Flipping real estate properties has been a hot topic for the past few years as a way to make a substantial income and build long-term wealth. Some flippers find success, while others struggle to survive. So what is it that the successful flippers are doing so differently from those who aren’t?
In this podcast episode, Clint Coons of Anderson Business Advisors talks to Tucker Merrihew, owner of TTM Development Company and host of the Real Dealz Podcast. Tucker explains some of the marketing systems and processes that he personally uses, and that he developed, as well as how to get funding to become a successful real estate flipper.
Highlights/Topics:
- How did Tucker get started in flipping real estate? While starting and growing a mortgage company, he flipped properties on the side to make a profit
- Why did Tucker start TTM Development in 2008? Mortgage markets imploded and real estate changed; created company to buy REOs from MLS and at auctions, as well as negotiate short sales to avoid foreclosures
- What has changed at auctions since then? Advances in technology and additional service providers have made it more competitive and difficult to get worthwhile deals
- What is direct-to-seller marketing? Tucker takes out the middleman and works directly with those who own real estate
- What’s the key to successful marketing that generates the biggest return rates? TTM Development’s marketing stands out from its competition by trying, testing, tweaking, and retesting ways to be different
- Marketing costs money, so how does Tucker’s company make money? Three buckets:
- Long-term Money: Redevelopment/new construction
- Medium-price Point: Renovation
- Wholesale: Buy property, then sell it for various reasons to generate profit
- How does Tucker’s team determine where to drop mail? Driving 4 Dollars (D4D) App
- How can real estate flippers raise money to get their business funded? Internal capital, private money, and hard money
- How and where to find good contractors? You get what you pay for, if you value cost over quality, pick one or the other or something in the middle
- What will impact the real estate market in 2020? Supply, demand, and interest rates
- What are must-dos for new investors? Understand it’s a marketing business first and real estate business second
Resources
Anderson Advisors Tax and Asset Protection Event
Full Episode Transcript
Clint: Welcome everyone, Hi it’s Clint Cloons here with Anderson Business Advisors and this is another edition of our weekly podcast. Today, what I thought I’d do starting out the new year is a lot of people are out there flipping real estate. It’s been a hot topic for the last couple of years, with the real estate prices going up, people are jumping into various markets and finding ways to make money.
What I discovered in working with real estate flippers all across the country for the past 3-4 years is that there are those people that find a way, a niche to really go out there and kill it. There are other people that struggle. They often wonder what is it that makes a difference between what I’m doing and what this other person is doing where they found success in their flipping.
It just so happens in my backyard, there is such an individual that has been flipping property in the Pacific Northwest, and they have done extremely well with it. They’ve developed systems around it and I thought what better way than to have this individual on the program, on the podcast, to talk about their success. They have their own podcast, they give away tons of free information. It’s something that you’re going to definitely want to sign up for if you’re considering flipping real estate just to follow these individuals.
Without any further ado, I want to introduce Tucker Merrihew of TTM Development. Tucker, how are you doing?
Tucker: Great. Thanks for having me on the show, Clint. Glad to be here.
Clint: I’m glad you’re finally here. I know it took a while for us to get together, to get you on the podcast, but now that you’re here, I think it’s perfect timing for everyone. As we’re just talking about before we got started, they were complaining about snow down there and you said you didn’t get much. Did you hunker in there or are you guys still out there still hitting the streets?
Tucker: We managed to make it into the office, just a few snowflakes flying by. Snow didn’t quite happen. We’re cranking and trying to get out of here for 2020.
Clint: Do you have any snowflakes that work for you that couldn’t make it into the office because they’re […] on the ground?
Tucker: I try not to hire snowflakes.
Clint: You can always tell the character of an employer, right? “Oh I see a snowflake on my lawn, so I can’t make it today.”
Tucker: Unfortunately, I’ve got guys that are not quite wired that way.
Clint: Well, there’s a key right there to building a successful business in flip, in having the right employees.
Tucker: That’s right. Most of the guys will dive into it. Chris who’s in the office next to me, he’s been with me for about 10 years. Dan in the office next to him, has been with me for about seven. And the guys on the field have been for a long time, too. We’ve got a business of some long-tenured employees and a good team we built here over that time.
Clint: To build a team like that, can you explain how you got started in this business?
Tucker: Sure. Let’s take it back to August 2007. I had a mortgage company previously. I was doing some flipping on the side, I was doing what they now coin as “house hacking.” Back then, there wasn’t such a cool name for it. It’s just called buying a house, living in it, fixing it up, getting roommates, and then selling it for profit. […] taking that money tax-free.
I did one of those on the run-up in the last cycle, bought it, […], sold it just before 2006, made about $200,000, did that on a couple of other investment-type properties. I bought a hoodie duplex that I put some tenants in, cleaned it up a little bit, made about $8000 on that one, flipped a couple of condos. I did some stuff on the side in addition to building a mortgage company.
In late 2007, the world changed in terms of the mortgage market and just the world of mortgage lending, and then ultimately, the world of real estate. That was the jump-off point that I really needed to go full-time into the real estate investment and development side of the business. Previously, I was kind of one foot in, one foot out, because the mortgage company was creating good income for me, but I was also doing really well in the real estate that I was doing.
Of course, the market was on fire, you could pretty much be a monkey throwing darts and probably do pretty well with real estate back then. That being said, I still did well with it, but I had a hard time letting go of the time commitment of the mortgage company because it also paid me well.
Once the new mortgage markets imploded and the world of real estate changed forever in late 2007 or late 2008, I then decided to kind of go full board into the world of, at that point, it was house flipping because new construction price points just weren’t quite there in most of Portland, so we had to get into the world of just flipping.
I started TTM Development back at the end of 2008, and here we are in 2020, 12 years later. We started in simple ways of buying. We bought REOs off the MLS, we did short sales, people have had too much debt that needs to be negotiated down and set a goal for closure. We had an in-house short sale negotiator. We eventually started buying at auctions as well.
Eventually, we segued to the world of direct seller marketing about 2010 once those other lead sources started to get a little more competitive and it wasn’t quite as easy to get deals. For about 9-10 years, we’ve been almost exclusively in the world of direct seller marketing, in terms of creating our opportunities […].
Clint: You mentioned REOs and auctions because I know a lot of real estate investors think they’re just going to go to auctions, that’s where they’re going to find properties, but that’s a tough game to try and make a profit at, the way I understand it.
Tucker: It is. Back in the day, it was different because now, there’s a lot more technology in this business, there are a lot more service providers. Back then, there were no bidding services. It was the usual suspects down at the auction block. You were basically bidding against the same five or six guys every time. There were some shenanigans that would go on, depending on who was full up that week and who wasn’t as to who ultimately ended up being able to walk away with more deals in any given week.
Once the bidding services came in, there was a never-ending supply of buyer money to buy at the steps, so it just became a lot more difficult. Nowadays, that same thing applies. You could still fish deals out of there, but it’s definitely more difficult. It’s more competitive in the margins, it’s more compressed than it was before.
Clint: That’s what I saw, too. We used to flip properties in the Las Vegas market. We started doing it in 2010 and it was great there, we mainly worked with REO deals, but eventually, it dried out for us. We just couldn’t get the returns we were looking for because of the bidding. People were coming in and just bidding it up. We just said it’s not worth it to go chasing after these deals for such a low margin.
Tucker: In here, that was the same thing. For a while, it was just low-hanging through. You’d watch an REO, you got to know the REO agents in town, and they would hook you up with deals before they hit the market and basically, they put it in as pending. If you’re able to get the price that they suggest you at the bank, the bank was happy just having you go pending, or you play the game of, “Okay, has it been on the market 60 days, 90 days? Does it have a sale fail?” If there’s some room there for the bank to negotiate and then you come in and clean up the mess on those.
Those are the two angles to get REOs. But eventually, as you said, there just was a lot more competition that came in. REO investing, there were no marketing dollars that needed to be spent on it. It was a very low barrier of entry for when people start to get back into the world of real estate investing. That’s why for most of the competition, that was their first stop, that’s where they landed, and that’s why all those prices started to get bid up. It was just more difficult to find deals (like you said) with enough room, with enough margin to make it all worth it.
Clint: You said something now since that area dried up for you, you’ve gone more to this direct consumer marketing strategy?
Tucker: I call it direct-to-seller. I guess the seller is a consumer too at the end of the day. Direct-to-seller would be somebody who owns real estate, whether it be inherited, whether it be long-term ownership, whether it be a rental property, whatever it is. You’re basically cutting out any intermediaries in between you and that owner.
Our first attempt at doing this was pretty simple, fairly unsophisticated. We bought a list. At the time, I think it was called the inherited property list. It was new to the market, and we just sent yellow letters to it. I remember I sent out 300 yellow letters and I probably got 60 calls. It was a crazy response rate, but back then, nobody was getting those and nobody was doing any mailings, so it was a new thing in the market.
Because of that, our response rates were off the charts and it was really easy to go fish deals out of that pond as well. Now, it’s tightened up quite a bit, especially over the last (probably) three years, with the advent of a lot more wholesalers and more technology-type wholesaling businesses that come into space, and they’re trying to scale, do large volumes and all those things.
It’s definitely got more difficult as well, but we’ve remained fairly competitive in that space, and we continue to pull deals out of it. We’ve changed our strategies slightly, we’ve had to pivot a little bit, we’ve had to spend a little more than what we used to, just those things that happen with the competition.
Clint: So are you still with the yellow letters campaign or you’re finding something else works a little better?
Tucker: We’ve abandoned yellow letters probably five years ago, maybe six, just because there are so many companies that actually start popping up, Yellow Letters HQ, Yellow Letters Correct, Yellow Letters everything. We again tried to reinvent ourselves in being different, try and have something different.
When you have seven or eight investors sending to the same list with the exact same copy with the exact same letter, it makes it challenging to stand out and it really is just a numbers game of are they getting your letter on the day that they want to call? They probably think you’re the same guy that mailed them six times before really.
We changed our marketing piece to try and stand out and make it look different. We don’t really do yellow letters, but we do the same type of concepts, like handwritten stuff, crazy packaging, some grabber pieces, just some direct mail tricks to kind of get people’s attention, keep their attention, and ultimately get them to call us first if they’re going to call somebody, so we can at least have first run at any property.
Clint: That is key when it comes to marketing. I think that’s the thing that a lot of people who have entered the space, that wants to flip real estate or wholesaling real estate, don’t necessarily get that, but you need to stand out from your competitions. These people that you’re targeting, are getting hit by 10, 20, 30 different other investors. I often tell people, if they ask me about it, they should do a split test. There should be trying one thing out and then trying something else, and see which is getting a greater return rate on it, which I’m sure you’re doing as well because you just never know what’s going to attract the seller to give you the call.
Tucker: Yeah, We’ve been tweaking, testing, re-testing over the years. I studied direct mail pretty intently, too, over the course of the last 10 years and all the tricks and things that people do to have success because we’re not the only industry that uses it by any means. I’ve taken a lot of strategies and ideas that are used by other industries and applied them to the real estate world, and that’s worked out well. I haven’t reinvented the wheel, I just took the wheel that’s been invented in another space and applied it to real estate.
Clint: That’s amazing you said that because that’s one of the things that we’ve been getting what we call junk mail that comes in. My wife used to always throw it away and I would tell her “No, don’t throw that stuff away, save it for me,” because I would go through it (and I still do it to this day), keep a folder and look at what catches my eye, that I would then not toss and it would make me want to open it.
Now, you said many times there’s a template for the stuff that I work on and just seeing how that would respond in my particular space. Have you ever done something similar to that?
Tucker: It’s funny you say that because I have a filing cabinet to my right and within that file, cabinet is a drive folder, and in that drive, folder has all that mail.
Clint: See? That’s what people say, “How do I come up with this stuff?” I said, “Somebody’s already doing it for you. All you have to do is to find it and then just re-engineer it. It’s a gift that keeps on giving. Take it and make it your own.”
Tucker: Yeah. You might be able to tweak things slightly, but there are guys that send hundreds and thousands of direct mail pieces a month in different industries. They know all the different things, they tried everything, they know what people respond to, the best, the different points from this and that. That information out there, those pieces are out there, you can just take them and tweak them for the industry that we’re in.
Clint: When you’re looking for properties, are there any certain criteria that you go through?
Tucker: Yeah. We have kind of three buckets in terms of what our business does to actually make money. We’ve been talking about marketing which costs money, but what do we do to actually make money? The biggest bucket is we call it our redevelopment or new construction, part of the business, or arm of the business, and that’s our longest-term money.
When we look for those types of properties, we’re generally looking in the nicer parts of town, higher price points, generally a million-plus for new construction. We’re also looking for houses within those areas. There’s not a lot of vacant land in Portland. We have an urban growth boundary. Most of the land within that has already been developed at some point.
What we look for is older housing that’s outlived its useful life, maybe it’s older housing on a bigger lot so that maybe two units could be put where there was previously one, or three units. We target those types of properties for that bucket and that served us really well. We’ll buy them, we’ll tear down the existing house, either build one in its place or two or three, depending on the zoning and how many lots can be created or whether or not we think we should make multiple lots there.
The second bucket is our renovation bucket. We basically buy houses, renovate them, put them back on the market. So it’s actually flipping, like the HGTV type. That will go down in price point a little bit more, we call it a medium price point, anywhere between $400,000 and $1 million for the existing construction bucket. We’ll renovate those, put those to market, and sell them. That’s usually a little quicker.
The new construction bucket takes anywhere between eight and 12 months to turn over your money and generate a profit. The rehab bucket takes anywhere between four months (usually), so it’s a little quicker turn.
Our third bucket is a wholesale, so anytime that we’re maxed out in terms of the number of projects we’re doing, the amount of capital that we got deployed, or the bandwidth that we have available, then we start wholesaling. But we also wholesale in areas where I don’t necessarily want to have my crew drive every day. It’s just not convenient to where our other projects are.
We just wholesaled one in Southeast Portland last week. We could have very easily renovated it, but we generated a great check on the front-end doing nothing, and we don’t have any other projects there right now. I didn’t want to have this kind of outlier project, so we wholesale as well.
Those are our three buckets, we generally fill up the development bucket first, we do as many rehabs we can do, and then we go to the wholesale bucket once we’re at capacity.
Clint: So, in that Southeast Portland deal, where you actively (I would assume) marketing in that area? I’m just wondering if you’re getting enough volume there to make it worth your while to get into that area? How did you end up there?
Tucker: The way that we market is we have the city mapped out. Over the years, we’ve driven every neighborhood that we feel is a good place to be marketing and doing deals. Even if we’re going to wholesale doesn’t mean it’s a bad area or that people don’t want to rehab there because we sold that property in Southeast Portland with one phone call. It’s definitely a hot rehab area, just not an area that’s convenient to everything that we have going on. So, we market all over.
In the wholesale bucket, we’ll market in a lot of areas that we wouldn’t want to market to keep, but it allows us to market in a larger geographical area.
In terms of paying for that marketing, the one that we sold last week we made $25,000 on the front-end of the wholesale deal. Our margins are good and that then substantiates quite a bit of marketing that we can allocate on those types of profits, at least the wholesale one a week before that, and we made $50,000 on it.
You can continue the marketing machine with a portion of those profits fairly easily. I wouldn’t say that we’re like a monster marketing house like some of these large-scale operations is. They’re spending $40,000–$50,000 a month on marketing. We’re more on probably $6000 a month, $7000 a month range on our marketing cost.
Clint: So with those markets that you’re talking about when you’re marketing, did you typically drive them? How do you determine where you want to drop mail?
Tucker: I guess getting back to where I was going to mention previously, we started Driving for Dollars back in 2010–2011. Back then, it was very archaic, just like yellow letters. We would have yellow notepads, we drive around, we write down addresses, and then we try and figure out, what’s the most efficient way to write down addresses and street. So, we put a street name at the top, and then we just put numbers all the way down. Then, I had to hire a high school kid or somebody that wouldn’t mind working for $10 an hour at the time, come in the office and basically pull public records, create an Excel file with all the owner information for each property, so then we can merge it, mail it.
Eventually, I thought to myself, technology was starting to advance 2011–2012 and apps were a thing. There’s got to be a way to really simplify this process. So, we started on this journey of building what is now the Driving for Dollars app. It wasn’t an easy process. Back then, it was much more difficult, there weren’t as many good app builders and coders. So, we’ve had a few iterations of this particular app.
Now, we use that app every day or every week still on our own business we built. Probably about 30,000–35,000 property universe using our Driving for Dollars app. Driving all of these different pockets and neighborhoods in areas within the Portland Metro area that we want to market in, whether it be for the new construction bucket, the rehab bucket, or the wholesale bucket. Then, we continually market to those 35,000 properties at different times, depending on what it is, which bucket we want to fill up.
Clint: That Driving for Dollars app that you made, that you produced, it’s available as I understand, on the Apple Store or on Google, correct? For both Android and the iPhone?
Tucker: Correct There’s an iTunes version and an Android version which, if you’d ask me, seven years ago if you need two versions of an app […] Yes, you need both versions and so it’s available in both.
Clint: It works all across the country?
Tucker: It does. So we basically APIN, skip trace data and owner records data all across the country, in every state. If you live in Boston, Massachusetts, you live in Portland, Oregon, you live somewhere in Texas, or wherever in Florida, you can use the app and you can basically build lists, have those lists immediately skip traced, then you can upload those lists to your computer, to your direct mail provider, your […] voicemail provider, or your cold call, whatever it is, and then take that information and mark it to those properties that you’ve identified as ones that should be bought by an investor or something that you’re interested at.
Clint: Wow. For some people listening in right now, you just gave a ton of information there, about how you would take data like that and go after and hit a market. You could hit multiple different ways other than just direct mail, so people listening are picking up on that. Definitely you should check out that app, sounds like it’s a great piece of information or actually it’s a great tool that you could use to help grow your business.
Now, when it comes to buying real estate and flipping real estate, one of the problems that a lot of people run into is funding. Where does the money come from to rehab the property? Sometimes they don’t even have the money to buy the property and have to use a hard money lender. I’m sure you’re beyond that point right now, but for those who are getting started, is there any tips you would recommend or advise you would tell them about how to get their business funded?
Tucker: I wouldn’t say we’re beyond it, I would say it’s the last bucket that we go to. In terms of cost of capital or something, that me as the guy that’s basically responsible for running the business, I have to be aware of our cost capital on any given project. Obviously, we want to use our cheapest capital first and our most expensive capital last. For us, the way that it works is we have our own internal capital that we use.
I know a lot of people are like, “Oh, I always use other people’s money,” but we’ve been doing this for 12 years. So, at a certain point, you have to put your own money to work, too. We put that to work first and foremost because it’s free capital. Beyond that, there’s opportunity cost we’re not investing elsewhere, but basically cost-free capital. After that, we have a fair bit of private money that we’ve raised. After that, we’ll go to hard money for some of the acquisition funds or things like that if we need to.
We’re in a higher price point market, so you can eat up $2–$3 million worth of capital very easily for a couple of projects. You got to raise a lot of money here to really be able to do a large number of projects.
To get back to your question, the best way that we found to raise money is twofold. Number one is—I don’t know if everybody is an advocate of this—for me personally and something that everybody can do is that if you have a house, and you have a fair bit of equity in your home, I started off using a line of credit or a home equity line of credit on my house to free up some capital. Over time, I’ve done the house hacking thing about five or six times over now, so I have a house that’s paid for. We have a million-dollar-plus line against the house and I use that line as I want to.
Now, you don’t necessarily need that much but if you have a house that has maybe $200,000 in equity, you might be able to get a good portion of that on a home equity line of credit. That’s a great way to raise money. Maybe you can’t do the full acquisition and rehab, but at least you have some cash there, some runway to work with.
Another great way that we’ve raised money is, again going back for direct mail strategy, where we pull a list of people that have lent on other property in our market as an individual and not as a company. So we pull a list, it’s called a deed of trust list, and within that list, which is basically a list of mortgages against properties, the deed of trust has an individual as the beneficiary and not a company. Usually, it’s a lesser sophisticated type of lender. They’re usually doing something for a family member or a friend.
We mail those people and say “Hey, we know that you’ve done some deed of trust investing before. If you’re interested in it again we’d love to talk.” That’s been a great source to find people who understand the deed of trust investment vehicles, and they’re comfortable with the idea because they’ve done that before, and we just show up. You can do this more at scale with us, as opposed to the onesie-choosy thing, and that’s been really successful for us raising money.
Clint: So that private money it’s not hard money. You’re probably getting a much better interest rate with those types of lenders than you are going out to the […] market.
Tucker: Exactly. The idea is it’s a cheaper cost in capital. Also, you can structure it however you want. They’ll pay for the full acquisition and full rehab if we want to, and they’ll also approve payments, so it’s all paid upon […]. That makes it much easier for a lot of people that maybe have cash flow challenges or things like that along the way. They don’t want to have to be making those payments as they go.
Clint: Do you ever give them equity?
Tucker: No, never give them equity. Just a […] and pay off.
Clint: That’s interesting. What a lot of people do is they’ll want to get equity away in the deal for the money. Do you have any thoughts on that? You’ve never done it or not do it?
Tucker: In the world of single-family I don’t think you need to. The turnover is quick enough a lot of times, especially in the renovation world. I think you’re giving away too much if you’re giving away equity. I don’t know what the equity equates to at the end of the day compared to return depending on what you’ve negotiated in terms of rate or point rates, whatever it is. I tend to think that if you keep it as interest rate or maybe a point or whatever it is, you keep them in the I’m the lender bucket and not the I’m a partner bucket. Once you get into the partner bucket, all of a sudden, people tend to have more opinions.
Clint: Yeah, you don’t want them telling what you should be doing. When it comes to these deals, you’ve got your own crew, but I’ve seen so many flippers in the last two years lose a ton of money not because the deal didn’t pencil, they didn’t do their numbers right. It’s because the contractors flaked on them.
It’s this recurring problem where you get a contractor in there and then they find a better deal for themselves, they drop off your project, they quit showing up, they move on to something else, and you’re stuck trying to scramble, to put this still together, plus you still got the money going out on the interest of the hard money loan that you took to fund it. Any words of advice for people when it comes to dealing with contractors, finding a good contractor?
Tucker: The investor base is a funny one because we want everything done for cheap, generally. It’s probably the biggest curse the investors have is they’re just too big of a cheapskate a lot of times. The problem is when you marry that world with the world of general contracting.
General contractors make the most money and subcontractors make the most money when they’re working for homeowners. That’s the most money, but it’s also a little bit bigger pain in the ass, generally, because people live in the house. It comes with just more babysitting, more hand-holding, more late-night phone calls, things like that. When you’re dealing with a cheapskate investor, a lot of the same headaches still apply, but they’re not making nearly as much money. It’s easy for them to deviate from your job and try and go find something that pays more for the same amount of headache.
I would say you get what you paid for. When you go and you look for your Craigslist contractors and you value cheap over everything else, you’re probably going to have issues, whether that’s them showing up when they say they are and screwing up your schedule, whether that’s quality of work, or that’s coming back to fix anything that they maybe didn’t do right, you’re going to get those problems.
I don’t think people realize that. You know you get one or the other. You get quality or you get cost. So you got to pick one or you got to try and find somebody in the middle. For us, we’re our own GC. I hold a general contractor license, I have for 10+ years, but we sub out virtually everything, and we basically run the business as a GC-type business.
What I found is that good subs flock together, so that’s how we built our fleet of subs. Most of them we found working new construction mainly, and we get them to kind of splinter off from that, do one of our rehab stuff as well. A lot of the rehab contractors in town just truly work on rehabs and things like that. They’re usually the more scabbed guys, aren’t quite as reliable, don’t do quite as good work. So we try to find new construction guys and really funnel them on our rehab projects. They’re not the cheapest, but they do a great job, they don’t screw up our schedules, they come back and fix stuff, so you have to weigh that. Do you want somebody that’s good or do you want somebody that’s cheap? You just have to go with eyes wide open.
Clint: Yeah, that’s an interesting take is to go out to new construction sites and start talking to the subs that are out there. We have a client in Texas. He actually had to hire security for his construction sites. When I asked people why they think that is, well, I should ask you why you think that is?
Tucker: Well they’re getting stolen from, obviously.
Clint: Yeah, but what are they stealing?
Tucker: Well probably supplies. We’ve had to do the same, actually. We have a big problem here in Portland (and I’m not going to be put on a corner on your show). We have a big homeless problem. With that comes a lot of drugs, it comes a lot of riff-raff, and it comes a lot with people that break into houses and steal stuff. We’ve had to do that on a number of projects just because we have people watching the house and the day that we drop off fixtures is the night that they break into it.
We don’t put up in Southeast Portland, for example. The reason why we wholesale that deal is we’ve done a lot of projects in Southeast Portland that we’ve kept it renovated or built. We don’t put “for sale” signs up. We don’t put signs up at all because that usually indicates a vacant house and a vacant house is much easier to break into than one that’s not.
We’ve dealt with a lot of the same stuff over the years here and it’s a problem, it definitely is. The other thing, too, is that some of these bad contractors (just to go full circle here), I’ve had my suspicions over the years, but you hire some sketchy guys that have the lockbox combo on a project, it means to say that sketchy guys don’t have sketchy friends. That’s the way it works. We found that to be the case as well, so that’s a risk that you run when you hire bottom of the barrel guys as well.
Clint: You gave me the answer that everyone gives me. The real reason why you hire security is that people are coming in and stealing the subs, his employees. They would drive up in a truck, he said, and he would have six guys out on the job, and he’d say, “Hey, how much is that guy paying you?” and he’d say “Oh, we’re getting paid $20 an hour.” “I’ll pay you $25. Drop everything you’re doing right now and jump on the back of my truck,” then they would go. He would show up in his project, the sub wouldn’t be there, and he’s got no employees working for him. And he said somebody just came and took them all. That’s how bad it is.
Tucker: There’s a big problem there. Number one is, there’s a big supply issue as far as workers, but number two is maybe he needs to spend a little more time building relationships with his workers.
Clint: That’s exactly right.
Tucker: Nobody on my job site would leave for a few bucks more. They might say “Hey we could make more money or maybe the bids are higher next time.” Maybe they’ll ask for a raise or something like that, but I’m not getting anybody to jump ship like that. I would say he probably needs to spend more time on his job site building a relationship with his guys.
Clint: Yeah, funny. You’re right about the homeless problems. Portland’s got it worse. I don’t know if it is worse than Seattle.
Tucker: I don’t think we do. I’ve argued with people over this. I went to Seattle a few weeks ago, speaking at events and seeing some other real estate guys. It’s not good out there, for sure, but man it is not good down here at all.
Clint: You got crazies down there. They’re homeless and crazy.
Tucker: Yeah, we got the […]. Crazy and drug addicts, so yeah, it’s a big problem down here. It’s bleeding over and it’s affecting real estate now in all of the neighborhoods. That’s one of the reasons why we refuse to build new construction in Southeast Portland because I’m afraid that, we start a project, and we’re going to try and exit this thing at $800,000–$1 million, and if a homeless camp decides to pop up on the sidewalk in front of this house, the city will not remove them. We’re going to have a really tough time selling a house. The homeless can’t be there in front of it, across the street from it or wherever. It’s becoming a bigger problem not just in terms of the homeless, but it’s starting to affect other people, businesses, and commerce as well.
Clint: Well, they call them homeless, but really, they’re just drug addicts that need treatment.
Tucker: Well, we decided to make it legal to possess drugs here, so that didn’t help.
Clint: Yeah. Pretty soon they’re going to go like California and make it legal to steal as long as it’s under a certain threshold.
Tucker: I wouldn’t be surprised. T-hey say keep Portland weird, right? Well…
Clint: So where do you think the market’s going 2020?
Tucker: That’s an interesting question, everybody wants to know. I really don’t see much changing before the election. I think that the first half of 2020 will be very strong still. We have an interesting thing here in Portland, it’s called the urban growth boundary, which limits the amount of new housing supply that can be put to market. We also have a ton of bureaucracy in cost, hoops, and hurdles to create new housing units even within that. So it’s very difficult to expand the supply dramatically, not only in our metro but in a lot of metros across the country. It’s also extremely costly.
I think there are three major functions that will affect the market: supply, demand, and interest rate. I know historically interest rates will have a big impact, but I think because we’ve had low-interest rates for so long, it’s now priced into the asset to some extent, especially in higher-priced metros. If the interest rate stays about the same, there isn’t a huge amount of supply coming to the market.
Most people that live in existing homes aren’t necessarily going to sell just to sell because it’s going to become a horizontal move. They might realize some equity, but they’re not going to be able to get as much house for the money moving, so I think a lot of people are going to stay still and there’s not going to be a huge amount of supply that gets injected in the market. For me, I think 2020 is probably a lot like 2019, and I don’t see anything major happening. It might speed up, slow down along the way a little bit, but nothing major in my opinion.
Clint: I would agree. It seems to be everything is pretty good as normal. Just in parting, a new investor is just getting started. Are there any or some things that they should just be focused on, would you say, that are must do’s?
Tucker: The biggest thing when you first start is it’s very difficult to find deals on the low-hanging fruit sources right now, unless you’re well-connected. It’s taken us years to become well-connected in the world of realtors here in town. We’ve done a variety of things to do that. If you’re new to the game and you’re getting in, chances are you’re not just going to stumble across a smoking deal that realtors got their claws in, that’s in the MLS, at an auction or whatever.
Really, what you got to understand on the front edge of your journey is this is a marketing business. First and foremost, to find opportunities to get in front of sellers of property that should be bought by an investor, so like investment grade property. If you get good at marketing and connecting with people, having conversations with those types of sellers, success is inevitable. I look at this as a marketing business first and it’s a real estate business second. I think that’s how people should look at it.
Clint: That’s wise advice. Now, you’ve got a great podcast yourself. If any of the listeners want to tune into that, where should they go? How would they find you?
Tucker: On iTunes or Stitcher, or wherever it is that you’d like to listen to podcasts. It’s called the Real Dealz Podcast. We’re going on six years now we’ve been doing the show. This may be the last year; we’ll see. It’s been a long run. We’re at 302 episodes, it’s been a really fun ride, and we’re doing the one last year here, so go check it out, I’ve got episodes on pretty much every topic you could imagine at this point, a lot of outside interviews as well, but there’s just a ton of free information that you could get by listening to that show.
Clint: Great, and then the name of your app again?
Tucker: It’s called The Driving for Dollars app. The only one that’s called that because we have a trademark on it, but as I said, it’s in the iTunes or the Google Play Store, depending on whether or not you have an iPhone or an Android phone.
Clint: Great, and do you work with investors or do you have any coachings, things like that?
Tucker: Yeah. We have a full coaching arm to the business, we have an online mastermind group called the Deal Finders Academy we’ve had about for six years, and we have a high-end coaching program where myself and another investor that I partner with, that actually […] kind of marketing business for investors. We basically build out your marketing machine for you, we help you execute the marketing, we help you take the lead calls, sit and sort out the opportunities that come in, and try to figure out how to make money for those leads. That’s our other education vehicle that we help other investors with.
Clint: That’s so important because I often talk about high value versus low-value work and where you should be spending your time. You’ve already nailed it. If I was a real estate flipper, and I was in this market, I don’t want to go to someone like you who’s actually out there doing it, you see how the market’s been changing, you know what’s working today versus what was working six years ago.
You brought up yellow letters, I still see that today. People are still sending those out and I think that is the best way to attract buyers, but as you indicated, things have moved on from that and you need to adapt as the market shifts. I hope everybody that are listening in, that you want to find out more about his services and what he can do for you, you look in the show notes. We have a link there, so you could contact Tucker and his team, and take your business to the next level. Any last points you want to leave with the audience?
Tucker: This is a great business, it’s changed my life tremendously, and I encourage everybody to get into it. But I also want you to understand it’s not easy and the world of entrepreneurship is not easy. You’re going to have some bumps and bruises along the way. It’s going to take a little bit of time to get some traction, but stick with it, get over the hump, and you’ll be glad you did.
Clint: Tucker, thanks for coming on. I really appreciate it. This has been a great podcast and I know people are getting a ton of information out of it. Guys, go out there. Get his app. At least start with that and see where it takes you from there. All right. Sir, thank you.
Tucker: Appreciate you having me. Thanks.
Clint: All right, bye-bye.
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