesn't matter what level you are at, you got hurt some one way or another. And then you bounce back, you know, so I think there was a fear part of that I saw Waypoint was a great company and they were building before we were and I got scared. I'm like, 'Blackstone's coming, and I'm gonna be out of business.' So, we worked it out. And it was way better, bigger and different than I ever had anticipated.

Aaron Norris  6:31  

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

Tommy Christy  6:36  

Yeah, so that was... That's a really great question. I, I had immediate need to, I had an immediate ability to take down to trustee sale files. I think that's what really appealed them. I've had people in five counties, some guy started a program called PropertyRadar and level the field. And, and I had now everybody was there because data was so available. And I looked at it from, they were swimming in a pool that I was not. I was not buying 1990 or newer stucco, tile roofs, like the easy ones, we're going to people that were better financed than I was, I was doing the you know, rurals or fixers and, you know, dirty title stuff, anything, but our volume was high. So, 2009 and '10, we were into Vegas, Phoenix, California, we were able to place capital, relatively competitively, you know, like, meaning the margins were still very reasonable before they had compressed. And so, when I, they they said, 'Can you get us product? Is there stock in the market?' And the answer was, yes. So, we were locking up short sales, people were closing on short sales, you know, that were six months, and the market was advancing. And we, they would close like, 200, we would close it like 250. And then we'd be so afraid that someone's gonna write an article about how, seven days later, we're paying $50,000 bucks more for a short sale that took six months to negotiate. Very PR unfriendly, you know, for us, like, like, we're overpaying for something when in reality, like where we started at 80 bucks a foot. We are not overpaying for this product right now, you know, like...

Aaron Norris  8:19  

Well, having competed against the likes of you on the trustee sale side, you know, a lot of local Main Street investors were scratching their heads, like these guys are going to get hosed. They don't know what they're doing.

Tommy Christy  8:30  

Yeah.

Aaron Norris  8:30  

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

Tommy Christy  8:44  

...yeah, a great point.

Aaron Norris  8:44  

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

Tommy Christy  8:49  

That is so yeah, it's very relative. And, and I think that's what changed for me, I spent investor management is at least 15% of any flip business, you know, you're like, let's just say a deal came through. How am I going to finance that? You know, Is it for me? Is it a partnership deal? Are we equity sharing with somebody else? Like, what, what works for this deal? Not every deal. They're all deals and some of them are cheap, and some of them are expensive. You're in the Bay Area, you do a $700,000 takedown and a million dollar exit. Those are completely different than buying a $70,000 house. That you mean, we were selling condos in Vegas for 25, for 25 grand that tells you that there was enough margin in that but I made money somehow buying it cheaper than that and selling it like you could buy just like your data set more than 100 times like you can buy condos in Vegas for less than a Honda Civic. That was 2010. So...

Sean O'Toole  9:45  

Yeah.

Tommy Christy  9:45  

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

Sean O'Toole  9:51  

I definitely remember all the calls I got as as Invitation, Blackstone, you know Colony, Waypoint started to operate in these markets. And, you know, people are like these guys are overpaying. And it's shutting down the opportunity. And I have to admit, at first, I didn't understand it, either. Once I understood that they were buying to rent, and I went, wait a second, you know, right now at these prices, the, the rent was 10, 12, 15% return on investment. And I believe, I think most of these guys had a target of 7% or better. So, they're like, bid it up until it's at 7%. The markets at 12%. That's all it's, it's tens of thousnads of dollars more the $100,000 more than anybody else in the market would buy to flip it. But their their goal wasn't to flip it. And all these auction investors had been buying the flip, versus buying to rent. And I just, it was like, once that light bulb went off, it went I went, 'Wow'. And you know, it also told me, I think I wrote a bunch of articles right at that time saying prices are about to go way up.

Tommy Christy  11:15  

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

Sean O'Toole  11:21  

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

Tommy Christy  11:26  

Yes.

Sean O'Toole  11:26  

Because it was in, it was in April of 2010. That I said, the foreclosure market is going to come to an end. And I need to start working on broadening beyond foreclosures to all properties and other things. So, that was in April 2010. But our foreclosure business didn't peak until 2013.

Tommy Christy  11:54  

And that was like ours, that my 2012 was our biggest year I, I'd created a simple product that was anything in California under $60 grand, I'll buy it, it didn't matter. Like I don't care how ugly it was, or where it was, I was financeable and the rents would always cover it and that I have private money lender that would totally agreed and I would buy 6, 8, 10 of those, put a $600,000 loan on it get all the money moving back at trustee sale.

Sean O'Toole  12:22  

And yeah.

Tommy Christy  12:25  

So, Invitation Homes came and they're like, oh, no move the combo. Like we could do $360,000 rentals. And my mind's like, that doesn't make sense right now, you know, I'm smarter than you, you know, but turns out they were right. And they gave me a giant spreadsheet that said prove this biggest spreadsheet headache thing you're gonna have to do every single day to prove this is correct. And that was the model, the model was at one point in time. Everything that is going to auction today will be worth what it was worth when they did a loan on it. And so when is that? And so they told me three to five years, and you better believe I kept looking for articles. But what are we going public? What are we doing this like because in my mind, I thought, three to five years, the whole world to be turned right back on again, perfect. And I thought people were late to the market and I could name 100 funds started after 2015 that half a billion dollar net worth, you know, the world has shifted. And there is a hoarding effect that are going on to these rentals. And the news feels like it's this percentage of the market but it's still you know, this small percent of the rental market it's people's move out of their house to keep it and though they're doing the rental laws in California, I don't know what it is nationally. kind of similar to the fact that people want to be able to keep their home and not be held to the same standard that a large rental fund is held to like it's just about the dollar like when you're doing one rental to one person or one family it's, it's, just it's a different models financed differently. It's and it's creating wealth for families and, and  the small investor.

Aaron Norris  14:07  

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

Tommy Christy  14:21  

So, you know, Invitation Homes is like moving the comma twice, if not three times, like so for the small investor and other you find your niche and, and sometimes you're not working enough on your business to know that your niche has expired. Like oh foreclosures are going away. Like I'm still here at the buyers there no one else at the auction right now because there's nothing going to sale. You know, you show up now and there's 10 of us of which Sean let the secret out. There's only one today like and everybody knows where it is and what's going on and where it's being posted. And I think when I talked to Sean before about this was that you saw some pretty crazy stuff going down the foreclosure world. And people had different niches and ways to do it. And it's still very, you could be an attorney trade at your auction, an auction at your office if you wanted to be or the sheriff's office or wherever you want to try a sale. So, the foreclosures kind of went away. And I now classify myself as a distressed real estate investor. And..

Sean O'Toole  15:25  

...you still do that, but you have started seeking other... right, which is what in April 2010, I said is that's what we're going to need, we're going to need other ways to look for properties.

Tommy Christy  15:35  

Yeah, you're right.

Aaron Norris  15:38  

Well...

Tommy Christy  15:38  

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

Aaron Norris  15:41  

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

Tommy Christy  15:53  

So, I would say that inside of the larger institutional model, the fear goes away. When it's your money, and it's one deal at a time. You don't worry about where the money is coming from. I mean, I had treasury management to do every night. And when we would lose cashier's checks, which any foreclosure guy understands you do, like, I can tell you competitors that are washed them in their pants, you know, like, you just watched $400,000, did you forget you had $400,000 in your pocket?

Sean O'Toole  16:24  

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

Tommy Christy  16:26  

You have some bond out of that. And I would have to at night, I would have to say you gave me 400 cashier's checks to go to five locations at three different auction times, you know, and if the stack is this big, and it's $8 million, you know, like, how did you spend that money today, and then I would have to spend more time, we actually had people that were treasury management inside of our, like, from the bookkeeper side, we had a local CFO, 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 four and a quarter or other, you learn, like, what is my buy box? How do I live within that buy box, still find stuff, manage the cost of money, you know, because that becomes super relative. And when I was at Invitation, people would call you they will read an article about you and say, 'You guys want to buy my house.' And so we had a sheet that was, and then people called Blackstone people called BlackRock, because they didn't know there's  BlackRock and Blackstone, and Blackstone, and they were like, Well, how do we capitalize on this, and maybe they funded you know, Colony or other I don't know where their money came from but I, it was, it's just a, it's a completely different mindset, when you don't have that fear factor and our fear, you know, in my buddy, Dan, and I, we, because we were, we would get there and we would have to have the money out by 4:45, in order to get a drive list in the morning to the Bay Area, and you can get Solano County still in time, we can get the money back to San Joaquin County, and we, we would just be rotating the bodies. And we had a phrase called use, buy, buy, buy, don't buy that, you know, it's like this whole like this vague, you know, you feel like they're going to hold it against you for what you're going to buy, like, and your job will be judged based off of that success or that failure. Because we were going so fast. So, in October of 12, we had a day where we bought over 40 houses in one day, you know, and you're like, Okay, so let's, you know, we have people that change the locks, and then you have vacant houses. Now, we're so afraid of the world writing an article about how we're mismanaging our houses that we've now owned for 72 hours, you know, like, it was vacant for seven years or four years, you know, and so it was a different model. And it's I look at how the rent is bonkers here in Sacramento right now. We're getting a giant Bay Area effect, which goes all the way up into the Tahoe region of people affecting the prices and the rents and the other. And I Invitation home said it's going to be worth this one this much someday, and it'll rent for this much someday. And when you see that on a spreadsheet times 1000 it's not relative to any thing you and I will do if you're you're just you don't you never think about borrowing a billion dollars against your portfolio, you know, so it's just it's not relative when you're looking at it, and they hire analysts, right. And that's the approach as if you had a person good enough that they can go out there and flip 12 houses at a time. They're not gonna be an analyst for $40,000. You know, so that's why the model, maturity, you got a lot of good people and then people they actually the salary started going up, too. So to get a great acquisitions guy into get it, you know, some of that it's totally worth their while that when they turn off their phone at five o'clock, you know, like it's off, you know, the it's a standard HR. By the time I left I had 90 employees and I was they basically said you got to have maybe 75 by the time you were gone and because you build up to deal with problems you have much like multifamily, you have a person dedicated Hoa and dedicated to you know, the, the taxes and the issues of code enforcement and go along with it. And other sorts, it was way different and way better.

Wait worked on the management side, not just the acquisition side, you actually manage them and rented them and ended the property management side too?

Yeah, and I, I would have to get into the dirty evictions, and I would have to and, so people would come in and be very upset about you name it bugs in the rentals, or, and they would surface up to, you know, like a surface level of, I had to get involved. And at the same time I'm on, you know, two-hour conference calls to New York or two-hour conference calls to Dallas, our home office and trying to deal with everything comes up with being a property manager, you know, the responsibilities of spending, you know, millions of bucks and trying to find product and that was can you get enough? How do you incentivize people on MLS? You know, how do you manage people bring you stuff direct and the conflict of, you know, not being your own broker yet? How do you lease stuff? It was really interesting, it still is, like, all of those companies, I think, have appreciation to run I don't, I think they're gonna hit a, they're gonna hit a real issue with their yield targets. Now, they can't keep buying forever. That's what builder rent is just blowing up.

Sean O'Toole  21:50  

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

Tommy Christy  21:54  

Don't buy that. Don't buy that house, like you can't buy...

Sean O'Toole  21:58  

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

Tommy Christy  22:05  

Yes I... There's a very reasonable amount of ego that goes into the auctions. And Sean had mentioned a guy that almost sounded like, you know, it's like the gamble right? You know, some people look at as an investment and some people really love the chase and the deal and you know, Trustee sales are a riot for that. Because you, if you go the extra mile, if you're following 20 sales versus 200 and you door knock everything you know their bacon and other people don't or you know, the people in there have already broken every fixture in there or other you can kind of make some a lot more educated decisions as you go.

Sean O'Toole  22:43  

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

Tommy Christy  22:46  

It does and people. So, so the very first week we did this, it was it was the best week for us. Because nobody knew it was me. I didn't tell anybody. And they're like, 'Christy, somebody came to the auction they bought seven houses', 'That's rude! Those people are rude. They did not come here at all'. That's me. I just bought those. So, you didn't notice the mailing address on every single one of those is the same. Like I still get mail from our California entities here. I'm just forwarded over but so I bought, the guys in the Bay Area or running us up just because they knew we would probably just keep but they felt like if I overpaid they would, I would leave.

Sean O'Toole  23:29  

You'd go away.

Tommy Christy  23:30  

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

Sean O'Toole  23:50  

You're looking at the cap rate worth 550.

Tommy Christy  23:53  

That's worth 550 I get it should never be worth 330 like there are people are gainfully employed in the Bay Area or jobs. And there's a shortage of housing and it's impossible to develop. So, and we 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 a problem at all. As long as I can stay within 'Can I pay the mortgage? 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 bought it. I bought a single family 55-acres and I want to say like and the rents were high the purchase price was low, very reasonably close to developable land.

Sean O'Toole  24:41  

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

Tommy Christy  24:49  

Yeah.

Sean O'Toole  24:49  

This is way outside of that buy box is way

Tommy Christy  24:51  

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 would show up and they just need to say I was in their region, great people, great, you know, great organization. They, they're hiring well, they're building this model well, that was their job and...

Sean O'Toole  25:11  

...well run company.

Tommy Christy  25:12  

And we would they, we would audit the purchases. Like, you can't buy this, you know, like you can't buy this product that was always the, the look you're expecting. Well, when they found out about a 56-acre or 55-acre ranch, you know, home, what if they didn't give me crap about at first, they're like, you can't buy that it was just simple. Then they moved on to the next issue we're dealing with. But when I went out to Dallas one time, well, the guy gave me a cowboy hat. And I was like the rancher now like, and in my world, I'm like, these guys are running us up like I, from just not like a back off. But like, I can buy whatever I want. You know, so we bought a 4500 square foot rental here in town. And those guys want to it's not your buy boxes. What's my buy box? Like if I have $5 million in an envelope? You tell me about the buy box?

Aaron Norris  26:01  

How did you decide to end up leaving?

Tommy Christy  26:04  

It was perfectly time, they, I was buying. And then property management when you bought so. And so if I wanted to stay, they would have found anybody who wanted there's still Atlanta is still there. Alicia is still there in Atlanta. And she took on I just saw an Invitational , but she's now got a national role. And I was second to go. I want to say Vegas was first they timed out. You know, they had a very tight buy box. Maybe only 1200 houses their total. And like, for instance, Tampa was Tampa and Orlando. And they were still buying and we weren't like it's just the mortgage cycle was different than the trustee sale cycle. So, she, we got a new COO and she said 'Your wife's 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-year vesting, I got to shave almost three years off of it still get all the upside all but majority of all the upside thereon and she just knew they were converting to a property management company now, they're just, they still are an acquisitions company, but it could be run national and the volume wasn't there to support my salary and bonus structure.

Aaron Norris  27:26  

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

Tommy Christy  27:30  

You know what I did, but I didn't do anything with it, I launched it, I took three months off to be a Dad and just try and figure out what I was going to do because I had a major identity crisis. Like, I've just reached a level of success in a growing region. And like, I could apply that I could jump on, I think Blackstone was was launching a multi, a single-family rental loan business at that time. And they were you know, there was, there were...

Aaron Norris  28:03  

Aaron knows them well.

Tommy Christy  28:04  

Yeah. And, and each of them I remember, you know, kind of looking at Opendoor thing, you guys are late to the model? You know, usually, and then of course, they're a technology company that's growing like crazy. And there, I want to say the other guy, multi-billion dollar valuation recently, and much like, I don't know, everything in the world, I didn't see...

Sean O'Toole  28:30  

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

Tommy Christy  28:41  

So, I didn't know what I was going to do... I still didn't know I, I still don't know, like, I guess it's a, you know, I get the shiny object thing going. But doing in volume is really fun. You know, like, it's just but buying a single-family housing, you can decide whether you keep it for the rest of your life, or you flip fix, and flip it or other was, and being self employed, and you know, kind of controlling your time and being a dad with, with young kids. I felt like getting back into, you know, the 65, 70 hour week of trying to build something bigger was not a good fit after doing that, you know, my wife gave me X amount of grace. I think I've used up all my husband points at that point in time.

Aaron Norris  29:20  

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

Tommy Christy  29:37  

Yeah, great point. Recently, I found that, you know, being in, I think it's my 18th year or so doing it. So, I've got a lot of great relationships. And the biggest difference for me and what we're targeting now is some regions are actually getting far better yields for us like Tampa and Orlando and places where we we could partner with people or we can get reasonable product to just, you know, work off of previous relationships we have built to move and do the same thing in other markets, but get the necessary yields we need or more of the velocity of because you can turn a house in six months and have a day job and do two deals a year and make a great site, a great living a great income, you know, out of that and our volume right now for what we're targeting with the digital ad spend in the Google, Google AdWords and creating that funnel is a bit more about spending money on building the funnel, you know, less, less on buying, sell your house as is or less on buying the words about sell your house faster. I mean, everybody's looking at how you diversify yourself from it. But if you know your, if you know your thresholds of what you can spend, and what you can manage, currently, the constrictions on our market are do you have the staff? You know, do you have a contractor 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 that are you able to so we target right now we're just targeting having houses at all, you know, things that we would usually call a $50,000 flip, if you have something available, and the market tells you they're not willing to pay you what you think it's worth as is, you can always flip it. So, we target just wholesale stuff that's coming through, a lot of people are able to make a buck off of bringing us a transaction, bringing us a deal, pre market stuff. We've put out some most recent free stuff, you know, Facebook ads and other that people used to post what you're looking for. And people say, 'Hey, I have a client looking in the following zip code in Simi Valley' or you know, whatever it is, you can actually make money looking at wholesale deals differently. Because they have a client that's going to take it off your hands, or, you know, the yields start to compress to a point where you have that fear kind of kicks back in. But this market is very forgiving right now, like you don't have...

Sean O'Toole  32:23  

...prices are going up plenty of buyers. And so it's kind of hard to make a mistake, you're not catching a falling knife. Like we can in other markets like 2006, 2007. So, it sounds like it's an interesting idea there of like finding, you know, because there's so little inventory on the market. Right? There's quite a few buyers.

Tommy Christy  32:46  

Yeah.

Sean O'Toole  32:47  

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 that were not on the MLS. And so, by knowing what people are looking for, by having those buyers, you can go out and look specifically for that.

Tommy Christy  33:07  

Yep.

Sean O'Toole  33:07  

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

Tommy Christy  33:11  

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

Sean O'Toole  33:13  

Very fast.

Tommy Christy  33:15  

Yeah, the agents are such a big part of that agents and brokers who know exactly what they're looking for, you don't have to explain to them the dynamics of the market or, you know, the buyers that are really just uncomfortable with losing and you know, I think that politically it will change. I think that the key here is liquidity and lending you know, if for some reason the FHA flip changes deals like do I want to wait 90 plus days to close this house when I can sell it right now? Like there's a big, that, that actually matters inside the mortgage industry too. So, that's how the 3% down conventional came about...

Sean O'Toole  33:54  

FHA has a rule that you, they won't fund a property that was purchased less than 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 ridiculous rule in, in a market that's moving quick and in in, in a world where folks go out and find hoarder homes and other things that FHA wouldn't finance anyways. And then they will clean them up and get them to a point where FHA can actually finance them because they're now cleaned up and title issues are fixed. Why does it matter was 90 days suddenly some magic anti-fraud number?

Tommy Christy  34:34  

Yep. And then you you take a buyer, and you trace them through the model, okay, we can't go FHA. You're not a vet can't go VA. Now, you know, you don't have the down payment. And then there's that, you know, it's like it becomes it we're incentivizing people with paying you $6000 bucks or 6% of the purchase price. You know, when that goes away, there's this huge fear like oh, no, like without the buyers, you know, no one's gonna buy houses from us if 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 kind of where this stuff is going. And you know, HOAs will squash deals because you have to get into stuff and you have to be pre approved by the HOA, there's a lot of weird filters that go into who gets to buy these things. But for right now, you know, if you understand how you're buying it, or how you're going to exit out of it, we're taking really tight deals right now that are not penciling tight, like we are making great money on because the markets giving us gifts, but has nothing to do with us. We know the product. It's a four two single story 1600 square foot house on a court. But when the market is full hiking, it could be on the busiest street, you know, the fourth bedrooms upstairs, and it's at a seven foot ceiling. And people are like, I'll take it. It's got four bedrooms. I want that house. That's my dream house like and suddenly the market's making investors feel like we know we are the best investor the best flipper that's ever live. You know, like...

Aaron Norris  36:03  

Which markets are you working in right now?

Tommy Christy  36:06  

I would say so we have 35-ish flips going right now. So, that includes stabilization of rentals. I started buying in Memphis in Arkansas and Tulsa, you know, places where I found people that wanted to work with us, they just said, You know, I got the contractor based on this, if you're buying rentals or I got, we can flip stuff together or other like when we when we kind of vet it out. And you use a Evernote or WhatsApp or whatever to communication, send photos and have a great process. It's it really brings a tight like a lot of people are worried about buying out of state they're going to you can't drive by it or so we are probably stabilizing maybe another 10 rentals out of state right now. That's Tallahassee, Tulsa, Memphis, and all the supporting communities into Arkansas that are surrounding Memphis, and I love that stuff. And then I have maybe a dozen full-time flips and flips are at any given stage, waiting for occupancy in rehab, pending sale, you know, inside of California, and then we have some in Missouri and Florida and Texas, but actively at least 20 of those are in California right now from San Joaquin up to you know, Northern Butte County.

Sean O'Toole  37:30  

Yeah, it's interesting, you know, the, we see so many folks like yourself that have gone and said, you know, I'm gonna expand and go to other places besides California, because the model that they were using wasn't working. And then you see folks like Aaron Mazzrillo, who we've had on the show, who I saw a post from him on Facebook this morning is like, you know, I'm now not buying it if I can't drive to it in five minutes or something ridiculous, like, or he's like, oh, he said, If I don't, if I have to look at a map to see where the city is, I'm not going. Like I'm not buying it.

Tommy Christy  38:06  

I'll take those stuff. I'll take that stuff. Like it's a trailer and it is a 90 minutes that way, and it is a windy road and fire insurance is really 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 out there.' You know, like...

Sean O'Toole  38:27  

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

Tommy Christy  38:32  

Yeah.

Sean O'Toole  38:33  

Yeah.

Tommy Christy  38:33  

And it is, you maybe I haven't graduated, like, you know, I told Aaron until that point where I have enough volume that I can eliminate those. But I really like stabilizing stuff like that, too, when you get a lower purchase price, it's a lot easier to get lending done, because you can leave less in the rentals. And I just feel like even the manufactured home industry is not delivering these amazing, affordable products that people would hope they are, you know, it's a matter of time you get a foundation underneath it and a porch built on it and attach the see to it and covered. It's like it's faster, and they have so many benefits they offer in the world. But...

Sean O'Toole  39:08  

There's so much demand, you can't blame them for not taking the cash, right? Like to the promise was there. I think the promise still is there that it could be a lot less expensive. But you know, somebody's looking at, okay, I've got I'm going to spend $300 a square foot for a site-built, right? Oh, but I can get this product over here and I can get it in half the time. I'll pay $300 for that. And so, if you're the, if you're that modular builder, right, you're gone. 'Yeah, I'll take your $300 it only cost me $100. But sure, let's go.

Tommy Christy  39:41  

Yeah, buyers are finding them that way too. They find out that someone else is selling their manufactured home online that the lending laws are different. 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 I see a major change in shifting there that, not that we've reached a level like, I just think that within inflation and the cost of materials and some of these other things, we have a consistent floor that's going with replacement costs that really won't be changing. And I really like that sub $250,000 market, because it's $30,000 wire money...

Sean O'Toole  40:21  

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

Tommy Christy  40:26  

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

Aaron Norris  40:30  

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

Tommy Christy  40:35  

Yeah, so as a distressed real estate investor, you don't really get to choose what 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 split off a lot and keep the lot or, you know, I have a trailer park that we bought on sale, I, I'm not a trailer park manager by any means. You know, like, I love it. I love the park, I love the rents, I got a FEMA lease on it, you know. So, when, when the land came through, we do tax sales too. And it was perfect, it's an L-shaped lot and the property next door was boarded up. So, if I could acquire that and get more density, it was a reasonable purchase price. And I, I really have the opportunity now to exit out of stuff I bought for 30 grand, 1031 into something better. And it's just, it's a perfect opportunity to kind of build the rent. But if I can't afford it, I can at least build the pie, cook it and sell the slices and keep my own little slice of that. And I that's how I see the development play is. I'm not going to be competing with a $5 million piece of land for the builders, but I can bring 4, 6, 8, fourplexes to market. And there are people who will take that scheduled rent, get a simple Fannie, Freddie, you know, loan on there and get a brand new rental. And I, you know, it's easy to be part of that when you can, when you're when you understand the costs associated with it, when you have a team you've built that'll help you make an educated decision.

Sean O'Toole  42:02  

You know, and I think coming almost back to invitation homes, I think this is one of the things that I think so many people missed back then and probably still missed today, right, is and I think to some degree, the politicians miss this too, right around like, Why are these big these folks are coming in and stealing the opportunity for homeownership and the rest. And it really is kind of a simple equation, right? Like, so. If you're, if you built a business, and you own your building, right, and then you retire, you're 70 years old, 65 years old, you retire, you sell the business to people don't want the building, right? You sell the building. And you just want something that is super easy. And you know, if you get a 4% return...

Tommy Christy  42:52  

...warranty.

Sean O'Toole  42:52  

...that money, it's probably, you know, my mom just sold some property. And like, I did an analysis not on her purchase price because it was forever ago, but, but on the current market value, she had like a 1% return. And I took that property and sold it and put her in a new property that's like a 5% return. But it's a no brainer whatever. It's five times the income for her.

Tommy Christy  43:18  

Yeah.

Sean O'Toole  43:19  

Right. People go, 'Oh, I'd never pay a five cap' and you're like, you're not understanding where this other person's coming from?

Tommy Christy  43:26  

Yeah.

Sean O'Toole  43:26  

So, if you can, if you can recognize, but there's the issue there is, they want it to be perfect. They don't want to have they can't rehab, my mom's you know, 84 but she's  not rehabbing a property, right. She's not doing anything. I could do it for her maybe but I didn't. I'm busy. I don't have time to do that either. I just want to buy something perfect, done, easy, tenants in place, ready to go turnkey, right? For her and that if you look for those things, that's a big opportunity. And that's what I keep hearing from you. Right is you're seeing these gaps.

Tommy Christy  44:03  

Yeah.

Sean O'Toole  44:04  

And when you find those gaps, whether it's right now these buyers that can't find anything, well, let me go find something that maybe they couldn'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.

Tommy Christy  44:17  

And it's not a level playing field. Because if you look when Florida kept running on trustee on auctions, California we were done. You know, like there was just not the volume there and now the mortgage states needed at 18 months to catch up to that. So, when you look at the jobs going to Huntsville, Alabama, and you see conforming multifamily there, which, that's my free tip of the world. I love Huntsville, Alabama. You look at these fourplexes that were built as fourplexes and you're like, 'Oh yeah, that here is $800k' that you know that product there is still $325k and then as a scheduled rate of return and you look at it from the cost segregation study that you're going to do on that and get a giant off, you know, offset of your taxes up front. bonus depreciation. It's different than your mom's like bonus anything, I get a 10 year warranty on a brand new, you know, fourplex, I look at it as I'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 my personal income taxes by doing a cost segregation study. And I buy a new rental and I upgrade out of a single family in a reasonable area. And now I got a four family multi unit delivering return, and you get the tax abatement that comes along with cost segregation strategy.

Sean O'Toole  45:41  

Yep, yep.

Aaron Norris  45:45  

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

Tommy Christy  45:52  

You know, it's transactional. You, you, you, grow slowly. And people, some people grow too fast. And I would say in 2008, the people who in my, in my industry who got hurt are the people who had unlimited amounts of money, and it was purely speculative. So, I believe that you're right now I bought a four two single story this week for in, Sacramento, in Sacramento for $350k. I think it'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, I have a dual exit on this property, when stuff was worth $500,000 at $500 bucks square foot, you know, a new build in some no somewhere bill. And the rents are only $2000 bucks, you don't have that, you know, that luxury. So, by scaling up slowly and not taking on unnecessary risk, you remain an investor versus in, you know, a gambler, like if you're like, 'Hey, I foresee the jobs are going to come and they're gonna come here to California', like, okay, you see that, right? And when Tennessee and Texas are doing campaigns to pull our businesses away, you know, like it's, it's a supply constrained market we're dealing with here. If you are gainfully employed, and you want to do a first your first rental, your 10th rental, your fifth rental, Fannie and Freddie are like, that's fine. Do you have reserves, and how much you putting down? It's so simple. Have you hired a property manager to handle that for you, they take all the science out of it. So you buy it. The most important I mean, the most motivating model for me right now is the BRRRR model to buy it, rehabilitate it, rent it, refinance, repeat model, the burn model, you hear a lot of it on BiggerPockets, and with David, and then, and then Brandon. And if you can live in that world and do one deal at a time, you're scaling up your rental business, or if you can get with the realtors, the agents and the brokers and say this is very specifically what I'm looking for. If I have to look at 25 deals, before we make one offer, or make 25 offers before we get one deal, are you willing to work with me on this and the agents and the brokers will facilitate that growth, and you meet people, and you tell them the truth, this is what I love to do, this is how we do this, and people will bring you stuff. So, scale is built transactionally unless you are building a business to scale, if your goal is I got to get 200 flips. That's a different level of scale. For the relative investor who wants to be an operator inside of this space. Do I have the people surrounding me there to help me succeed at this construction management finance, you know, the finance side. It's, it is a big part of rehabilitation and cost of money that will affect your business. If it's all your money, and the risk is way less. That's not really you know, something I'm looking at from scaling from that standpoint. But for the people who can do one deal a quarter or who are gainfully employed, they want to do one rental a year or one rental every six months or something and the BRRR deals. That stuff just you build on your current success and you build on your comfort level like I'm not buying 100 year old remodels or restoration projects. We're buying, In Arkansas, we're doing 1990 or newer, single-family houses sub $20,000 bucks. And they're out there if you like...

Sean O'Toole  49:29  

What? Yeah.

Tommy Christy  49:31  

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

Sean O'Toole  49:35  

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

Tommy Christy  49:50  

Yeah.

Sean O'Toole  49:50  

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

Tommy Christy  50:03  

The season we're in, in real estate, it's higher ratios. So, I would say in the MLS world, I toward 25 to 50 for one that I get it is, but it does not mean there are no deals on MLS that is one of the over the objections, you hear people like 'Oh, there's no deals on it.' Like, there's just stuff that can't be financed or has hair on it, or people just don't understand the dirt value underneath it. There's so much there that if you're looking at it, but that is a grind, right? The KPIs..

Sean O'Toole  50:40  

That's a perfect example, though, right? All these people that say there's none of this...

Yup.

Right? They're just not understanding the work it takes to find them. I mean, that's so awesome. And it's, it's such a such a thing we deal with every day with folks are like, I called two people and both said they weren't interested. I'm like, call me back when you called 50, right?

Tommy Christy  51:03  

Yeah. And so, when you buy your, you buy a house on MLS and you beat the system, right? You were the only guy who got a deal on MLS this year, they think you're right, you're fixing it up, neighbors will come to you. Like I'm talking a $6 vinyl sign in your front yard is like this, hey, we buy houses and like, people will call that phone number because they're the neighbor they want to how much is it gonna be sold for? How much did you pay for that and if you put inside of the data that even the Radar gives you it's like find out who all the neighbors are sending them a postcard for 50 cents each and say, just bought this you know, we paid $250,000 bucks for it as is with the problem tenant, whatever you want the you know the, the message to be, people will acknowledge that you're doing it and so you you get the ball really starts rolling on, you know people there in front of you, they want to work with you, they choose to work with you. And the MLS thing is like it is a grind the KPIs for advertising in Indianapolis, it's like 1250 a deal. Like if you pump $3000 bucks into advertising, you're going to get either one or two or three very reasonable deals out of that, from what a buddy of mine who's got it season out there is saying and, but do you know what a deal is in the first place? Like 'Oh, Zillow says it's worth 160', 'Oh, well, what's it actually worth?' You know, like, you know, have you are you working with someone on your team to do that. So, we get inside of advertising, it's more like 80 calls, eight offers, and it gets you one to two deals. And you know, the KPIs there for advertising. It's more like it's a real win would be $2500 striking price, you know, per lead that you close on or something but it's kind of advertising, it's kind of ranging between $3500 and 5k depending on, are you paying more for advertising based off of who else is buying and when that's a real fluctuation of how you do it or strike...

Sean O'Toole  52:59  

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

Tommy Christy  53:08  

Inside direct mail, I haven't done it in years. But I very, I loved I want to go back there because the digital buyers click on far more websites or other before they find you. The direct mail is, they may have gotten 10 advertisements 10 days in a row. And the one they got that day or others the one in your hands that speaks to them for whatever reason. They're not shopping for more use, sometimes some people will sell the mail aside, they'll have 10 to look through them and decide which one they want to call. However that happens. I think there's a few, there's a it's more of a level playing field. There's not like they're actively looking at 10 other people doing exactly what I'm doing. I really had success with working with that mail, but we just haven't been doing it last couple years.

Aaron Norris  53:52  

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

Tommy Christy  54:03  

It's, it's, it's really personal to the investor. Ours are distressed. So, inside of the data of if I only did mailings and property drove, drives and NODs. If I'm in that same area, the lists that overlap become really important. Like, do you have a code enforcement blank list that you could apply to that? Can you apply the USPS vacancy list to that? It'll ring three bells, you could probably surface 30 houses out of a list of 300 that are on all three lists. And that becomes the science behind the data is like how many more can we you know, like if I only had to look at these 30 like could I target those personally, then you have no cost? You know, can I do those drives or can I pay for those drives? There are companies right now that you can pay for a photo of a house there You know, they'll go in and open it for like, there are rental companies and listing companies that will let you list your home. And you can pay a realtor to show it for you. You know, it's like a $35 fee or something and someone will go open the door. And so, you don't have to leave your desk. Even if you understand the data better. And you, or you line the data up like that, it, it just becomes so obvious. You're like, oh, man, I had 300 leads three of them, you know, these, these ring, ring the bell three times, there's my focus.

Aaron Norris  55:33  

List stacking, Hurray!

Tommy Christy  55:37  

Right.

Aaron Norris  55:37  

..I'm just kidding

Sean O'Toole  55:38  

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

Tommy Christy  55:42  

Yeah, just keep adding criteria, and you can eliminate that point time. You know, stuff over $600,000 bucks and I have a stellar resume breaking even on flips over $700k like it is a, it's not, it is not the Bay Area market here in Northern California like that, like $700k last few years, people are like, 'Oh, that looks a little, that's a little pricey', now like our move up market is now like at $700k but you look at something like oh, it's worth $750k I'm buying it for $450k, you put $150,000 into it and carried it for nine months you know, like the margin just aren't going, started dying.

Aaron Norris  56:16  

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

Tommy Christy  56:21  

Yeah.

Aaron Norris  56:22  

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

Tommy Christy  56:29  

I think it's a real game changer for me as tax strategy. I really feel like for people that are getting into why you're buying it, you really can think indifferently people that need the write off that are buying their first commercial property they're they're getting out of residential and commercial buying their first rental or other what you buy really matters like and how and what its price point is and how it cash flows according, according to seed you're planting you know people really don't see the fact that you can sell that duplex in five years and buy you know 10., 15 units out of state you know or other that are cash flowing even higher or better or different. You graduate piece by piece by piece by using the tax strategy for your portfolio it's much more than one single-family rental you own you get to drive by or other when you if you can take the emotion out of which I cannot sometimes I'm like I bought this thing so cheap, I love the tenants and have a great dog and your kids are going to the high school or like if you can sell something just like what Sean had mentioned. It's it's operating like a four cap if you consider what you paid for it or whatever, if you could unlock that $250,000 in equity you have now in property and how's that working for you also, there's really a strategy to doing that every two years or five years or other so I'm you know, I'm looking for people people that invest in me and other than get the benefits of that when we co-invest or people that loan us money some of the stuff we're doing so well right now is choosing what we're keeping and how and why we're keeping it and can you tell that story to people that want to understand it and tax strategy is something that is just really deep right now like for how much of a benefit you can get out of it that you proactively instead of reactive tax strategy is so much different.

Aaron Norris  58:32  

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

Tommy Christy  58:36  

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

Aaron Norris  58:51  

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

Tommy Christy  58:55  

All right. Thank you guys.

Aaron Norris  58:58  

Thank you for listening to the Data Driven Real Estate Podcast, you can find show notes and links to some of the resources mentioned in the show at datadrivenrealestate.com. Click that join the community, and you'll be forwarded to the PropertyRadar community where you can ask questions about the current show and even see upcoming guests and ask questions there. We'd love to engage with you in the community. So check it out. Please don't forget to like, favorite, subscribe and share on your favorite platform where you're listening to the show. It helps us out a great deal. Thanks for listening, and we'll see you next week.