How Tom Cruz Makes $300,000/m In Section 8 Rent

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If you were on my site in 2015 and tried to leave it, a pop up that Tom Cruz created would have sprung up to convince you to join my email list and buy a membership.

It worked beautifully, so why did Tom ditch that business for real estate? And can we see his numbers from that business?

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Tom Cruz

Tom Cruz

Cruz Properties

Tom Cruz is a real estate investor.

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Full Interview Transcript

Andrew: Hey, they’re freedom fighters. My name is Andrew Warner and I’m doing something a little bit crazy here today.

Tom. First of all, I’ve got to tell you, I got Tom cruise on here, not the movie star. The guy I talked to back when he was still in school, the guy that, uh, we’ve kinda lost touch over the years, but I was a customer of his software company. He was a guy who was texting me and emailing me, I think back when he was in school and we lost touch.

And after knowing him as a guy who wanted to be a software entrepreneur, he comes back into my life and he says, Andrew, I. I’m doing the section eight housing real estate thing, and it’s going well. And he, he got slammed online, but he loves it for calling his friend broke Bobby because Bobby made how much money

Tom: He made 125,000 a year as an accountant.

Andrew: and because you only made 125, you call them broke and you did it. What it was it on Tik TOK,

Instagram.

Tom: Yeah. We have a spreadsheet where we track our friend groups, income and bonuses because we’re always traveling together. So on there, his name, we, we put our nicknames. So I’m Kodak cruise. Cause I listened a lot to Kodak black and rap music. And he’s the broker of the group. I didn’t give him that nickname.

Actually, someone else gave him, but it stuck when we were talking about putting this list together. But yeah.

Andrew: But you also have this thing where you’re on Tik TOK. You’re big on Tik TOK. You’re on Instagram. And I guess you, you posted this publicly and then everyone ripped into you

Tom: Yeah.

Andrew: you would hang where I feel like you would just love attention. Yeah. Otherwise, right? You do, you love, the people are saying this guy is, uh, I don’t know, an arrogant

asshole or something like, all right, this is great.

Yeah. I don’t have a problem with anyone doing that to me either. I don’t necessarily love attention at this point in my life, but I don’t get her hurt when people say stuff like that. So I invited, um, Tom, back on, not back on, I invited Tom on here so that I could catch up with him and find out what happened to the web design company had I want to know why he’s doing not just section eight real estate that I actually am excited to find out about, but what the hell is he doing? Trying to get attention for himself when he’s doing section eight real estate people who are in sexting, don’t want anyone to know

about it.

Tom: Exactly

Andrew: Right. And we could, we could do it.

Thanks to two phenomenal sponsors. The first one, uh, brought a smile to his face. When I told him we were going to talk about them. It’s HostGator for hosting websites. The second one, I don’t know if you know, so well, it’s a send in

blue for email marketing. I’ll

Tom: I do. I use them for my mid-market

Buffalo.

Andrew: Get out of here.

Can you talk about it

within the ad?

Tom: They’re out of Europe. I think they’re on Paris, right? So yeah, no, I, I, you send them blue and I I’ve used those getting, yeah.

Andrew: Fricking. I love that by the way. Tom. I want to know about all, all that happened, but let’s start with real estate. How much revenue you guys actually have? What’s a good way for me to analyze how, how well you’re doing in real estate.

Tom: As far as like rent or units or what metric are you

asking about?

Andrew: Yeah. I don’t know. I guess with the, with SAS companies, I could say what’s your annual annualized

Tom: you could do the same thing. I

Andrew: How do you measure

Tom: right now, for me, it’s a unit count. Um, the more units that I can acquire to the portfolio and the higher the net worth, the more credible credibility I have with lenders, the easier it is to bring on partners. So right now, our average rent’s around 12 to $1,300 a month per unit at right at 400 units.

It’s about half a million dollars a month in gross run rate. And out of that, obviously,

Andrew: that,

means half a million dollars a month in rent comes

into you into your company.

Tom: then I retain, I would say between 50 to 55% of that, because I don’t have, I don’t have debt on all the P on the whole portfolio. A lot of it’s paid off. Some of it, you know, we pay aggressively down on it, but yeah, that’s about 275 to 300,000.

Isn’t that?

Andrew: Section eight housing is something I remember from when my dad used to sell clothing to stores in the rougher parts of New York. Can you explain what

Tom: Yeah. Section eight is simply a federal program that allows economically disadvantaged people that are at or below the poverty line to get rental assistance. Meaning if you, you know, make $20,000 a year, you have a hard time getting housing. You can apply to section eight, which by the way, there are mostly two to five year wait list.

So you’re going to be waiting a long time to, to get help from them. But once you do, they will pay up to a hundred percent of your monthly.

Andrew: Directly to the landlord. And so the landlord has no risk taking on a section eight person beyond any damage to the, to the

apartment.

Tom: Correct. But that’s, that’s not section eight. I mean, that’s totally agnostic to that because if you have a regular tenant and you don’t screen them, you have the same risk as a section eight tenant. You don’t screen. So I’m a big fan of aggressive screening and making sure you have quality people in your portfolio.

Andrew: Why are you doing this, dude? Why are you doing an interview with me? Why you tick talking? You’ve got a real estate business. What the hell do you need all this

attention for?

Tom: uh, it’s fun. And B um, I get a lot of people that are asking me questions about section eight and real estate and how to get started. Everybody’s fascinated with real estate right now. It’s real estate, you know, crypto or Amazon. Right. And I just happened to be in a very niche part of real estate.

And, you know, with almost 900,000 followers on tech talk every day I get hundreds of DMS like, Hey man, how’d you start? How’d you do this? So I started. Um, to be able to teach at scale. Um, so I have a group and, um, educational content step a step by step showing you how to get started with section eight.

Andrew: So I could do that. I could follow what you’re doing. I could end up buying section eight real

estate and making

money.

Tom: anybody can do it. I just, I happened to figure it out early and I happen to find what works with it. And me being in OCD, you know, data nerd figured out, okay. The perfect, you know, goldmine property is a three bedroom, two bath at 900 square feet in these areas, you know, buying it at this price.

Andrew: Did you do this while you were doing that web design company that

I knew you

you four years ago? no, This came

Tom: In college, yeah, in college, I was doing the web design and all marketing agency and I was all in on that. And then I,

yeah.

Andrew: through the history then. So college you’re listening to Mixergy reading all kinds of stuff about startups and saying, I want to do it. Okay. And then you start out with a web design company, which is one of the toughest places to start, right.

Tom: So with the one does my company, I fell into it. I was actually, I’ll make a long story short. I was in a, uh, intro to business law class and they wanted me to do a presentation I didn’t want to do with PowerPoint. So I was like, Cam’s going to throw it up on a website. I learned about WordPress at the time.

So I did a website, got a domain, did the whole thing for this presentation. My teacher liked it so much. She was a practicing attorney, my, uh, associate professor at the time. And she’s like, can you do me a website? And I was like, I mean, sure. So I built her a website. I didn’t charge her anything, except she was always asking me to make updates.

And I was like, look 149 bucks a month. I’ll do unlimited updates. I’ll post it for free. Everything’s included and you can just stop paying me whenever you don’t need it anymore. And she’s like, all right. So I sold her a website. I made 149 bucks. And, you know, I was in college that was a decent amount of free income.

So I just did more of that. And I did it in a way that almost got me kicked out of school, but it worked really well. I found out quickly that when you reach out to small businesses where they business domain, you know, it comes across a spammy, especially even in 2012, 2011, you know, when you’re selling marketing, it’s not as saturated as today.

So I found that once you send out an email from a.edu email, that. They open it. They’re like, Hey, what, you know, college students I needed to pay and who doesn’t want to help, uh, you know, uh, nothing coming call a student. So I set up an SMTP server that routed through my school’s, uh, email server. And I outsourced to India.

I got someone to scrape, um, chamber of commerce, email addresses for me. So I get about a thousand per day from around. And then I would, I would send out emails through this, um, through my school’s email server. And the response rate was insane. I mean, we were selling, you know, 20 or 30 per month and it was 149 bucks a month.

Uh, the Indian God that was doing the scraping for me, he had a whole family and they all did web design. So I hired all of them and they were doing the WordPress sites and we just kind of had assembly line, you know, he would scrape it. I was in the emails. I would do the sales. I would hand it off. They would build a WordPress site and then it became the planet fitness model.

Everybody signed up at 1 49. But people might’ve sent me two or three changes a month, you know, and even then my designers were doing it. So that’s how I

Andrew: a pretty good business. How much money did you get it

too?

Tom: Um, man, I mean, I think at the height around 300,000 per year, um, as far as run-rate, twenty-five 30,000, because there was also fluctuation.

I didn’t do contracts as all month to month. So people would quit after three months or if they didn’t get any traffics, they didn’t do any marketing. But, um, I mean, for, for college, I mean, that was great. Um, I had pretty limited marketing expenses, obviously, you know, federal and state taxes learned about that the hard way.

And,

um,

Andrew: do you mean?

Did you miss any,

Tom: Yeah. Oh yeah.

Cause

Andrew: you did.

Tom: oh yeah, I wasn’t withholding or doing anything. I didn’t know quarterly taxes. I was just like, Hey, this is, you know, free income level law. So that was, that was it. But, uh, it caught up with me and then I just had, you know, I had to write a big check, but that was.

Andrew: How much was the check for and how much trouble do you get

into?

Tom: It wasn’t much of, it was just penalties insurance. We would probably two years in back taxes. Um, it was just an ugly notice from the IRS. I think it was like $70,000 or $65,000. So they put me on a payment plan. I got caught, I hired an accountant and she got me out of that mess. And as soon as the same account to this day,

Andrew: So at some point you realize this is not going to go before you get to that. Did you buy yourself something? Did you do anything luxurious? You seem to me like a guy with good,

like

fancy tastes. You did. What’d you get.

Tom: Um, the first fancy thing that I bought was a BMW, M three, um, which I had in college. Um, and then it was very much lifestyle creep, you know, and make some more money and then I’d buy the next best car that I could afford with that. So I didn’t reinvest as much as I should have in college.

If I had, I would add a lot more properties than I do now. You know, you live in, you learn, it was fun. And being, having, you know, the coolest car on campus was always super fun. I got my first six figure car. Um, you know, right after college, I bought my first portion on 11. And then from then it just kind of went up from there, especially after I got into real estate.

Yeah. Did I, what,

Andrew: Did you

date or girl, by the way?

I think that I, I think the mic is getting better here. Um, I think before that Chris back crashed and now it’s working, who knows, I’m willing to invest more time in this because I love being outside. Okay. Tell me about dating. Tell me like when you, when you’re making money at a time, when other people in college have no money, what’s that

like.

Tom: I mean, it’s fun. Um, especially because it was completely disposable. I mean, I was paying for my schooling at that point, but I went to a public school in state tuition. So living there was cheap at the time. Wilmington was under expensive. It was cheap. I mean, all had all this disposable income. So on the bars, you know, I was buying stuff for friends and these are all friends that I had before I started doing really well.

I think I lost you, Andrew.

Andrew: No, I had to suddenly cough up some of the coffee. I was shocked by something. All right. I see, I see where this is going. At what point did you get into real estate while you were in

school?

Tom: Yeah. So right when I graduated real estate, I realized that I really didn’t want. To do the marketing thing too much longer. It was very intensive. I mean, I was constantly, you know, involved with reporting with onboarding clients. It was just an endless rat race. Um, so I started looking for other options and I, I found wholesaling, which is, you know, the process of finding an undervalued unit on the market and being able to.

Flip it to an investor that wants to either be a landlord with it, or they want to flip it and rehab it themselves. So I got started, you know, doing that.

Andrew: Property.

Tom: Um, the first property that I bought was for myself, it was a condo in Wilmington, North Carolina. I bought it for like a hundred grand using an FHA loan. So I put my 3% down at the time I had Obama’s $8,000 tax credit, shout out to Obama and he got me into that property. And, um, from that point on. I stayed in it for a year.

I had to live in it for a year. After that, I, I bought a dog. I bought a big government pincher and he needed a yard. So I needed to buy another single family property. And this is where I kind of had that first aha moment was they didn’t allow Dobermans in my condo complex and I needed a yard for him.

So I couldn’t sell the unit because I was so upside down on it. Keep in mind this all post 2008, you know, values were in the toilet.

Andrew: Even though you bought the place for a hundred thousand, I guess I have no sense of real estate outside of major cities, because I’ve always lived in New York, LA San Francisco, a hundred thousand dollars. Gets you a nice Tom cruise taste.

Apartment.

Tom: I mean, yeah. I mean, it was a three bedroom and it was, you know, near the beach. Oh yeah, yeah. Three bedroom, two bath. Yeah. A hundred days. Everyone outside of California, New York are blown away. When I show these $50,000 units, there are cities outside of New York. Did you know that name here?

Andrew: I’ve never lived in them. I literally,

before Austin, I

guess Argentina. Yeah,

Tom: Yeah. Yeah. No. So, yeah, so they exist anyways. I couldn’t sell it because I owed more than it was worth. So I was like, I gotta, I gotta rent it out. So I put it up. I rented it out. Same day. Very nice. Lesbian. Um, they had rented it for probably six or seven years after, you know, uh, the day I rented it and I had lunch with them, you know, like we went out, they were super cool.

I knew that I wanted them in my unit. So that’s how I got started. I was making $500 more per month than my mortgage. So I was like, oh man, you know, my marketing clients were paying me 500 bucks a month and they were paying me 500 bucks a month and I never talked to them. So I was like, I got to do more of this.

So that’s kind of where the wheels started turning. And I started going more all in, on real estate.

Andrew: Okay. That web design company, the website is still up. I saw it a few moments ago. It looks very much like the, like the 2010s, but okay. It was, it was working then exit Intel. This is right around the time that bounce exchange was worth a ton of money. Right? This was the company that said, if people are leaving your website, we’re going to help you keep them on the side by giving them a discount, just moments before they’re about to do.

From the site. And then they started adding all of, all kinds of other services. And what was special about them was they were doing software and services. So they would give you software that only they had, and then they would manage it in a way that would help get results that they were promising. And so it exit Intel, I guess you guys use the full name, exit intelligence

Tom: No, because we got sued by Intel for copyright infringement. Yeah.

Andrew: Is that why now you’re calling it

exit intelligence. Cause I

knew you as

Tom: is, yeah, yeah, no, we got it. We got a cease and desist. We have, that was a whole story. We got a cease and desist from Intel corporation because the name was infringing on their trademark and they did not like it. And we did not have the money to fight Intel corporation.

Andrew: Do you know how stupid some of these things are? Or just like so infuriating, like you did a John Lee Dumas podcast. Um, I’ve known him for years. He used to call his podcast entrepreneur on fire and then entrepreneur magazine got on him for it. And they’re known for being litigious. And so his dad who’s, I think a lawyer helped him fight it for a long time.

And they finally said, what do we need this headache for? Let’s just call it EO fire then went with the old fire and now it’s entrepreneurs on fire. And that fricking magazine, which has got nothing going for it, except that they use the word entrepreneur a long time ago. Anyway, they got on him. Um, all right.

So that’s what the change was. Talk to me about how that business went, where you really were not copied. Where are you copying a bounce exchange there?

Tom: no. I mean, the exit intent, they had said at some point that they had a patent on it as far as utility of the jock, but it was JavaScript, you know, once you move your mouse outside of a certain area, it triggers it. But now everyone and their brother does it on a self-service level. Um, at the time we didn’t think we were, we were fine for a long time.

They were trying to get us to license it. There’s a whole nother story there. Um, that, I mean, it was a long drawn out battle,

but

Andrew: but what was the original idea coming from them saying, look, there they’re pioneering something. It was okay, but they shouldn’t have a patent on something so simple. We’ll do

this to.

Tom: The reason why is that we were going downstream. They were only dealing with enterprise. They’re dealing with the Nike’s, the Adidas we were going with, you know, these $50,000 a month e-commerce stores that were getting started. And we were doing it full service. So that was kind of our big differentiator.

And we were the first ones to do it, um, outside of the enterprise level. That’s why we didn’t really think they would care because until they got into the, you know, that space, then they’re like, okay, there’s, you know, a lot of money down here with the rest of, you know, Inc 500 is great, but the 5 million in small businesses, there’s a lot more

potential

Andrew: So Tom, you guys did this for me and you said, don’t worry, we’ll handle everything. What I loved about it was you came up with the offer. You said, give people 10% off. If they’re leaving your site, just offer them 10% off of membership. I go 10%, who cares about 10%. The membership was twenty-five bucks a month.

You tell me for $2 and 50 cents people make a decision. You go, yeah, they will just do it. And sure enough, you were right. And then also I hated designing things. And you said, no, no, you can design things. We’ll do it for you. And it was so like everything handled for us that I just had to say yes. And work with you guys.

It was such good service. The idea made sense. Where did you get your first customers and then why didn’t it take off the way the bounce exchange

did.

Tom: Yeah. Um, first customers came from, we did a lot of pay-per-click advertising with use ad words, quite a bit for bouncing traffic. Um, we did a lot of outreach, you know, we had different sales organization, companies that do lead generation and we had a sales team. I was the first sales person, so I was selling it and I had two other, um, I had an SDR, another sales person, and we closed it.

Um, I was with them for a couple of years. Um, I had a partner, you know, he still runs it today out of. Um, you know, it seems to be doing fine just from looking at, you know, what you see online, but as far as scale, I don’t know. I think that there’s diminishing return. There’s so many new competitors that are self service that charge, you know, 19 bucks a month, you know, and you can create from a million different templates.

And I think that that really started eroding away at the revenue and, and, and profits. And for us, it just, for me, it didn’t make sense. I wanted to get into real estate. My partner wants to do that full time. So we eventually worked out a buy, sell agreement and. Um, you know, we went different ways and they were in Raleigh.

I was in Wilmington. Um, so I wasn’t there day to day to, you know, be involved with, with growing up.

Andrew: All right. I want to dig deeper into it, but first let me talk about my first sponsor. It’s send in blue. You’re the first person who I interviewed, who, who knew it recognizes, smiled. When I said it, what is it about sending blue that got you to sign

up?

Tom: Um, It was their speed to be able to start sending email. So I had it in an Amanda’s to be a great case study. I had a zoom with like 400 people that were coming up and I quickly found out that the zoom webinar notification system is a joke. They will only notify 24 hours in advance, which people forget about it.

So. Damn, I got to go and I got to notify people right now. So I just Googled, you know, fast onboarding something and they were the first ones to come up. I’ve signed up at a free trial. I uploaded all 400 registered agents and literally in less than like 20 minutes, they had approved my account. And, um, I was sending emails.

So I was able, you know, once I launched the webinar, I emailed everybody at the same time. Deliverability was great. I mean, it worked out perfectly. And then, I mean, I had like a 60%. Um, everybody was opening the emails. So that’s how I got started. And it’s like 25 bucks a month compared to MailChimp’s a joke at like a hundred, 150

and

Andrew: Then it ratchets up even further as you build your business. And you don’t know when you get started, because you say, I just want whatever everyone else is using. You sign up for

these companies that

everyone

Tom: your

Andrew: knows about. And then you’re hostage because who wants to move in an email list and. All right.

And then they also have all this marketing automation. So if somebody comes up to come to a webinar, you can also follow up with them differently from someone who didn’t come to webinars. All right. Listen, people, if you want to get started, I’m going to give you a deal where you get to try them for free.

Right now, then you’ll get a discount for the first three months. Then you’ll get, they’re always low price for forever because these people know what it takes to send out email, which is really not that it’s not that expensive, Tom to send out emails. Fractions of pennies. Everyone else just marks it up because they can, because they’ve trapped.

You, you, your hostage people, here’s a URL. Send in blue.com/mixer. Listen to Tom, go to send in blue.com/mixergy.

Tom: Yeah, and they have great support too, which is something important and they respond fast, any issues that come up. So I

definitely

Andrew: great

company.

Tom: Yeah. And I’m not even sponsor.

Andrew: No, you’re not getting paid for this. I am so getting how much revenue did you guys get? Exit intelligence

up to

Tom: I left when we were between 40 and 50,000 per month. I’m sure it’s grown since then. You know, we’re up think around half a million, 600,000 per year. Uh, when I left.

Andrew: profit was how much.

Tom: Um, probably 40%. I mean, we were pretty good margin. We had a lot of expenses. I mean, we had a growing team, you know, we were totally, we, we didn’t have any funding. You know, we were doing this bootstrap.

Andrew: but here’s the thing that I liked about the model. A lot of times you get software, you’re supposed to install it. You’re supposed to figure out the right design, the right offer, the right, everything. You’re supposed to stay on top of this. Dad’s to adjust it. What bounce exchange showed was that companies shouldn’t have to do that.

That the big should be outsourcing this. You did that. Why didn’t that go bigger? Why didn’t that become the big hit that I expected it to be?

Tom: Um, I just don’t think that the cost for acquiring clients was really high. Um, from ad-words side to even Facebook marketing, I can’t remember the exact cost per acquisition, but it was expensive. Um, labor and talent in Raleigh was expensive. Real estate and rent was expensive. Everything was expensive.

And like I said, we didn’t have funding. So getting it to bounce exchange million dollar run rate. Didn’t happen as fast as we wanted. Um, and then very quickly then you had, um, opt-in monster opt-in monster came onto the scene. They had a done for you solution. You just sign up, put in the code snippet and then boom, every phone call we had was why are you charging 1500 a month when I could get it for 29 a month?

And then it’s just one more hurdle. So, um, essentially what it was is we built ourselves like a marketing agency that happened to have software. You know, it wasn’t really a true self service SAS. Um, and that’s, I think a big reason that kind of hindered the growth. At least when I was there, I have no idea how they’re doing now.

Um, but

Andrew: Right. Do you, do you think Tom, that it could have gotten too? It could have grown more if you added more ser more software to it. So it wasn’t just about exit. It was about all the little tools that you need in order to grow, you will manage them even if you don’t create them. So if opt-in monster makes a better, uh, app use them, if somebody else makes a better chat experience, use the chat experience.

Do you think that that could have been a direction.

Tom: Um, possibly, but the thing is everyone that reached out to us, just one of the exit intent. They want us to know the tech, the algorithm, you know, to determine that, um, we never really thought about expanding past that that was kind of our bread and butter and our core product. And that’s what we, you know, we focus on doing, but.

I think that, I mean, we, we sat in a hotel room because we were going into this meeting. Um, I can’t remember what we’re doing. And we were like, we need to decide a decision, like a direction today. Like, are we going to go self-service or are we going to go full or full service? And let’s do it. And then we kind of looked at, you know, yeah, five clients at two grand it’s 10,000 bucks a month, or how many people we have to support, you know, with the same $29 self-service offer.

So we decided to go full service and I mean, it worked well. I mean, it, it was growing pretty, pretty decently. Um, but it was just, you know, uh, Well, war of attrition because people would then sign up three months later, they’d be like, Hey, I was Googling, you know, alternatives. And I found that and that’s kind of where it kept coming back to.

So that’s,

that’s

Andrew: I say something, Tom? I’m noticing that I’m more excited about that business and you are what got you to be less excited about it and be willing to take the buyout from your partner. Was it real estate picking

up? Was it that it was

Tom: Um, no.

Andrew: thought it would be?

Tom: Yeah. I had already run a marketing agency for three years at university college. Right. And I really didn’t want to be involved with another marketing agency. Assumption was what it was. And I went into it thinking it was more of a SAS solution. It’s always, especially watching your interviews, you see these guys on hand, they’re like, yeah.

You know, I set up clear.com and now I just sell data and I make $2 million, you know, from these enterprise companies, that was the dream, you know, to sell, you know, they sign up, they sign up for 99 bucks a month. We never talked to them. They onboard through video content and then they get value very quickly.

That’s kind of what I wanted. That I saw going that direction, but we didn’t have the funds to be able to hire out a whole dev team to build out that dream. You know? So that’s, that’s kind of where we went in different directions to

Andrew: All right. Meanwhile, it sounds to me like your first real estate endeavor did well now the 500 bucks a month, then you bought another place so that your dog had space to run. Did you end up renting that or take me through the rest of the

real estate story.

Tom: Yeah. So from that point on, I had the condo that was rented. That was my first kind of foray into that and realized that I wanted to do that more. Um, I still had that single family property that lived, I lived in there for another two or three years while I was doing wholesaling and doing, um, a bunch of other, um, actually I lived there for way longer than that, but I started buying more condos.

So I reinvested cash from, um, No, my rental. And then I reinvest the cash that I had from my marketing company. And then also from the salary that I had from, um, wholesaling, and then from any other sources of income from exit Intel, up until that point. And then I started buying properties. I quickly found out that, Hey look, a condo is 80 grand.

You know, a decent condo in Wilmington, two bedroom, three bedroom, 80 grand, 20% down, an investment loan of $16,000. So my goal every month when I woke up was how do I get 16,000 to put a deal under. So at that point, then it just becomes like a running, you know, 30 days I had a rolling kind of target of being able to close on one unit every 30 days.

Um, and I did that through when I started wholesaling, I was making five to $7,000 per deal. So I figured, all right, I can do two wholesale deals, you know, make 10 or 12 grand. And then, um, supplement that with income from other sources, from my rentals, from whatever. And that’s kinda how I got start.

Andrew: Wait, what’s.

Tom: Yeah, wholesaling is when you find a property, let’s say that you have a property and you want to sell it, and you’re doing it for sale by owner it’s in disrepair.

There’s, you know, problems with it. You can’t afford to fix it. I come to USA. Hey Andrew. Um, I see that you’re trying to sell this property for a hundred grand. Um, I’ll give you 75,000, $70,000 on it, but it’s going to be a cash deal. No appraisal, you know, I close in 10 days or two weeks and you can just walk away from the property.

Keep in mind, 20 13, 20 14, 20 12 into the market. Wasn’t as crazy now we’re going at a ton of equity. So you would have these people that would come and say, yeah, sure, no problem. So I would have, I’ll put it under contract. You and I was on the contract. I’m going to buy your property. I would then go to one of my buyers, you know, or wholesale or flippers and say, Hey man, I found this really good property fixed up.

It’s probably worth 150 grand, you know, maybe once. Um, I have another contract for 70. I will give it to you. I’ll assign this contract to you for 75,000. He’s like, that’s great. I have all this built in equity. I did all the hard work of finding the unit, right? So you get your $70,000. I get my $5,000, which is, you know, the difference between 75 and seven days.

And then he gets a house that he can go and flip. So I, and then the great part about this is you don’t need a ton of cash. I put $500 down as earnest money to put the property under contract with the seller. And then I went on, I think at the time I was using Craigslist, I list the property and then I would, I would find someone to buy it for a higher value.

Andrew: Okay. And then you kept doing this and at one point you decided I’m going to start teaching it.

I wonder why,

why start.

Tom: yeah. Yeah. So.

Andrew: why not say, why not say, guess what, guys, I know how to do this. You’re trying to figure out how to do it. Tell you why. Just give me some money, invest in this REIT that I’m putting together and I’ll go and buy the property, or we’ll do a partnership.

You’ll be a limited partner. I’ll write. Why

didn’t you do it that way?

Tom: Because I looked into REITs and to regulation D and all these other sec regulated things. I’ve seen syndications and I’ve seen, you know, kind of how it’s put together. I see a lot of these multi-family guys doing. It’s just not a direction I wanted to go. I already had the cashflow for my single portfolio.

I didn’t want to continue doing that with other partners. I didn’t want to have to go and raise money. I didn’t want to have to go and constantly searching for deals. Um, I think that I’m able to help a lot more people directly do it themselves and be able to build their own portfolio because on these reads, it’s a joke, man.

I mean, if you were, if you were to buy into one of my deals, uh, and you see, I mean, these grant Cardone, you know, a bunch of these other really big multifamily syndicators, they pay out five or 6%. You know, I mean, you can put that money almost anywhere, crypto and FTS stocks, and you’re going to do better than 5% a year.

Um, and I just never, I never was a fan of nut. So if you can go out and I can teach you right now to go buy a property for 80 grand, put $16,000 down on it, rent it for $1,400 a month and you’re going to get a 60% cash on cash return in your first year. It’s a lot more attractive and it’s guaranteed 20, 20 global pandemic.

I had my best. People weren’t moving out of units. I was, you know, increasing rents on section eight units. Um, they were still honoring, you know, the annual increases and we were still showing houses. You know, we were doing content contactless showings. You had, you know, those door, the automatic walks on the doors.

And all we were doing is buying properties and occupying them. Everybody was terrified of showing units and, you know, having this processes, we already had an in place. So we were buying 20, 30 units per month. So that’s kind of why I got into teaching.

Andrew: All right. Walk me through it in a moment. First, I’m going to say my second sponsor is HostGator. What do you know about HostGator? This is like the greatest ad technique ever.

Tom: Yeah.

Andrew: was like, Hey Tom, what do you know about HostGator? And then I get my URL. Then

HostGator goes,

wow.

Tom: HostGator IX, uh, was a host, you know, I mean, they’ve been around forever when I started hosting in 2007, 2008, you know, right when I started. Uh, college here in North Carolina and they were them and go daddy, and we’re always kind of the big 800 pound gorillas in the space and Bluehost, I think Louis is still around and

I’m

Andrew: And now they, there, they were acquired by the same company there they’re merged. Yeah. They

Tom: I haven’t been keeping up with it.

Andrew: they got

Tom: Yeah. But, um, HostGator, they blew up through their affiliate program. I’ll never forget. I mean, they were giving away like $200, you know, for $300 for a sign up on a $5 a month hosting. So they were playing the long game and I just remember them having, you know, the goofy Gator logo and everything, but the hosting was solid.

They had a bunch of built-ins for WordPress. I mean, I used it at one point before I had my own server, so great from great hooks.

Andrew: Alright. Uh, I use HostGator also anyone out there who wants to get started with a website, go to HostGator. It’s inexpensive. It just works. And it’ll scale with you beyond their less expensive packages. They do have much more robust offerings that will do all kinds of things that everyone else is doing, but at a lower price.

So if you want to get started, go to hostgator.com/mixergy when use that URL. They’ll give you the lowest possible price. Maybe that’s like exaggeration. I think the lowest possible price is zero, but they’ll give you the lowest price that I’m aware that they make available. And frankly, you’ll get tagged as one of our listeners, which means that I’ll have your back with them and, and they’ll know it.

So they’ll take great care of you because your friend and listener mind go to hostgator.com/mixergy, by the way, I’m digging it. I don’t think that the sound is coming through in a wacky way. Right? I’m still out here. The ducks are going nuts. Do you hear a duck?

Tom: Very little background noise.

Andrew: All right. I’m going to keep working on this because first of all, I’m a little cold, but I’m loving being outdoors. This feels a little bit strange. Cause people keep looking at me,

but Austin still has a little weirdness in it. All right. So Tom, all right. Let’s suppose that I wanted to do this,

right. What do I do?

Do I do this year in Austin? Do I have to think outside note? Like how your eyes just went? Like no Andrew, no

way.

Okay.

Tom: just gonna be,

yeah. The property tax is there and the purchase price that they were going to be high. It’s going to be tough to cashflow correctly. I would recommend Ohio. I’m buying a lot in Ohio Dayton,

Ohio.

Andrew: We’ll have to fly to

Ohio and

Tom: no, no, no, no, no. I mean, I’ve, I’ve never been to Ohio and I have no intention of going to Ohio.

No, I buy it remotely. So I’ll find I use realtor.com. I go look at properties that are under a hundred thousand dollars and move in. Ready. Um, I’ll buy a property. I’ll find a property management company there they’ll take over. And, um, between zero and 10 units, I recommend a property management company.

After you get your 10th unit, you can start affording your own full-time property manager, and then it just a whole lot easier to scale because then you can just give them as many properties that you want and your fee doesn’t change. You know, they have a set annual salary and, um, yeah,

Andrew: So under a hundred thousand dollars, then let’s suppose I don’t need a mortgage for that. Right. I just pay the whole thing. Cash, right. Mortgage company. I’m

Tom: You wouldn’t do that?

Andrew: wouldn’t get

Tom: No, no, you, you wouldn’t buy cash

at all because money is three and a half, 4%. I mean, you’re going to make, you’re going to make so much more in England. For example, here’s a quick math. If you take a hundred thousand dollars cash and you go and buy a property right now, you’re going to be a hundred thousand dollars into that unit.

And you’re going to be making 1300 bucks a month. That’s great. But you could take the a hundred thousand dollars and that’s 20% down on half a million dollar portfolio. Now you’re buying seven or eight units that are cash flowing, four or 500. And you’re you’re, you know, you have a lot more leverage, but

yes.

Andrew: All right. So I buy it. I get, I got a mortgage at these low interest rates. Fine. Um, it has to be under a hundred thousand dollars. It’d have to be in a certain kind of

neighborhood. Is it.

Tom: It’s going to just naturally in that price range is going to be in a, you know, they call it a C class B class neighborhood. Um, the big thing that I look for is, is crime. You know, there’s crime maps and they have really good sense, especially when talking to inspectors and property managers. They’ll tell you, Hey, look, do not buy here.

I won’t even go there during the day. So you get a good sense of the area and then you know, what streets to buy on. And then from that point on you just acquire and add it to your property management team.

Andrew: So I buy, I buy the. Remotely. I get somebody to go with a, with an iPhone and FaceTime and just show me the place. That’s what you do. Okay. So you go through, you, you find it, you’re looking for anything specific, like no, no cracks in the wall. What are you

Tom: Yeah. So section eight has a, um, compliance and inspection guidelines that you have to look at. Um, it’s really the three SS sanitation, structural and safety. You want to make sure that the foundation, the roof and all the big components are. Nothing know, no piers falling over, no foundation, all cracked.

Um, and then sanitation, obviously the unit has to be clean. It can be debris can have, you know, mold growing anywhere. And then, um, safety, you know, no broken windows, all the window locks have to work during off the work of applying stuff to work. Everything has to work. That’s really the only main thing for inspection.

And then you go through it and if it looks good and your inspected. Then you close on it, that’s it

Andrew: Um, was that next

Tom: it’s No no, it’s not. Sorry. I had my first time completely. I have FaceTime. Yeah.

Andrew: Okay. How do you get, um, government approval for section eight?

Tom: Um, sorry, I’m just signing out of my message. Um, government approval for, uh, aids pretty straight forward. What happens is after you buy the property and it’s available for, um, occupancy, then you would notify that your local housing authority. Hey, look, I have this unit. Then from that point on, they notified their member base, you know, the tenants that are looking for section eight units.

And then from there you would go, um, and, and start screening. You know, I check for eviction credit background, um, income verification, landlord verification. Uh, we go as far as going in, going to where they live and checking out how they’re currently living, um, before we’ll allow them into our units,

Andrew: How do you send somebody in

to go look at where they live?

Tom: our property manager will call them and say, Hey, we have an in-home visit.

When are you available?

Andrew: Your property management company will do

that. And what do they charge?

Tom: Um, well it’s part of, I mean, so with the property management company, they’re going to have their own like visit fee. I know it’s not a normal screening method. So I normally work out, I think it’s like 50 bucks per visit, but the advantage is when you have your own full time property manager, then you’re able to just, you know, it’s just one of their duties.

Andrew: Got

Tom: And for that, you can, you know, 4,000 bucks a month, you have a really good, you know, property manager that you can, you can trust you to do that.

Andrew: Okay, anything else that goes into this? I mean, I obviously go into more detail

wherever it is that you’re teaching

Tom: Yeah. So the, the big thing is, is, is, is the tenant screening is going because if you get that, you can get the best property in the best market, and you can be getting $1,400 a month in rent, and you can have a $300 mortgages be knocking it out of the park. But if you didn’t check the tenant out, if they have a criminal background and drug trafficking, it’s gonna, it’s gonna leach into your property.

You’re gonna have cops called all the time. It just normally. You want to make sure that the risk is reduced, you know, and make sure there’s no crazy felonies, no violent assaults. No. Maybe just also liability for you and you don’t want someone killing someone else on your property.

Andrew: Yeah, that’d be on the liability. No, I don’t want anyone killing anyone. Uh, all right. What’s the biggest headache that you’ve had with.

Tom: At first as inspections, you know, because you’re dealing with, um, an inspector that comes out there, they make sure that the property is. The way that it’s supposed to be. And at the beginning, I really didn’t know what they were looking for. We have a checklist and the checklist is kind of vague, you know?

So we were going off that I had a contractor that would go out there and make the fixes for me, but they’d come out and there’d be some like, minor things. Like, for example, I never forget, you know, how, like in kitchens, there’s, you know, ceramic tile on the floor. And, um, one of the tiles had like a hairline fracture.

The tile wasn’t even loose. They were just like a little crack in the tile. And the guy was like, this is a safety hazard. Cause someone.

Andrew: Um,

Tom: going to ever trip on that crack. And they’re like, well, we have to fail you until you replace it. So, you know, they come back the next day or we got to a point with our relationship where we would just take a picture, send it to them.

Then they would pass us in their system because what happens is if you don’t, if you don’t take care of the property and you don’t maintain it, then they put you in a Bateman and they’ll stop paying you. So there’s a lot of incentive outside of wanting to keep the tenant happy to take care of the property.

And that’s really the only way. Uh, especially at scale, I mean, out of the 400 units that I have now over 350, our section eight. So we have 350 inspections annually across four states. So the logistics of that, you know, we use software, you know, we use, um, different processes in place to make sure those get done efficiently, but that was really the only, the only real headache.

Andrew: No clue, no tenant headache where something terrible happened, couldn’t get rid of somebody or

they broke something. It

Tom: states where you can buy and get rid of tenants very easily. So North Carolina, South Carolina, Tennessee, and Ohio have very good landlord laws. Um, it’s not like in New York where you’re waiting years and you have these horror stories of getting evicting tenants. I was evicting tenants the entire time.

So that’s, that’s, it’s 150 bucks in three weeks and you can get a tenant out in these states. So the tenants, not a real issue, you always have these outliers, no matter how well you screen, you’re always going to have people that bring other people into the property. Right. Girlfriends, boyfriends, cousins on everyone that’s live.

So we’ve had some, like, you know, I had some, I had one guy set up a whole strip club in my rental property. Yep.

Andrew: Wow.

Tom: So I’ve had that

Andrew: And how’d you even find out about it?

Tom: uh, he. What was it? Oh, one of my contractors was working down on that street and he walked by the property and they gave him a flyer for the strip club. That’s how I found out.

And then I looked it up and he had like a whole Yelp page and reviews. And he had like themed nights, you know, for different things on the nights. And he had serving are coming. It was a huge mass and I contacted him about them. I was like, Hey man, what are you doing? You can’t do. He’s like, don’t worry about it.

This is kinda my quarantine hustle. So then after quarantine ended last year, just shut it down. But yeah, I mean, there’s, there’s always ridiculous stories when you have, you know, inevitably when you have that many units,

Andrew: Would you have shut it down?

Does it matter to you? If somebody is doing anything, if they’re

not hurting anyone

Tom: yeah. It doesn’t really bother me. I mean, I wouldn’t have gotten in trouble for it. I didn’t know about it. You know, up until that point, I didn’t know exactly what they were doing. It’s their private domicile, you know, they weren’t spilling into the streets, but I told them I was like, look, you know, as long as I don’t hear about it, if the cops aren’t calling me, cause I’ve had situations where I’ll wake up at two in the morning where the new Hanover county SWAT division, uh, you need to come down here because we just blew out two of your windows and both entrance and exit doors, uh, front back doors.

Cause your tenants were. Or they doing, uh, manufacturing meth. And I was one of my favorite ones, so they just wrecked the whole house. So, I mean, there’s, you know, there’s, there’s a few stories like that. Um, where you just got to roll with the punches, you know, we ended up suing the county, they paid us for all the damages and, um, yeah, that’s fun time.

Andrew: Why did you have to Sue the county? Why is it their responsibility? If ‘

someone’s making meth in your

Tom: cause they, they, um, they use excessive force to gain entry into the property. So instead of just blowing up the front door and be dealt with it, they blew up every window in the house, the back door, and then flash bang, the entire interior, the entire, I mean, there was, you know, burns from the flash bangs.

There was the hinges, the casing, it was all right, like $6,000 in damage that they did just to get to, you know, crack heads out of the house or methods.

Andrew: All right. Meanwhile, while it doesn’t sound like there were they methods, it seems like they were met the entrepreneurs. I did interview them.

Tom: I’ll

Andrew: It didn’t work out very well

Tom: I’ll do it live and

Andrew: I would love it.

Tom: from, their prison.

Andrew: All right. And so for all those headaches, what’s the best upside that you’ve had. Where are you getting to go? Where your buddy, uh, poor Bobby

doesn’t get to.

Tom: I mean, man, it’s so few and far between, I mean, this is just the funny stories that come up, you know, when you’re, when you’re dealing with it, any, any business entrepreneur, you know, venture, you’re going to have headaches. You’re going to have like crazy, ridiculous stories. I’ve had a story where I had a property manager showing one of the properties and her perspective tenant was about to come up and there were some guys drug dealing up front.

And she was like, man, I’m never going to rent this house. If these drug dealers are up front. So she goes, and she has probably like five to, you know, soaking wet, just like this little skinny girl. And she goes, knocks on her window. I was like, can you guys just, can you guys go to the next block? I’m about to show this property and I can’t have you in front.

And they’re like, yeah, yeah, yeah, bet that bit. And then they moved and I was like, I know you did not kind of front drug dealers to move their operations. She’s like, I wouldn’t have been able to rent the unit. And then she rented the unit. So, and stuff like that, it gets pretty.

Andrew: All right. So did you get to do anything fun? Like we talked earlier on, in your career, you got to do fun stuff. What are you getting to do now? What are you doing? That’s

that makes this

Tom: uh, traveling, I travel a lot. I’m a degenerate gambler, so I love going to Vegas. I love going there, like at least three times a year. Um, we just got back from Italy a few months ago. Uh, we went for two weeks, me and my girlfriend, my sister, her boyfriend. Um, and it may interest, you know, the toys, I’m a big car fan.

So I started collecting cars and I got rolls Royce and Lamborghinis and range rovers and boats and jet skis. So all this shit that I’ve always wanted that, you know, growing up now I have, so that’s the big man. I mean, just mostly financial. You know, bill kind of the dream house on the water. Um, just all the check boxes that I wanted.

And then now it’s just a matter of keeping busy, you know, finding other fun things to do. Um, I thought I hit a ceiling or a plateau with real estate, you know, after you buy so many units, it’s the same thing over and over acquire rent or repeat, you know, so now I’m really enjoying the education side of it because now I’m able to talk to a bunch of.

I’m talking to people that, you know, have their last $20,000. They want to invest that in talking to guys that are with $20 million that, you know, want to buy 500 units and want to partner with me. So, um, I’m just finding the more that I connect with other people, the more opportunities come up and, you know, it’s different every day.

Andrew: Where they talking to you on that

discord or yours?

Tom: Uh, this quarters for wholesaling. So I do have a discord there that that does mostly wholesaling, but no, it’s a telegram. So as part of my $5,000 coaching course, um, I have 12 months of coaching included and they reached out to me through their telegram. It’s a whole separate

Andrew: How much are you making off of

teaching?

Tom: off of like, okay.

So discord, um, I think at the height was around 45 to 50,000 per month. That was paid subscription attention. Um, that was during quarantine there’s pre quarantine during quarantine and post quarantine quarantine. Everybody was at home, had stimulus money coming out everywhere. So, you know, they were throwing fluoride $47 a month, but it’s dropped off.

I mean, it’s probably half that now, uh, 25, maybe 30,000 bucks is, um, what this quarter’s throwing. And then as far as courses, that’s still new. I launched it about two months ago. Um, we’re doing anywhere from, I would say. 30 to $50,000 per month right now. I mean, of course it’s five grounds. So it only takes about 10 or 12 sales to really have some pretty significant revenue.

But, um, but we’re still kind of putting together a sales team and sales organization and, um, working out through pipelines and we’re, we’re figuring out organic versus paid ads and things like that.

Andrew: All right. And then compare that to how much cash flows coming in

from real estate.

Tom: I mean real estate is going to be, I mean, right now, real estate is 275 to 300,000 per month. Is the, is the net cashflow on about half a million dollars in, in rental income. So, I mean, this is probably

combined after mortgage everything. Yeah. So 500,000 gross, maybe 2 75, 300 net after paying debt, service managers, maintenance, vacancy, that’s all

Andrew: yeah. All right, Tom. Well, congratulations. Where did, where do even people see you? I, I wanted to send my sponsor like a list of people who are coming up in their websites. And the site that I saw for you was not even a site that you used to rent. The only thing that I see for you is Tik TOK and like a

link tree type

Tom: Yeah. Yeah. So the main one is section eight, formula.com. Um, from there I have, you know, a webinar that goes over everything. You can book a call with my team. Um, it’s my only product. I’m only selling one, one core, so I don’t have a full built-out website. It’s just essentially a ClickFunnel site. And then I have, um, a lot of content around section eight there as well.

Andrew: All right. I think this experiment of, uh, recording outdoors is mildly successful. I’m going to call it a success overall, but it has some issues I think. Um, I think I’m going to do it again. What do you think today? It was a little distracting for you, frankly, because we had to pause while I restarted my system.

But other than that,

what do you think.

Tom: No, it’s fine. I’m just imagining the people around you just like staring at you while doing like a full interview with your whole mic set up at a coffee shop.

Andrew: Well, you know what, I’m going to put up like a Mixergy sign here,

let these people like,

Tom: Why don’t you just do this outside of your house? Do you not have a backyard?

Andrew: We’re at an Airbnb. And also I can’t, I need to see people. I, I, I love being around people. The reason I came to San Fran to Austin is whenever I’d go to coffee shops or hotels, I see such interesting people.

They would dress differently. They had this, they had this cool vibe to them and San Francisco, everyone looked like a, like a, like a schlub in a hoodie who just did not want to talk and wanted to work, which I get, but I, I

need some atmosphere.

All right. Well, I hope I get to see you here and for anyone else who is here in Austin, come by, say hello on andrew@mixergy.com. That’s how Tom connected with me over the years. So email me and say hi and Tom.

Congratulations.

Tom: Thank you so much. I appreciate it. Yeah. If you get near your followers or audience, want to

reach out, I just T cruise and see

that’s my social

media.

Andrew: Okay. Cool. Thanks.

Bye.

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