the crushing cashflow podcast with tommy brant and Andrew schutzsky
Andrew Schutsky: Welcome back to another great episode of Crushing Cashflow with me today, a big welcome to Mr. Tommy Brant. Tommy, nice to meet you.
Tommy Brant: I like the opening. Strong. Andrew, It’s a blast being in here as I’ve mentioned before I’ve listened to a number of your shows and you’ve got some truly great guests so I’m excited to be here.
Andrew Schutsky: Awesome, awesome. So a little bit about Tommy’s background, he’s a recovering electrical engineer, I love how you put that, and a data scientist turned into a full-time real estate investor. He’s based in Nashville, Tennessee, and started the TB Capital Group as a tool to help friends, family, and partners accelerate well through passively investing in real estate. Currently invested in 136 units, totaling $11M in assets. A really strong start again welcome to the show, Tommy! Thanks for joining us.
Tommy Brant: Thank you, sir.
Andrew Schutsky: So let’s start off with the topic that’s near and dear I think to almost all of our listeners. You’ve recently made a risk, a career change, much like a lot of my friends and family are investors, technology professionals, and data scientists. That’s all my language. I know quite well. My W2 side of things, so you’ve recently made a change. How long have you changed being an investor full-time?
Tommy Brant: I gave my 100-day notice in March of last year, March of 2021.
Andrew Schutsky: Okay, so you’re coming up on a year now.
Tommy Brant: Technically, full-time since August.
Andrew Schutsky: So what pushed you over the edge?
Tommy Brant: So for me, I started out as an electrical engineer, a lot of roles. There were customer-facing, a lot of roles in sales but attributed most of what really pushed me to the edge is my latest role. It is where I developed a lot of confidence. I was basically a business analyst and worked as sales operations. I was basically managing an arm of the global distribution manufacturer, not small by any means. But understanding what is the system’s process, there are tools that we can use to understand our pipelines. In real estate, it’s marrying the investor’s pipeline, to the deal’s pipeline, but over there it’s understanding the pipelines, the forecasts, and people’s salaries rely on that stuff.
There was a little bit of fiduciary responsibility in administering the bonus payouts and compensation plan design. I would say that I felt like I overcome a lot with that one because it was such a sharp turn in my career path for me. So, I had to overcome some things like imposter syndrome. It definitely scratched my entrepreneur itch because it was such drastically different. There really wasn’t a whole lot defined when I came into that role. It was kind of just like, all right, Tommy, here’s a bunch of the plates that are in the air. Keep them spinning, and by the way, we want to make it better, so make other plates spin and all that stuff. That gave me a little bit of a taste of what’s it like if I just had to survive. I was just thrown into the lion’s den and made things work. So confidence through that is definitely a big one for me.
Andrew Schutsky: So two things that stood out for me there, your confidence was a big one, and I think we can all relate to that. Another one was you found a point of commonality, right? Like, what am I doing today?
There are transferrable skills in almost everything we do. You talked about the data and the analysis. A huge part of underwriting, a huge part of market research, a huge part of picking a property and picking a business plan. So you found that commonality, which I think really helps people get over the line. When it came time to pulling the trigger, what was going through your head? Did you have to build up reserves financially? What was going through your head? Help us there.
Tommy Brant: So my first investment property I had bought in 2011, and I promise this is going get come back around to answering your question. I guess in 2020 we liquidated that property, kind of took a look at our finances and my wife was still working, we haven’t had kids.
We took a look at our current situation and just said, Hey, you know, if I’m looking at a three to five-year outlook for starting a business like this, I think we’ll be okay If we take a hit for one or two years. So we made sure that we were capitalized to take a risk for 12 to 24 months on a business like this.
It was really a calculated risk. I’d love to have gotten to the point where I said, or where I have enough real estate assets to offset my income, but now it’s time to go full board in real estate. I had gotten a taste and I’d seen the trajectory and I’d seen the path, and then we just made a calculated.
Andrew Schutsky: I love that. I love the thought process behind it, and I think wanted to point out one thing that always goes through my mind. People ask me the same question or they ask for advice for their own scenarios. You have a long-term outlook, right? Yes. Almost every time you change careers, change jobs, and trajectory to a business take a risk.
There’s going be a short-term consequence, but it’s a long-term benefit, right? If you never take risks, you really never know what can happen. So I love that as you know. Real estate’s a team sport. So you’re not doing this on your own, I’m sure. How did you go about selecting partners and how did you go about finding them? What was your thought process there?
Tommy Brant: So I’ll compare it to single-family to multifamily space because in a single-family space, you can probably do it by yourself. You can probably analyze properties, and bring deals to realtors off the MLS. That’s how I got my first three base hits off the MLS in 2020.
It wasn’t like that far into the past. So even in a competitive environment, I would argue that there are deals to be had, but they’re probably not gonna be home runs. But in the single-family space, I was effectively working with really small teams. I found a property manager to look after the properties.
I probably could have self-managed, but I tried and I didn’t want to. Fast forward to the multifamily space, as soon as you decide, Hey, I’m not scaling up my net worth as quickly as I want to in a single-family space, let me look at multifamily. There’s room for team members to play, right?
You can definitely specialize a lot. One of the self-limiting beliefs that I had to overcome for me was I need people and I want to focus on one thing. Yeah, I wanna get really good at it. And so, that leads into building a team is picking not only, I mean, everyone says pick one thing you’re good at and go, but it’s like not only did I want to pick one thing I’m good at, but I wanted to be challenged in a way that I wanted to grow.
So we’ve talked a lot about my very analytical background and I’m very capable of underwriting, but I think a lot of people would assume that I’m a deal finder and I’m the underwriter and I don’t play that primary role, actually. So I’m leaning in toward investor relations. I have a partner who is the primary underwriter in our group, but I poke holes in his models and everything.
But as far as mental health and everything, it’s good for me to be in front of people. I’d thrive on talking to people, and understanding what motivates them. It’s a perpetual cycle, talking to people, understanding what they’re going through, and sharing what happens to you with them.
So I’m playing investor relations as a primary role. In underwriting, it’s secondary right now.
Andrew Schutsky: That’s great. I’m gonna focus on overcoming self-limiting beliefs. We all struggle with that to some degree, whether we wanna admit it or not. What tools or weapons do you have that you wanna share with our listeners to help overcome that? Is it being part of mastermind groups or reading books, or what’s your weapon of choice?
Tommy Brant: Oh, it’s people. It’s definitely people. So there are tons of virtual meetups. I think, as a result of covid, you could argue they’re virtual, they’re physical. Nothing replaces an in-person meetup and having a face-to-face versus, just talking to someone 15 minutes over the phone or anything like that.
So I would opt for in-person meetups over virtual meetups, although just ease of access for the virtual. They’ll be around for a long time, no doubt. If I just focus on educational content, I could answer that in a million different ways because there’s this book for that problem.
So it’s really a culmination of making sure you have your daily routine and check. You’re doing things to get 1% better every day on a personal level before you invest time in your business. So having that balance and making sure that you’re allocating time in your day for your family.
As well as you’re doing things to keep your confidence level up. There was something else I was gonna mention too, as far as that goes, but habits can be engineered. I’m an engineer so I can’t help but use that word, but you can use your daily habits to kind of hack your life to the way that you want it to be.
So it all starts with, I think, just kind of the compound effect of starting something small. So I’m a big James Clear fan of Atomic Habits. Then also The Miracle Morning from Hal Elrod. I write three things that I’m thankful for every day, and one of the things I got to do, so keeps me motivated and allows me to focus, but it also keeps me humble knowing that there are tons of things I got to be thankful for, I can be thankful for.
My favorite one is I’m thankful that I woke up this morning. It’s so simple. It’s like there are so many things that we take for granted in this first-world problem kind of country.
Andrew Schutsky: You’re right, and it’s funny, I saw your newsletter a few weeks back about the Atomic Habits being a highlight. I just released the same thing a week before. I thought I was late to the party of reading that. Maybe I was but I thought that was a really helpful but really simple little tips in there that they’re kind of common sense when you get back and think about them. Applying them in a systematic way really helps you get through the tough points of your day or tough points of your week or when you get stuck, how to really dial in your habits.
And you and I are both technical people, right? Because we think similarly. So I think that’s really powerful. You start with a kind of a master plan when you kicked off, Hey, I wanna build this business of like planning out the next two years, or did you kind of just start the concept and build from there?
Tommy Brant: For me, the biggest long-term plan, a long-term decision that I had to make was, do I want to focus on multifamily or do I want to just be a private equity firm and maybe open a blind fund and invest, cross-asset classes. I decided that I guess given the current state and the longevity of multifamily. I decided 3- 5 years for me, I want to establish a well-rounded apartment syndication firm. So I want to bring asset management in-house. I want to bring acquisitions in-house. That was about the longest-term decision I had made. The shortest-term decision I had made was, I want to write a book, I want to create a sample deal deck, and I need to finalize my company overview. That was kind of like one to three for me as far as the transition goes.
Andrew Schutsky: I liked how you kind of focused on, here are the attributes of what I want my business to be, and here are some of the outcomes, and you’re like, oh, I’ll figure out the rest. I think that’s pretty cool. Cool. So, I mean, Tommy has a self-proclaimed black sheep approach to his marketing and looking at direct-to-seller in finding deals. Could you walk us through some of that and there are lots of people. 2022, I’m just gonna timestamp where we are right now. It’s a very hot market across the board. Tertiary markets have become the new primaries, right? So how are you finding deals? What’s your process look like at a 10,000-foot level?
Tommy Brant: Yeah. Direct-to-seller is really important because if we’re looking at acquisitions, and I talk a lot about leading goals and liking goals, right? So your liking goals are, I want to close down a deal before Q3 starts, and then your leading goals are what are your goals throughout the activity that feeds that, right?
So what is the number of leads that convert to the number of offers to convert to the number of under contract, to convert to the number of closes, that type of things. So if I’m reverse engineering all of that to close in one deal, I need to have a good lead pipeline. The things I’m not sacrificing are my markets because I have to demonstrate excellence.
I have to know those better than anyone else. So I’m looking at deals that are in Louisville. That obviously includes the Middle Tennessee area, and Nashville MSA, but also includes East Tennessee. So Chattanooga and Knoxville are too good to ignore. So I’ve picked my markets, and now the question becomes, how can I create a lead volume to help me convert on something before Q3?
I can’t get to that number by just getting stuff from Marcus and Millichap. So that’s where it became an easy decision as to whether or not to start doing direct-to-seller this year. It really strikes me as a no-brainer. So our approach is a little different. So my partner and I, I’ll get into the nitty, maybe I’ll go high level, but we’re actually partnering with the broker at a high level. So we’re bringing the properties that fit the 30 – 200 units, 1980s or later built to him. And then we’re saying, okay, Mr. Broker, can you give us CoStar underwriting reports for these? And so then we determine are these top of the market? Is there juice left to squeeze? If they are top of the market, we pass. If there is juice left to squeeze our initial touch, we have some good assumptions based on the underwriting that we’ve done and other deals in our market. But our first touch is an offer.
Andrew Schutsky: So let me back up a step. So you and your partner are generating a list, however, you’re doing that. You’re saying, Hey, I want to narrow down on these 150 properties across Nashville, surrounding Tennessee, parts of Louisville you mentioned, right? So I’ve got these markets, I’m dialing down to my, let’s say 150 properties. Are you doing this skip trace from there to find the owners and then giving that to the broker? Or you’re saying, Hey, Mr. Broker, go figure it out. Here are the properties we want to go after.
Tommy Brant: We’re leaning on the broker to do that at this point. That’s something I kind of asked him. I was like, are you doing skip tracing? He said, no, I’m just doing what’s in CoStar at this point. We met at the turn of the year to talk about this and how this would execute.
The joke was, he was like, I do this every day. Let me do this. So I think most of the information is coming directly from CoStar, so we’re relying a little bit on that one. But I think if we do have plenty of just dead follow-ups and dead leads, maybe we revisit those and do skip traces on those and try to rehash that conversation.
Andrew Schutsky: If you don’t mind me asking, what’s your primary mechanism for communication from the broker to the seller? Is he texting or emails? Is it all cold calls or is it all of the above? Postcards? That kind of thing.
Tommy Brant: So our initial touch is an offer letter, so that is either a mail or email whatever we have on record. So that is more or less a pretty cold touch. We usually put something out there that we think is 85 to 90% fair market value, knowing that it’s a human tendency to ask for more and that we can get to their number, but we just want to have a discussion where there’s no or low competition. We virtually have no responses on the first touch. Then he does follow-up calls, and said, Hey, did you get my mailer? Did you get my letter or my email? Something like that. And that’s really where the magic has been made based on our experience so far.
Andrew Schutsky: So you’re doing this without any T-12 financials, rent roll, or just kind of going off of whatever you can get. You can say, Costa, our Yardi, whatever. You’re just firing off. Hey, 90% of market value which makes some assumptions, I’ll dial it in later. That is an unorthodox approach.
Tommy Brant: For sure. At least in like Middle Tennessee, you can use about a 45% expense ratio. We find Louisville is closer to a 50% expense ratio. So those are some of our key assumptions that are driving at least the middle line. The bottom line being the profits, right? Therefore the expenses we can kind of understand the income based on what are the rents showing on apartments.com or what is CoStar reporting, stuff like that.
Andrew Schutsky: Really interesting. So are you guys getting exclusivity to these deals with that broker? I assume they can’t go like, Hey, take your list and then run it to 10 different people after the fact or you don’t know?
Tommy Brant: We would’ve first right of refusal for whatever he generated for those. So there’s going to be some situations where there are no problems to solve on a property and they decide that they want to go full retail and we’re probably not going to their buyers, but hey, we’ve generated a lead for the broker and he quote and quote, owes us, you know something. I don’t know what that looks like.
Andrew Schutsky: So he does this all like, he absorbs all the costs and time of the outreach. Do you guys fund any of the campaigns? This is really interesting to me.
Tommy Brant: Yeah.
Andrew Schutsky: Really cool. So I guess there are pros and cons to your approach. This is the first I’ve heard of using the broker as the means to contact the seller. But pros, big pro is really none of your time investors than pulling the list.
No cost invested in campaigns and mailers and you know, using VAs. I’m assuming the broker is doing it all by himself or does he leverage VAs as well?
Tommy Brant: He’s been hiring mostly in-house people, so I don’t think he has any virtual assistance, but he leans really heavily on his director of operations for a lot of this.
Andrew Schutsky: Really cool. No, I love it. Thanks for sharing. I know I said I kept it at 10,000 feet. I felt like we took it down to 1000. That’s okay.
Tommy Brant: That’s ok. So it’s been exciting some of the results so far if you’re okay with talking about them.
Andrew Schutsky: I love it.
Tommy Brant: Okay, so we’ve sent over 20 offers. As of last week, it’s been 217 million dollars in offers total this year. Some of that has been on-market offers, but most of that has just been unsolicited off-market offers. That’s over 20 offers. We’ve had two people come back so far that we know of. There’s gonna be more based on the recent discussion we’ve had, but two of the responses have been encouraging. As one person said, I like the way you do business, I do not want to list my property because he had just a bad experience in going through the brokering, doing his best in finalizing, and going through all those. So we often don’t think about the burden that the seller goes through when putting something on market, but he is like, I don’t want to sell this property. I want to sell two others in four to six months.
Let’s keep in touch. Another point of feedback was, I want to sell. Let me get the managing members on board and will talk. And so that’s been some examples of some of the points of feedback there. I think some people would argue that anything over 50 units in this campaign would be a waste of time. There are plenty of individual owners that own in a hundred-unit range where they have multiple properties. So anything and everything that fits the 30 to 200-unit box for us.
Andrew Schutsky: So you mentioned 20 offers, 200 plus million off. That’s awesome. When did you start officially? Was it the end of 2021?
Tommy Brant: That’s just this year.
Andrew Schutsky: Oh wow. So 2022 calendar year was the first time you started. Wow, that’s real. That’s great. It’s like three months in;
Tommy Brant: We’re throwing so much wet spaghetti against the wall, Andrew. There’s gotta be something that sticks in.
Andrew Schutsky: Well, I remember, I know you and I met at Best Ever this year. I remember, remember hearing one of the conferences’ discussions, I think it was Jason YarusiI that said, Hey, one of my main takeaways was there’s no best way. There’s a lot of trial and error. Just be willing to experiment and see what sticks. I’ve heard that again, again, and again. So you can’t come in thinking you have it all figured out. No doubt. Love it. So if you had I’ll ask as we start to wrap up here. One more question for you. If you had to start over again a couple of years back, what would you do differently?
Tommy Brant: I guess one of the driving factors for me was I couldn’t find an alignment between my passions and my work life. So I think that probably could have been relieved if I was just talking to more people and let everyone know what I was interested in. So I would’ve started talking to my network sooner about my interest and my hobbies in investing in general. I kind of grew up where money wasn’t really talked about a whole lot, and so trying to shed that would’ve been helpful for me.
So right now I’ve been digging a well while we focus on acquisitions. So it’s been good so far. As far as mechanical advice for starting your own business and going full-time, I started in August. I wish I would’ve gotten on my wife’s benefits earlier. So if there’s about a five-month time span where I had no benefits, I was quote and quote at risk.
If you can start at the turn of the year, that’s probably better where you can go through open enrollment and get on your spouse’s benefits there. Since I started in August, there was no chance that I could file my taxes as a real estate professional.
Andrew Schutsky: Yeah. Wow. That’s a really practical tip and it’s something that wasn’t even on my mind or thinking about. That’s really great. So as we wrap up here, we covered so much ground here in the last 20 minutes or so, for someone that maybe wants to talk about a career change or we’re talking about active or passive investing, or talk about direct-to-seller or kick some ideas around how do we get ahold of you.
Tommy Brant: I’m definitely active on social media. I’m also on Facebook. Look up Tommy Brant. Last name is B as in boy, R-A-NT as in Tommy. A lot of people like to put a Y or a D in my last name, but they’re not there. Also got a website, TBcapitalgroup.com TB as in Tommy Brant capital group.com.
I did finish that book, thankfully that I was talking about before. It’s called The Passive Investors Guide to the Multifamily Universe. I’m not monetizing it, it’s a free download on the website. But me being an engineer, it is very data-driven. So I think that no matter your experience level, there are probably some data points that are going to surprise somebody.
I put my calendar on my website. So fun fact, you can always secure 30 minutes with me on my connect page of TBcapitalgroup.com.
Andrew Schutsky: Take him up on that. It’s great having you on the show, Tommy. Thanks for joining us.
Tommy Brant: Thank you.