MULTIFAMILY MONEY PODCAST WITH SHAWN WINSLOW AND TOMMY BRANT
Audio
TRANSCRIPTION
Shawn Winslow: All right everybody. Our guest today, his name is Tommy Brant. He resides in Tennessee, just outside of Nashville. Tommy is an electrical engineer by trade and he started investing in real estate when he bought the first home that he lived in. He house hacked it by having a roommate, one of his former colleagues, and then renovated it while he was living there. So a little house hack with a value add component to it, and that opened his eyes to real estate.
Since then he’s gone full-time. He left engineering about a year ago, last August. He invests in multifamily syndicates, multifamily. He also has recently purchased a lifestyle, short-term rental. What I mean by that is that he picked a location in Florida where his parents are now retired to where he can also have a place there where he can go, live, and visit occasionally.
Then when he’s not there, he can short-term rent it, and it more than pays for itself. So he gets into kind of some tips and tricks on how he did that effectively and kind of some pitfalls to look out for. That was very interesting. We talked about, as we all know, the market has gotten really tight over the last couple of years in terms of getting offers accepted. There’s a lot of competition out there so he wanted to set himself apart. He was building broker relations, but he couldn’t get anything to pencil. And the stuff, he did get to pencil, everyone was making offers. He had like 20 offers and it eventually just get up to a price where it didn’t make sense anymore.
So to set himself apart, he went direct-to-seller. I know we’ve recently had some guests on here that have talked about that, but he took a different strategy. Now I’m not gonna get into that. I’m going to let him explain, but it’s a really cool strategy to not only get leads but also build really cool relationships with other investors that could potentially lead to some awesome opportunities.
So without further ado, here’s Tommy Brant. Hey Tommy. Welcome to the show my friend.
Tommy Brant: Shawn, I’m pleased to be here. Huge thank you to having me on. I took a listen to some of your other podcasts before I came on here, and you’ve had a lot of superstars on the podcast, so I’m humbled and honored to be on here and have an opportunity to add value to your listeners there.
Shawn Winslow: Hey, Tom. Well thanks for taking time out of your day, and I’m sure you’re gonna add value just from the quick conversation we had before this, so I’m excited to get into this one. So to start, everyone loves a good origin story. So what’s Tommy’s origin story? Where are you from? What was life like for Tommy growing up and how did you get into doing what you’re doing today?
Tommy Brant: For sure. My name’s Tommy Brant. I’m a recovering electrical engineer now, a full-time real estate investor, and I went full-time last August. I’m based out of the Nashville market. I’ve been here for 13 years, last January after graduating from Georgia Tech in 2008, and wanted time to be looking for a job, so I’ll just kind of leave that there.
Shawn Winslow: Hey, I graduated shortly after you, so I know how that feels.
Tommy Brant: It’s like 50 job applications and one person called me back.
Shawn Winslow: Yep.
Tommy Brant: Then you look at the job market today, it’s a little bit different with the reductions in force going on, but I still remember it like a year ago, whenever everyone was hiring. I compared that to when I was looking for a job.
Shawn Winslow: I know, man, I started on the ground floor when I was in the financial services industry. I started with an entry-level job and then probably three to five years down the road, the people that they were hiring for the position I was currently at were people who ran out of college. So they got to skip like three steps. It was just because it was a completely different job market, it wasn’t as tight. I feel you on that.
Tommy Brant: Yeah, no doubt. As far as how I got started in real estate in 2006, I’ll call it an internship if you will, but I worked for a friend’s dad who is a general contractor.
So a lot of our time was spent making mobile homes rent-ready. So we’ll call it light. Light rehab. Light renovation, light construction, whatever. So we’re in middle Georgia. About 15% of the demographic we were servicing was post-eviction. And so we’re walking into these mobile homes and it looks terrible.
There’s trash everywhere. There are used diapers in the corner. There are hypodermic needles in the other corner. And by the way, the utilities have been cut off for a couple of weeks and you’re looking at your friend and you’re like, who’s gonna open the fridge? Not it! So it did a couple of things for me.
So one, it built character, we will kind of leave it at that after going into some nasty fridges and you see some sweet potatoes that look like they’re ready to grow another sweet potato. Then the other thing it did is it gave me the vision to see past all the clutter and know what the finished product is going to look like.
So that was 2006. I graduated in 2008 as we talked about before. Fast forward to 2011, I’ve got some savings after being on an engineer salary for a couple of years. I found a home that I just fell in love with, and I think if anyone looked at it today, they’d be like, you’re crazy. It was a four-bed, two-bath, and it had a pool in the back. An in-ground pool and it all sounds great on paper until you realize that it had just been neglected. The pool was solid black. The house had a leak over the garage, there was a sweet little bulge, and the drywall over the garage where there is a leak of every square inch needed to be updated, and some sagging parts in the subfloor and foundation and stuff like that. I looked at my realtor and said ‘This is the house I want’.
Shawn Winslow: We call that value-add baby.
Tommy Brant: Probably not like most 25 year old buying their first house. But she was like, well, let me just show you around some other houses. She was like trying to shove other houses into my face, like, take a look at this one.
You don’t need to do all that hard work that you’re probably going to be doing. So she showed me five other houses and I kept fighting myself comparing it to this other house and like just really like what the finished product would be like. Yeah. But it’s missing this bit of character.
I don’t like the layout compared to the other house, or it clearly doesn’t have an in-ground pool in the back, right? Things like that.
Shawn Winslow: Yeah.
Tommy Brant: It was a short sale. I ended up closing on that one. It was a slow live-in flip. I rented out a bedroom to a colleague of mine while I was saving up every year for repairs.
I would try to save up $10,000 a year for flooring throughout the house or painting every square inch or kitchen project or backyard, a hardscaping project, stuff like that. So every year I would just save up for a new big, massive project and I just waited for a storm so I could file an insurance claim on the roof. So it’s like I’m not paying for it.
Shawn Winslow: Smart. That’s smart man. House’s hacking with a value add component.
Tommy Brant: Yeah. Fast forward eight years later, we liquidate that property and then after that, It’s true that they say more money, more problems. I was like, what do I do with this? I’m like the world’s slowest learner, I feel like, but I’m like, I just clearly generated a bunch of wealth in real estate.
You would’ve thought I just immediately would just look into real estate and do stuff, but it took me a while to come to the conclusion that, all right, like investment real estate, not just being in it and fixing and flipping, like look at investment real estate. So I came across Rich Dad, Poor Dad shortly thereafter, the bigger pockets community and just trying to understand like what to do with this type of stuff.
I ended the level of capital that I was at. There are a lot of questions about how much money I need to save for my first home. And I was like, yeah, I’m in a different place. I immediately bought three single-family homes within a six-month time period. They were actually all of the MLS.
In 2020, I really knew what my buy box was. I want it in this county, in this national submarket price needs to be this, it needs to rent for this much. Then after that, it was just speed, just acting with speed. I closed on two on the same day. The third one was a couple of months after I took a look at my net worth calculator and I was like, how am I looking?
I compared it to the trajectory that all was on based on the timeline where I wanted to have a certain amount of passive income. I’m not really on track. I wasn’t really satisfied with where I was going. The conclusion that I drew from all of that was I needed more doors but fewer driveways.
So initially when I started out, I was actually looking for quadplexes. The thing that where I was really struggling with, I can either invest in my backyard, which has Quadplexes, or I can invest in a market that is remote or a distance. Initially, I was planning on taking on self-management and so that was really leaning towards needs to be in my backyard.
After two months of owning the first property. I was like, I’m giving this up. There are some other things in life that kind of dictates that, right? I’d just taken a new role. It mandated 14 hours a day of my attention. I’m not gonna compete with any other property manager when I need to, like let emails and voicemails bubble up over lunch and then get to them or after work, it wasn’t working and so got a PM in there.
Life was good, actually. Like after I got the PM, he got a lease in less than a month When we got the third one, he walked the property with me on the day of closing and he is like what do you wanna do? And the kid’s like, I know you’re handy. And I was like, it’s better if I don’t do anything.
And so we ended up getting some small repairs, by getting a tenant in there in three weeks or so. I was actually budgeting for like a month and a half of reserves for getting a tenant in there, but just like everyone was better than the last, right? And so, doing well there. I really wish I could have started with a quadplex.
Still, the limiting belief that I had that kind of set me back if you will, was that I needed to be close to it. Now I have three properties in 20 minutes range that I haven’t been to in over a year and a half.
Shawn Winslow: I know how that is. That happens.
Tommy Brant: So a lot of good that did to me. If you want to fast forward now, we came across multifamily syndication. I saw how well that aligned with the skillset that I had developed being an electrical engineer, mostly on the commercial side of the business, mostly in sales, but also being in very technical roles, managing CRM databases, but also being on this service side to think customer service side of things. So professional communication is the easy part for me.
Managing expectations with the intent to exceed increased amounts of transparency. All of that just kind of led me to the investor relations side. Not only that but the investor relations side, plus some multifamily syndication. Since then, I’ve invested in two apartment deals, one in Louisville, Kentucky, and another one in the Huntsville submarket. Invested in a new development deal as well in a Nashville submarket. I recently completed a joint venture for a 55-unit storage facility, also in a Nashville submarket. So just very well invested within a 4-hour drive of me any direction is kind of whatever I’m looking, except the West. I’m not quite turned onto Memphis just yet, but I know people do stuff there, but it’s such a street-by-street market and I feel like I got to put in so much work to understand what’s going on with the market and the geography there to where it’s, I don’t know that I’ll get the payoff that I want, but that’s where I’m at now. So I’ve been full-time since last August.
When I have a short-term rental in Panama City Beach, we closed on that earlier this year in March. And so we have a lifestyle asset at this point.
Shawn Winslow: Nice. So why did you add that to the portfolio? Is it simply because it’s a lifestyle?
Tommy Brant: Yeah, and I really struggled with this shiny thing, syndrome. Am I giving into this?
Shawn Winslow: Yes, I think all entrepreneurs do.
Tommy Brant: The number one mistake is you try to build too many bridges in too many directions too quickly. I’m trying to be mindful of that. So I’ve got these long-term rentals and they’re doing okay. They’re paying for themselves. The apartment deals I’m invested in are great and we started doing direct-to-seller at the turn of the year for multifamily.
We’re getting our lead funnel. We’re looking at hundreds of properties a quarter. At the end of the day, once you get your systems and processes and team built up, people selling apartment complexes, it’s not on my schedule. We’re getting a pretty good response rate, but it’s on their schedule. So I felt good that we had the right activity that was eventually going to lead to the right goals of more acquisitions around multifamily assets.
It doesn’t help that it’s arguably the most competitive commercial asset class out there, and we’re in a very desirable market being around Nashville. So to me it felt a little bit like I was watching paint dry. With multifamily, it’s just like we had everything lined up. We have a pipeline but it’s like I said, it’s not on my timeline.
Considering other more cash-centric cash flow assets. I had known for some time that what short-term rentals are known for is there’s appreciation. Sure. But there’s also the number that I was given that on average across markets, across the entire US short-term rentals earned 60% more than long-term rentals. It’s all market by market.
There are tons of disclaimers in there. I was just like, is it really? And then I started looking at AirDNA, I started looking at Rabbu. My parents are retired and they live in Panama City Beach. What’s a guy in real estate do when he is bored, right?
He starts looking on Zillow and poking around like, what is this trading for? What is this trading for? I found some pretty affordable neighborhoods in the Panama City Beach market that were a block off the beach built in 1980. The price point is pretty interesting compared to what I see in the daily rate. Just minding economic occupancy and stuff like that. And it’s just like, this seems like a good deal. So then I just out of, we’ll call it boredom, but I was just like, I let myself be curious and I was just like, just, we’ll see where this goes. So I think I got like three different underwriting templates for short-term rentals.
I walked through a bunch of YouTube videos of how to analyze properties very quickly, and consumed three different books on short-term rentals. I still think Avery Carl’s book on short-term rentals published by Bigger Pockets is number one. Just kind of giving you the well-rounded ecosystem of short-term rentals, what to look for, what to avoid, but also setting up your systems, building your team, that type of stuff.
I started looking at those properties that seemed to be low beared entry, but still renting consistently. They’re in the middle of the market. They weren’t intended for the 1% of the world. Then we still had money left over from us whenever we liquidated that property in 2020.
So I was like, you wanna try this? By the way, we have a house like near our parents, so they could stop by if we needed to drop off a TV or anything like that, but, or just have someone stop in. But I have no problem with trying something with my own capital. I know we talked about invest relations in other people’s money, but it’s like my tolerance for risk is a lot different than what I would be with other people’s money.
There are some people, who are not that way and they’re just like, Hey, this looks interesting. I’ll take anyone’s money, whether it’s mine or other people’s. That’s the scariest. I don’t want to interact with people like that, but it’s just like, let me try this first. My wife still works. She has a W2 job, and there was a world where we were like if we get 10 of these.
There’s a world where that offsets her income, her W2 income, and then she’s now full-time in real estate and maybe we start building up a property management firm. I’m not too interested in arbitrage, but if it could get to the point we’re coaching people on how to analyze properties in our market and we end up managing them. That kind of like what I thought like I was like if I wanted to build a business and I don’t want to play entrepreneur or something else. I saw the path forward for that one but for right now, we’re just trying, all right, let’s do one.
And so we’ve had that one since March. In July alone, I think we earned like four times debt service. In July that went bonkers. So 31 days in July, there is one day that it wasn’t rented.
Shawn Winslow: Crazy. with everything that’s going on
Yeah and I’m a big proponent of other markets that did have slowdown. Markets that you had to fly to or they were luxury properties. I’ve heard of really large properties struggling and so, but I have a middle-of-the-market product and I have a middle-of-the-market market. It’s a drivable place. You can get there in eight hours for maybe the bottom part of Kentucky. Kentucky, Tennessee, Alabama, Georgia, like a lot of people congregate to that market, and so it’s been pretty resilient so far.
I’m going into the slow season, so I’m trying to be mindful that I’m probably gonna need more reserves than I would normally. One of my friends that manages, and he’s gone through a July experience or a January experience, but he’s like, in January, it’s a race to the bottom. Our plan was, why don’t we live there in January?
We had snow six times last year in Nashville. People think Nashville doesn’t get a lot of snow and stuff like that, but we had snow six times last year. I was tired of that. I was just like, again, get out this mop or not this shovel. I got to get out this brush or something. I don’t even have a snow shovel.
I’m like snow shovel In Tennessee, you couldn’t meet. I had these things that I was like, these brushes that I used to clean my garage it is taking me forever to get the snow off the driveway. I’m just ill-equipped to handle that stuff.
Shawn Winslow: I’m sure most people in Tennessee are.
Tommy Brant: My wife was from Chicago and she’s just laughing at me. I’m like, so cold and she’s like, you don’t know cold.
Shawn Winslow: Yeah, you don’t know cold. Well, man, any tips for anyone that would be interested in that? The short-term rental, what to look out for, or what they should be doing that maybe they wouldn’t even think of?
Tommy Brant: Yeah, the short-term rental space has been interesting. I’ll give a tip for a couple of different aspects of it, but one tip when it comes to underwriting is that, so if you go on AirDNA, you’re gonna get estimates. The thing I don’t like about AirDNA is it gives you the market’s average daily rate and then it gives you occupancy 75%, 70%, whatever.
I think generally speaking, a lot of people will take those to multiply them together times 365 and say, this is the gross income I’m gonna get for my property. When 80% of the market are luxury condos on the beach. Everetts means something a lot different then. When you’re buying an asset that’s a block off the beach, that is not going to get those rates and command that.
So if it had stuff like median rents, I’d be more interested in stuff like that. There are so many outliers that the word average gets skewed. I also have a data scientist background, and so I’m very mindful of how are things being sampled and like using median versus average, and I’m super sensitive to outliers and how they can affect the dataset.
With that in mind, so far, Rabbu has probably been superior. R A B B U.
Shawn Winslow: That’s online, right?
Tommy Brant: Yeah. That’s where you’re just putting in your. It says, this is what we anticipate gross income to be, plus or minus, that 90%, 110%. But for the most part, it’s fair. The gross income does also include cleaning fees because there’s no way for them to take it out of the reporting and stuff like that.
There are just a lot of holes where people could miscalculate something, especially if they are taking other people’s money into something. So I would say if you’re gonna try out anything, try it out on your own. Test it for a full year, a full season before you start saying, all right, I’m gonna get five.
Right? If I’m listening what are the most mistakes people make in the short-term rental space? It’s that they go too big, too fast without knowing what a full season looks like, without knowing what to do when the HVAC goes out while the tenants are in there or whenever they have a roof leak while a tenant is there and they need to display someone like the ‘oh crap moments’ is what people need to be prepared for whenever they have multiple units like that.
So be over-prepared for something like that. That’s kind of on like the underwriting side. I actually presented to my former workplace last month the secret formula to how you have a vacation home paper itself.
Shawn Winslow: Oh, let’s hear it.
Tommy Brant: I guess generally speaking, if you can self-manage that is the way, I would argue that 99% of the front-end marketing can be automated.
So for example, you get your listing in order, you get your photos in order, and then you just let it bake, right? You’re putting those things in the oven until the timer is up, and then someone is going to book something on Airbnb or Vrbo. It kind of helps to be on many channels as you can but you can get those going.
I have a property management system that syncs the calendars together, and then I have my smart locks that are on the property. My property management system takes the last four digits of whoever books make that the code. So it’s easy for them to remember.
Shawn Winslow: Nice. What’s the name of that management software?
Tommy Brant: I use Guesty for hosts. I use RemoteLock just my lock management system there but Guesty for hosts should do everything you need for something like that. There’s Guesty and then there’s Guesty for hosts. So if you just search Guesty, you’re not going to find the same thing, but that’s pretty interesting.
It’s similar to the self-storage space of like whatever software you get is going to dictate what hardware you can get because they’re kind of married together in partnerships and stuff like that. So if I was using Hospitable, I’d probably have to use different locks. I’d probably have to use Yale Locks or something like that.
So just be mindful and make sure you got all your pieces to the puzzle. Figure it out. I bought the locks first. Thankfully, the PMs that I used was integrable with that, but I came to find out later that there are some fine lines drawn around what can be integrated into what can be and so if you’re self-managing as I said, I think you can manage a lot.
If there are any issues, there’s no way to automate that. That kind of all hands-on tech, and that’s where making sure your local team is. You have tiers one through three of cleaners. You have tiers one through three of the handyman. People that are responsive and low cost. The cleaners need to be under the market so that you can mark up the cleaning fee and make money on administrating the cleaner and stuff like that. That’s kind of this health management aspect of it. The part that’s not really well known is the vacation home loan or a secondary home loan. So let me compare it to an investment property loan first. So if you go say, Hey, Mr. And Mrs. Bank, I would love to buy a property that is not my primary.
I already have a house. I want to buy an investment property. They say, okay, great just give me 20 to 25% down. We’ll get you taken care of. A vacation home loan is, Hey, Mr. And Mrs. Bank, I’d love to buy a vacation home loan that I’ll be staying at, occasionally visiting a couple of times a year.
It’s in a vacation market. It’s not anywhere near my primary residence. Can you help me get into this and say, okay, well yeah, bring 10% down and I’ll get you taken care of. That’s one of those situations and there are a lot more lender requirements along those lines like it has to be warrantable, which is a term dictated by Fannie Mae Freddie Mac guidelines.
So there are duplexes, quadplexes, and triplexes that are automatically disqualified. Everything in a condotel on the beach is automatically disqualified. The property has to fit a certain criteria for something like that but you can get started a lot less out of pocket. Think of like a $300,000 townhome.
That’s a block off the beach. You now only need $30,000 plus closing costs instead of 60 to $70,000 to close on an asset like that. So lowers the barrier to entry to get started and something like that. You’re dead to income. Needs to make sense, right? You have to be bankable, all those other things. So it’s more on your personal loan than it is you trying to get like a DSER loan based on the asset.
Shawn Winslow: Well, that’s handy. That’s a game-changer. Do local banks offer that? Iit more like a niche product?
Tommy Brant: I would say there’s a large number of them that will. So the three investment properties that I bought here in the Nashville area, I went to the lender and I said, Hey, can you give me a vacation home loan?
They said we don’t fool with those. So there are some banks that won’t. They’re just so well-established. They’re a cookie cutter. They say, that’s a little bit outside the box. I don’t want to deal with it. Then there are other people that will take that on. For mine, I just chose a lender at the recommendation of the realtor.
The concern was, there are a lot of interesting things that happen in Florida and there are some good old boy counties and there are things that you need to navigate and they didn’t recommend an out-of-state lender for something like that. So I just went with it. I honestly didn’t have a great experience with a lender in terms of like responsiveness and being proactive and like they’re asking me for things.
They should be asking for the realtor, and I try to connect him and he is like, oh, you’re not the client. When they’re talking to the realtor, they’re like, you’re not the client. I don’t need to answer you. You should be making it as easy as possible on me. What kind of service is this?
So I think we’ll call it an outlier experience now. I would never recommend them. So, but still, I think generally speaking, there’s a number of people that’ll do it. What I’m coming to find though after like a happy hour, I went to last month, a lender was there and so he was just like, yeah, whatever bank that’s hosting this loan, they can be flexible, right?
One of the requirements is it needs to be 65 miles from your primary residence. He’s like, it could be close, right? There are some things where they can be flexible on some things where they can’t. I’ve heard of some credit unions in Tennessee that will even do 5% down.
Shawn Winslow: Oh, wow.
Tommy Brant: I mean, think about like a million-dollar cabin in the Smokies. Right? I mean, if you bought it as an investment property, you need 200 to $250,000. Take it down. If you bought a just vacation home. You need a hundred thousand dollars plus closing costs. It blows my mind to think that you could get into a cabin for $50,000 plus closing costs.
Shawn Winslow: How much cash flow do these short-term rentals bring in? That still makes sense right? Now, if it’s a long-term rental, that probably wouldn’t be with that type of leverage on that, that size property. But with short-term rentals, it still makes sense, which is a game changer. How many did you own right now? Currently? Just one?
Tommy Brant: Yeah, just one. Testing out the waters. I told myself I wouldn’t get a second or third one until we had gone for a full year on this one. So like I said, I would be nervous for January if I wasn’t planning on staying there for the majority of the month.
Spring break comes starts to come online in March or April and stuff like that. I’m a little nervous, but I think it’s high school spring break in April or March, and so I can just kind of say, all your parents need to book this type of thing. No 21 or under, that type of thing. I think that’ll kind of self-filter.
A lot of hoodlums but we missed spring break last market. We’d actually been making offers since December and we were under contract for three really, before we closed on one.
Shawn Winslow: That’s been a crazy market.
Tommy Brant: There’s the fact that everything takes longer to close than you wanted it to, or everything takes longer than you want it to for the first of any new type of business plan or investment strategy and stuff of that sort. So it took us every bit of a month and a half to come online and we really didn’t even need to replace much furniture, but it was just like, all right, we need to go down this weekend, get this place fully stocked.
Oh, by the way, we missed this thing. Oh, by the way, we missed this thing. And so we had over a month and a half, we went down from Nashville three different times, interviewed a number of cleaners, and found one that we just fell in love with. We had tried a number of handymen, and found one that we fell in love with. So far so good.
Shawn Winslow: Amazing man. So what is TB Capital Group focusing on now? What is your primary focus?
Tommy Brant: My day job.
Shawn Winslow: Yeah. What’s a day job?
Tommy Brant: Yeah, so we’re focused on multifamily syndication. We’ve been doing direct-to-seller since the turn of the year which really stepped up our game. If you consider a sales funnel from the top down, right?
I need to be looking at so many deals to put out so many offers to get under contract for so many to close on one. If I’m just waiting for stuff to come to market through Marcus and Millichap, Walker & Dunlop, and the small broker brokerages. I’m not going to hit that number of leads, offers, and contracts to close.
So my conclusion after last year was like, I need to be making my own leads. I said that was kind of the impetus for us to start doing direct-to-seller. Since then, I guess pretty good response rate overall, but we’re doing it a little bit differently than most people, I would say.
Shawn Winslow: What are you doing? Are you doing cold calls or mailers? What does that look like?
Tommy Brant: I think the generic blueprint for something like that is I guess, cold call, text message follow-up, email, maybe in a different order, but something of that variation to whoever you can get. You may or may not skip trace. You’re using some data aggregator to understand who is the ownership group, and then you’re hoping that you get to a decision-maker, right? So that’s kind of the generic blueprint. It’s all kind of built upon some idea of ask, ask, ask before you even give anything. So you’re asking for a T-12, you’re asking for a rent roll so that you can give some type of firm offer.
So we try to position ours as a give on the first touch. Our first touch is an offer letter.
Shawn Winslow: Really?
Tommy Brant: Yeah and so there’s a lot that leads up to that. I’ll talk about the foundation of that one. But the idea is to give something first and then just have something to start a conversation.
They may say, I don’t wanna sell this property, but I am looking to offload some other stuff in my portfolio. It’s pretty interesting how that happens. Or I don’t wanna sell right now. Follow up back up with me in three to six months. Those are some of the types of responses that we’ve had and just something in where it’s not in a competitive environment.
We’re pressed for time or anything like that. It’s amazing. It’s incredible being a part of these discussions. But the part that leads up to this, so we’re using, I’ll break it down, but we’re using some data aggregator of some sort just to understand the inventory. Our buy box is we’re looking for 1980 or later build.
We’re looking for 30 – 200 units from Louisville to Huntsville, obviously, Nashville is in between there, and then also East Tennessee. So Chattanooga and Knoxville are kind of too good to ignore, right? They’re both fighting for third. In this state, I venture a population, and so whenever you’re considering stuff like that, I need to know what inventory is.
I’m looking for addresses. I’m looking for unit sizes. I’m looking for year built. I’m looking for owners and so that helps us understand the inventory and then we’re in the part that I think is unique, and we’re actually partnered with a broker, and so we say, okay, Mr. And Mrs. Broker, these are the properties that fit our buy box.
Can you send us CoStar reports that give you rent comp and sales comps. So from those you’re trying to understand what are the properties that have top-of-market rents and we pass on those. There’s probably no to very little room to add value, right? We’re looking for burnt-out landlords, we’re looking for neglected properties, mismanagement, that type of stuff.
If you’re at the top of the market, you’re probably none of those, right? That’s kind of our quick way to disqualify stuff. And so after that, we do a little bit more digging. The sweet spot that we found is, is there a $200 gap between current rents and market rents? That’s just like a no-brainer.
That’s something we want to have a conversation about with those types of people. After that, we make assumptions about expenses. We have income based on what are they renting for in Apartments.com, but also the report from CoStar. So we’re making expenses of either a dollar amount or a percentage of the income.
Some of our markets are B and C class, maybe $4,500 a door, $5,000 a door in expenses is reasonable. If it gets to be older than the 1980s, that needs to go up. Repairs and maintenance start to go up a little bit or you can take a really lazy approach and just say 50% of my income is going to be expenses, or 45% of my income is going to be expenses If you’re in a kind of low-tax state like Tennessee. From there, determine your purchase price. What are my NOI, cap rate, and purchase price? That’s kind of how we come up with the purchase price. We take what is probably 90% of fair market value and we put it out there, knowing that it’s human tendency to ask for more.
And so even if they’re saying, Hey, your number looks slow. Yeah, we could probably really sharpen his pencil if you give us a T-12 and Rent Roll. Perfect. It’s pretty interesting. The last round that we did of follow-ups is just like, there was one response we got. He’s like, I value my property at 14 million.
Oh. It was obviously way different than the offer that we put out there. Well, can we get T-12 and Rent Roll? Getting access to that is gonna give us a lot clearer picture of whether are they being unreasonable or is that fair. Can we make that work for our investors and aiming for 15 to 20% annualized returns?
By the way, I’m not competing with a whole nother nation of people that want to get in the national market.
Shawn Winslow: That’s smart, especially in a hot market. You got to set yourself apart and to your point, the top of your funnel is what needs to grow in order for you to submit the amount of offers you need to submit to actually get a deal close. You mentioned CO-Star. Is that the primary source where you’re getting this or are you using like list source or something like that to generate the actual list you’re going off of?
Tommy Brant: Yeah, so giving away all my secrets here but this is actually a great tip for newbies and anyone that’s just starting out we use a program called Reonomy. They’re the only aggregator I’ve found that gives a free trial, actually. So Reonomy will give you a seven-day free trial as long as you have a phone number that is not voiceover, IP based, and you have an email, they make sure there are no duplicates to that. So whenever your timer starts in that seven-day trial, you need to be exporting as much as possible. The first time I did it, I exported 600 properties worth of data in an afternoon. I gave it to a VA and I said, please put this in Excel format for me. Thanks. I got my Saturday back for $30 worth of work. I didn’t CoStar, if you don’t know pricing, CoStar is a mortgage.
Reonomy, I think ranges from like $5 to $800. It depends on how much you want to export every month. So it varies, but we’ll just say less than a thousand dollars a month, but still a substantial burden financially if you want to do that. So we’ve paid for that for a number of months, but really just to export everything that we wanted for asset classes that we were interested in.
And so, as I said, people just starting out can get a trial. You’re limited to 50 exports, and then you get a map whenever you do something like that. You can zoom in and get 50. Zoom in somewhere else and get 50. It just becomes really simple to handle. So Reonomy has been our initial source to understand where the inventory is in the buy box that we were looking for. If people are still getting started or if they are still figuring out, who are their focus and stuff like that. It has to be market first. Step one is to get educated. How do you analyze deals and how do you analyze markets? What KPI should I be looking for? Population growth, job growth, median household income, median home price, and crime rate, figure all that out. Figure out what market supports those criteria that you want after you’ve got your market, then just build a team around the market.
That is the blueprint for succeeding in real estate. After that, that’s where the fancy apps come in, where you’re exporting data and stuff like that.
Shawn Winslow: Oh man, you gave some nuggets. I appreciate that. I’ve had a few people come on and talk about direct-to-seller. It’s never been like that. That makes a lot of sense to, first, how you define the criteria and how you’re reaching out with a give and not a take. I think that’s important because everyone’s sending out mailers or some type of cold call asking, you want to sell, you want to sell, you want to sell. I like that. And then it’ll elicit some type of response and then you can dig into the, well, if you want me to sharpen my pencil and you send over rent roll, T-12, and then we can get going. That’s smart! I like that a lot. So how you’ve been doing this for about a year?
Tommy Brant: Full-time, my one-year anniversary was August 1st. We’ve been doing direct-to-seller since literally January 1.
Shawn Winslow: Okay. So we’re talking about eight months, almost full eight months.
Tommy Brant: Yep.
Shawn Winslow: Oh, that’s awesome man.
Tommy Brant: I think there are 800 properties total that are in our markets that fit our buy box 200 properties where we’ve gotten CoStar reports from underwritten.
We’ve offered close to 70, just the direct-to-seller stuff. We’ve put out over 60 offers and had some really interesting conversations. So one conversation for example was, I don’t wanna sell this property, but I have some other ones I want to offload this year. Come to find out they have like 10 properties in Tennessee.
They’ve got like six in the Nashville area, two in East Tennessee. We’re just like, okay, let’s keep this conversation going. My partner and I actually went walking with them. We were walking two properties every weekend for like a month and we’re just like, these are nice, like a hundred plus units and can’t it be B class?
We just thought that these are really good. One was like a townhome community that we just fell in love with. So we’re really going to push for that one next time that we talk. It’s interesting conversations and things that you wouldn’t think happen. I think there is a couple of criticism of direct-to-seller in general. One is just like if you’re offering anything over 50 units, you’re wasting your time because you’re probably talking to a sophisticated investor group. As we are putting offers on a hundred-plus unit apartment complex is what led to more than a hundred-plus-unit apartment complex.
They said, Hey, this is our portfolio, but so much of it can be timing. There’s like four apartment complexes that I know of within a 30-minute drive of me where they’ve had buildings burned down. How many of those owners do you think are just like, I want out, I don’t wanna deal with this.
It’s crazy to think about. I was talking to a commercial insurance guy here locally. He’s like, I’ve had the same building burned down twice at the same apartment complex.
Shawn Winslow: Wow.
Tommy Brant: He’s just like, we’re more or less like not even making money on this property anymore as an insurance company. He’s like, we’re negative.
We’re gonna have to hold him for years, like increase his rate so much. There’s a couple also, just like on the way to Nashville, there’s like two others I visibly saw a charred part of a building. And I was like, okay. And my partner’s like, yeah, I know about that one. There’s also this one that had a building burned down.
So much of it can be timing, right? Where it’s just like if someone tells you no, and you stop there, you’re leaving something on the table. But also like this size, the limiting belief on size. I mean, it’s free marketing, right? It’s even like a form of networking to get in touch with other apartment owners and maybe we can just have a coffee and see how you got started.
Like do you need help? Like does your son or daughter need tennis lessons? I used to play a lot in high school. Like, I mean, just there’s a lot of creative ways that I think people undervalue themselves that they could add value to someone else. Given that the real estate business is a people business at the end of the day.
Shawn Winslow: Yes. I was going to add that point. That’s what I was going to follow up with. It’s a form of networking, and that’s what business, or any business is about. It’s not about who you know, it’s about who knows you. You wanna be top of mind. So that guy might say, no, I don’t wanna sell this property.
Yes, you’re looking at other ones of his properties, but what happens when he does wanna sell that he’s probably going to think of you first and come to you, and that’s what it’s about. So I feel like a lot of start-off direct-to-seller type of marketing don’t continue it is because they get so many nos and get frustrated.
Yes, you can get a quick hit, but I think it’s more of a long-term play that you’re really gonna reap the benefits. Have you scored anything yet based on this?
Tommy Brant: At this point? No, quite honestly, which is on one side it’s frustrating, but on the other side, like the relationship that we’re building up with a broker has actually led to, I think there were like two or three pocket listings that have been sent our way, one we had access to earlier this year, and another one. We are the best offer right now. So I think, ask me again in 30 days and we may be under contract.
Shawn Winslow: Awesome.
Tommy Brant: In terms of the relationship that’s being built with the broker, like there’s a lot of intangibles that come out of doing this.
Shawn Winslow: One deal can pay for it all too.
Tommy Brant: So the other counterpoint to doing this, or the other criticism to doing direct-to-seller in this manner where you’re just throwing a number out there is if I’m saying, you know, Hey Mr. and Mrs. Apartment owner, I’ll buy your apartment for this much. Generally speaking to someone else would want to come in and say, Hey, what would be an amount that you would walk away from this apartment and give me the keys? You would want to feel them out but the criticism with me doing it this way is they’re gonna figure out how much their property is worth, and then they’re gonna go to a broker and say, Hey, can you help me push the price on this one?
I think my place is worth this much. I have people who are offering me something like this. It’s an informal appraisal. So that’s why we don’t push the price too high. We offer 90% of fair market value but also the other thing is we’re doing it through a broker.
Shawn Winslow: Right.
Tommy Brant: So it’s like we’re giving them the tools that they need, even if they did want to take it to market. It’s just like if it came to one of those situations where it’s like we weren’t their buyers. Which is possible, right? I got to think that there’s a world where the universe gives us something else in return. Maybe not in the way that we think it is, but that’s kind of the idea, around adding value and like the universe’s response to doing that.
And so in real estate, I would say, is there some way I can add value to you? Is there some way I can add value to? So tons of lunches with people that really don’t have anything to offer me. Not an issue. I’ll do that all day, every day as much as I can. That’s why I love to invest in relations and I just want to hear where they’re at, I want to check in with them three or six months from now and say like, did you apply anything that you learned?
Please say yes. Even if there’s nothing they can do, I know there’s going to be returning my way in some form of, oh, I have a realtor friend that wants to invest in real estate or needs to shelter their income, they could really benefit from cost segregation or something like that. Do you know of anything, anybody that’s doing stuff like that, I’m gonna chomp at the bits and say, oh, I know a guy, they can help them out there.
I’m always about adding value to people regardless of what’s in it for me. Same way with this stuff, right? If they end up brokering a deal and I’m not a part of it, I’m not gonna expect a kickback. There’s going to be some intangible way that I benefit.
Shawn Winslow: Yeah, the law of reciprocity. But I feel like if you’re going to direct-to-seller and conversing with you. There’s probably a good chance that they don’t, the reason they are is they don’t want to go to a broker. Obviously, you might come across a few that would, but that’s awesome, man. All right. We’ll come in the top hour. I don’t wanna take too much more of your time, but first, where can listeners find you before I ask the last two questions?
Tommy Brant: Thank you so much, Shawn. This is Tommy Brant and so I am on Facebook and LinkedIn and that is Brant is in B-R-A-N-T as in Tommy. Check me out on Facebook and LinkedIn, also TBcapitalgroup.com. If you go on there, there’s actually a little gift for your listeners. I wrote a book that is very data-driven and detail-oriented.
Sue me, I’m an engineer, I can’t help it. It’s the Passive Investor’s Guide to the MultiFamily Universe. So if you want to learn a little bit more about that or just find what I think are some pretty interesting data points on different comparisons between conventional assets to alternative assets, and then comparisons between single family, multifamily, and then comparisons between all of the commercial assets in general. I think there’s gonna be some intriguing information in there for your readers.
Shawn Winslow: Awesome. Hey, I appreciate that and listeners definitely go and check that out. I think I would the same. All right, final two questions. The first one has two parts and that is, Why multifamily to build wealth or to get you to your goal, your ultimate goals. And part B of that is what kind of life has this afforded you?
Tommy Brant: I love that. I’d say, It was through experience that I concluded that multifamily was the way I know after my first three single-family homes. I might’ve alluded to it before, but my conclusion a couple of months after that experience was my passive income isn’t scaling effectively. My net worth isn’t scaling as I wanted it to, and my conclusion was I needed more doors and less drive.
So I needed the scaling effect. I needed to not have to build a team around every single property, every single time I get one. I would say, generally speaking, the ability to scale quickly and effectively led me to multifamily pretty organically, I would say.
Shawn Winslow: That’s awesome.
Tommy Brant: Remind me of part B.
Shawn Winslow: Yeah. What type of life has multifamily investing provided you and your wife?
Tommy Brant: Sure. I’ll generalize that a little bit, but just real estate investing in general. Yeah, although I am very heavily invested in multifamily, I think just 350 units plus invested in multifamily only but it’s pretty incredible.
So the kind of life that this has afforded me, I’ll just give an example. There are five freedoms that everyone needs to be ultimately free. There’s people freedom, people that you want to hang out with. There’s geographic freedom where you can go anywhere you want. Then there’s time freedom, being able to hang out with who you want to, where you want to, and when you want to. Then’s there the financial freedom. There’s the fifth one. I forgot it and being financially free, being able to afford all the other four freedoms and the life that you want. I’m going to put a big emphasis on geographic freedom. My wife and I actually got back from Cambodia. Two weeks ago.
Shawn Winslow: Oh, cool.
Tommy Brant: We got back from Cambodia this week actually, after being in Cambodia for two weeks. So my long-term rentals were taken care of, and the apartment deals were running themselves. The rest of my JV team I was interacting with, albeit on a 12-hour difference.
I was taking care of the short-term rental taxes that I needed to file for talking to tenants, albeit on a time difference, but I was managing the real estate business regardless of where I was. I’m well on my way to ultimate freedom. Just having freedom of geography is critical for me.
Shawn Winslow: Well, that’s awesome man. That’s the really cool thing about real estate investing is that you can tailor it to fit whatever your one, your goals are, but also what financial freedom is to you. You can completely tailor that to it. I tell this story all the time is that when I decided to go heavily into real estate and leave finance. I wanted to create a business first.
I wanted to create the ideal life that I wanted and then create a business around that. And that involved one, obviously, the money to fund it, but the flexible calendar time so I could go where I wanted to go be with the people I wanted to be when I wanted to be there. That’s hands down, that’s what real estate provides.
You see it time and time again. So yeah, I agree with you a hundred percent. All right, last question. Tommy. If I was to give you a time machine. Think back, you go back to the younger Tommy, maybe the one that was just graduating college. It was tough out there trying to get a job. Since this is also a personal finance show, we talk about personal finance every Friday, what is one piece of financial advice you’d give your younger self?
Tommy Brant: This is very specific to me, but I would’ve taken a HELOC on that home and bought other rental properties, dead capital in my house for the better part of a decade. So that was probably the thing I would do differently had I known how to analyze rental properties, how to build a team, and how to afford a property manager.
That’s kind of the specific thing. Generally speaking, I wasn’t educated. So I should have been, I think at some point I was fat, happy, and complacent. So I should have put more of an emphasis on being a lifelong learner. Always being curious and giving into the curiosity and also being genuinely curious about what I think extends into networking as well as competency.
Shawn Winslow: Yeah, I love that answer. Yeah, I wish I had done that earlier too. Wish I had bought earlier and then tried to scale faster. We all wish that. Tommy, thank you so much for your time today, man. I appreciate it. I know you’re a busy guy. You shared a lot, a lot of tips and strategies that people can put to use today, and I hope they do.
To your point of did you actually use it, what I told you? I hope they do. Thank you. All right, listeners, thank you for tuning in as always, easy doesn’t pay well and instant gratification is self-destructive. So get out there, work hard for your money, but also have your money work hard for you so you can create the life of your dreams and make the world a better place along with Tommy and me. All right, catch on to the next one.