I SURVIVED REAL ESTATE 2024
The Norris Groups 7th annual award-winning event, I Survived Real Estate, is Friday, October 25 at the Nixon Library in Yorba Linda. Our 17th annual black-tie gala will benefit Make-A-Wish. Since 2008, together we’ve raised well over $1,000,000 for charity!
In a year of lingering inflation, housing shortage, sticky high interest rates, national affordability challenges, a dangerous war and an uncertain upcoming election are just some of the headwinds we face as an industry and a nation. What will the FED do as year year finishes out? How big will the FED decision loom on this year and the expectation of a better 2025? Oh yeah, there is that little decision the country is going to make as this year looks like a big presidential election in terms of what the economy will look like for the next four years. Our panels are always some of the brightest minds to help us tackle topics we never thought we’d have to consider and how they might impact real estate.
In this episode:
- Â Craig Welcomes Real Estate Experts Bill Allen, Owner & CEO of 7 Figure Flipping and Mark de Lautour, Owner of SBD Housing Solutions
- Exploring Market Inefficiencies and Strategic Investments
- Pivoting Real Estate Strategies in Changing Market Conditions
- Enhancing Operational Efficiency to Adapt in Real Estate
- Â Analyzing the Current Real Estate Market Outlook
Episode:
Narrator  Welcome to The Norris Group real estate podcast, a show committed to bringing you insights from thought leaders shaping the real estate industry. In each episode, we’ll dive into conversations with industry experts and local insiders, all aimed at helping you thrive in an ever-changing real estate market. continuing the legacy that Bruce Norris created, sharing valuable knowledge, and empowering you on your real estate journey. Whether you’re a seasoned pro or a newcomer, this is your go-to source for insider tips, market trends and success strategies. Here’s your host, Craig Evans.The Norris Group, proudly presents, I Survived Real Estate. industry experts discuss evolving industry trends, real estate bubbles, inflation, and opportunities emerging for real estate professionals. We want to thank our Platinum partners. uDirect IRA Services, San Diego Creative Investors Association, White Feather Investments, MVT Productions, Inland Empire Real Estate Investment Club,DBL Capital, Douglas BrookeHomes and Realty 411Magazine. See, isurvivedrealestate.com for event details, information on all our generous sponsors and to connect with our speakers.
Craig Evans  I’m informed to let you know that every slide that we’ve got plus there was probably 20 others that we didn’t use tonight, through the stuff that Bruce has, everybody will get access to that tonight. Just reach out to Joey the first of next week. We’ll make sure that everybody gets that so. So listen, I’m excited. I’ve met these two men here in the last probably two months very honored to get to know them and to meet them. The first one that I want to bring to the stage is Bill Allen. Bill is the owner and CEO of 7 Figure Flipping and 7 Figure Podcast. He is a retired Navy Test Pilot, military and Bill had an interesting story. Bill kind of accidentally fell into real estate investing because he got deployed, and now he’s got to figure out, how do I become a landlord on the other side of the world when I’ve got a house in San Diego that I need to rent, right? So Bill’s got a really interesting story. Has grown his business to where they’re doing 60 plus flips a year, and has started turning through his organization. Bill really understands systems and processes extremely well. Bill, it is a pleasure to have you on stage with us, my friend.
Bill Allen  Thank you. Thank you.
Craig Evans  The next gentleman I’ve had a pleasure to meet is Mark de Lautour. He owns SBD Housing. They’re out of Kansas City. They are the premier number one turnkey real estate investment firm in Kansas City. Got an interesting story, really now, you know, as you start to listen to him, I know you’ll probably get he and I, you know, you’ll think that we’re probably brothers, because, you know, we sound so much alike. He’s from New Zealand. Great guy. Great story. How he got started again. One of those things is, you know, how do I get moving? What do I do? Got into real estate. He’s grown his business to where they’re doing 150 to 200 transactions per year, grown a great organization. Again, very systems oriented. You’ll hear me talk about that a lot. As a guy that owns five businesses, I’ve got to have systems and procedures in place so the guys that I’m bringing the stage understand that and get that, understand how to scale in this economy. Mark, pleasure to have you, my friend.
Marck de Lautour  Thank you buddy. Have a seat with us.
Craig Evans  All right, as we start diving in here, I want to get right to some things. So my first question, really for everybody, what are some of the market efficiencies that you look for in real estate, and you guys can just jump in. I don’t want to call on you one on one, but as you’re looking at things, what are some of the inefficiencies that you look for when you’re making investments?
Marck de Lautour  Yeah, for a minute there. I thought you said market efficiencies. Obviously, as investors, we’re always looking for market inefficiencies. Eat the mic. So as a young entrepreneur, my foray into real estate started on the foreclosure courthouse steps, and so I think the way that the code is still written to, you know, have banks, there’s such an inefficient process of disposing of assets, having to go through this clunky. How to have people actually live in person at the auction with cash on the day is an extremely inefficient way of selling property. So that is how I kind of first got into it. Obviously, Auction.com and some of these other big players have reduced that inefficiency and made a little bit more efficient. And so the hedge funds started coming in. Obviously, you know, at the at, you know, right around 2012, 2013 started buying aggressively, and obviously squeezed others out of the market. But it’s an example of something that we would look for. The other one is just, I think, in as a, that, so that is kind of how I got into the game, back in the day, in the market, as it sits right now, we’re really looking for people that have to sell, that have let their houses go unmaintained, and that’s how we’re getting ideal flow.
Bill Allen  Yeah, I agree with Mark. Inefficiencies are where we make money. I think most business owners are, they’re a little leery to like change their strategy a lot. So we were, we flipped, we’ve wholesaled, we’ve sold on owner finance, we’ve bought on owner finance. We’ve done a lot of different things. And I see all the time an investor just gets stuck, like I’m a fix and flipper, or I’m a wholesaler, or I buy apartments. And I really think the way that you need to think three words that I think about every business strategy I do is I hypothesize test pivot. And so if everybody we were wholesaling a lot of deals for a while, and then we started seeing, I wholesaled a deal with somebody, and I made 50k and he made 30k just by doing nothing and throwing it up on the MLS. And I saw that, and I said, huh, I could have made 80,000 just by buying it and throwing it on the MLS. So then we started doing that, and then that started to slow down. We called it whole tailing, right? You guys probably say the same phrases that we do. And then that started slowing down. We started having to build a flipping business, because flippers stopped buying when the market started to tighten up. And so we had to squeeze every ounce, every dollar, out of every deal that we did. So what I would challenge you is, what are other people not willing to do that you’re willing to do, and that’s business. That’s how you make money. Inefficiency is how we make money. And figure out how you fit in the marketplace and what other people need. I started as a flipper. I became a wholesaler. I went back to a flipper. Now we sell a lot on owner financing. We’re buying apartments. I’m just kind of bouncing around figuring out where to put my money and my time. I have a good, I was just in Tampa. We’re doing a show in Tampa right now. Two hurricanes rolled through in Tampa, and I told my buddy, I said, Look, man, you’re here. You’re local. There are neighborhoods where you cannot sell a house right now in Tampa, Florida, you need to figure out how to go lift these houses up. Put them on stilts. Lift them up. Buy every single one of them. Let them get their insurance money. You buy them all, you lift them up, you’ll make millions of dollars in the next two or three years. And that’s the inefficiency in the market. Other people are not going to do that. They’re going to fire sale their house. So you can build an entire business just on one local, small area. And the inefficiencies in there, you don’t have to go nationwide. You can be right in your backyard and make a ton of money and help a lot of people.
Bruce Norris  As usual, we start with charts. So we created a thing called a deal wheel, and it basically looked at the set of charts that we were facing, or where we were going to be heading. And it was very valuable, because, like, I could say, oh, the affordability number in 2005 and six just bottom out at 17, no one would build a relationship with an REO agent in 2006 because there were none. But I did, because I told him it’s coming. You should call the lenders and be their number one guy, the number one guy that I said to that I bought a fair amount of REOs from him, and he ended up with 1000 listings because he was the first person that showed up to the lenders and said, this is all coming. I’m going to be your guy. So we use charts to buy there were systems for when there was REOs. But if that’s all you know, then what do you do for the eight years there’s no REOs, so there’s a shift, and it showed a whole buying system. So when’s the best time to buy land? It would be 2009 through 2012 when you can’t build a thing. People have land they can’t do anything with. So what did we do? We bought 93 building lots in California with streets in street lights, sidewalks. What do we pay for each of those lots? Three grand. Three grand to finish lot, we built 93 houses and made a little bit of money on those. But we but we look at it, the inefficiencies we look at the opposite cycle. I want lots when you hate them, and I want to make relationships with people that are going to troll inventory before anyone has it.
Craig Evans  So each of you, to some degree, started talking about that you at different times because of inefficiencies, you had to create pivots. How couple questions on that? I think, first, how much should people be looking at, how often they need to pivot? What are the levers, the metrics that they’ve got to look at within their own business, of what they’re doing and what their goal is, but the ability to pivot. How crucial is that, and what are some of the metrics that you three look at when you’re pivoting through markets?
Bill Allen  Yeah, I think the speed at which you adjust. Number one, the one number you need in your business is your margin. When your margin starts getting squeezed in the company, if you know your numbers, your margin starts getting squeezed, you’ve got to start asking why that’s happening. It’s people, it’s process,it’s the mechanism, the widget, it’s something, it’s the strategy. And so right then you got to take a step back and say, and you guys fall in love with your businesses a little too fast. I know I do. So you got to pull yourself back and pull yourself out of that and look down on it and get yourself out. It’s probably not you, it’s not all the people in there. Something is changing. And you know, when Bruce was just talking one thing, I was introduced to Bruce way too late in my investing journey. I wish I knew him way earlier. I’d be a lot richer and a lot smarter. And what I noticed about him, I study people, I study these strategies I study so there’s there’s principles, there are strategies that are tactics. Okay, the principles never change. They’re foundational. They never change. The strategies are going to change. And that’s kind of what we’re talking about right now, shifting strategies and then tactics are going to come and go. What I love about Bruce, and what I’ve studied with him, is he is willing to be right and wait. When him and I were talking over the past few years, what I noticed is he started like paying people off, like he was right before anyone else would listen to him. And so he knew the crash was coming, he just didn’t know when. And so he started pulling back when everybody else was stepping on the gas, and that’s the challenging piece. You know the storm is coming, you just don’t know when, and you’re willing to start adjusting the strategy a little earlier on. And so that’s been really challenging for me. But what when I study really smart people, that’s what they do. So it’s been incredible to watch.
Marck de Lautour  So I was talking with Craig last night and gave him the analogy of our business that I kind of find myself now sitting up in the crow’s nest. You know, if you’re, if your business is the your operations is the ballast of the boat, and everyone’s trying to row in the same direction, and your COO is kind of running the company and you know, trying to get everyone in the right direction. You know, really, our role as CEO of a company or a business owner, as you guys are all in the room, is really to kind of forecast, and that’s why the value of The Norris group and prognosticators in the industry that you need to listen to is so valuable, because the pivot needs to happen before it’s too late. If you’re looking at your P and L for the pivot, you’ve probably waited too long. Margins is a good one, but there’s that there. You know, they say it’s easier to do than to think. I think thinking time is something that I’ve tried to allocate on my calendar every week now. So Thursdays are a day just solely for thinking and looking out and looking at data and charts to try and see what’s coming down the pipeline. Because oftentimes, if you do wait too late, mate, you’re, it’s not good.
Bruce Norris  I’ll just mention what you just said is very interesting. Getting out too late is very painful. Getting in too early is as far as, let’s say you’re done with a downside, you can be patient then and not get hurt. You know, there’s a lot of people that don’t mind waiting until the evidence is pretty certain you’re going to be on the upswing. You haven’t missed much of the upswing if you got in year one or year three, but you can get really hurt if you don’t get out in time. And that’s the hardest thing, because you’re emotionally patting yourself on the back constantly. In 2006 I’m so brilliant, oh my gosh. And then literally, that property, those properties, went down in California, three or 4% a month for a year. We were wholesale buying, and when we were calibrating what we would pay, we were subtracting 24% from the retail price. Thinking we were going to exit this in six months. We had to start with a number with a retail number that was going to be 24% less, and then buy it at a discount. But if you didn’t get out with in that cycle, yeah, you got hurt really bad. What was really crazy, too, is the lenders were listing properties with the reo agents and not listening to them. So these big REO agents that had it, they’d have, you know, they, they’d foreclose on something for 380 grand, and it listed for 359. And then they take it away from that agent 60 days later and give it to another friend that I knew, Steve. So Steve would get his listings, and Bob would get those listings. They would just keep swapping like some magic was going to happen. And by the time they went through all that cycle, they ended up getting less than 100 for all of it.
Marck de Lautour  2022 was a pretty major time frame for that. You know, interest rates go from the Fed funds rate .33 in April, up to 5.33 in August. It was very hard, as an example, to pivot like we had projected that investor, you know, we’re selling turnkey assets to investors, but suddenly we look up on October 1 and, you know, we had 147 assets in rehab at the time, looking to sell to our investors that were now saying, let’s just wait and see what these interest rates do. And I’m like, Oh my gosh, you guys are screaming for product. What do we do? So my pivot very quickly was to stop buying. Sometimes you got to quit digging when you’re in a hole. And so we quit buying and aggressively sold down for losses, if need be. But I didn’t know what 2023 was going to bring. And so in October of 2022 we had 147 assets. We made up shirts that said chasing 90, because my whole team was on a mission to quickly pivot and get out of this disaster was a balance sheet exercise, not a P and L exercise. And so we had to tell everyone in the business we were chasing 90. And when you measure what matters. So every morning, on our daily huddle, everyone would report that number, 147, 145, 143, 143, 143. Why we sold 143 let’s go. Let’s get down. Everyone was trying to chase 90. The team got down to 77 by 12/31 of that year, and we sold out all of our inventory and got cash rich, negative net earnings, but cash rich so we could take advantage of what was coming through the pipeline. Because a lot of operators did not do that, and then they had to sell in 2023 for massive losses.
Craig Evans  So you know, Bruce, I’ve heard you over the years, since I’ve met you, you and I’ve talked and I don’t know how many times you you’ve talked about this to me, of you would rather know when to do something than how to do it.
Bruce Norris  Absolutely.
Craig Evans  Let’s face it, since 2020 I mean, let’s look at all. We’ve had COVID, we’ve had supply chain issues, we’ve had labor issues, we’ve had interest rate changes, we’ve had hurricanes, we’ve had fires in anything and everything you can think of. We have experienced it in the last four years with these kind of situations that can create, and have created market swings. What do you guys look for? And really, I should say, let me change that from now through the end of 25 for the next year, are you guys looking from a pivoting standpoint and knowing what and when to do? Are you looking to be pretty bullish and really drive hard? Are you sitting back and just riding right now and say, I want to ride a little bit. I want to be a little bearish and just work through this market and just hold steady. What are you looking at in this market now?
Bill Allen  Yeah, with Mark said, I we run a community of hundreds of house flippers and wholesalers around the country, so I get to have front row seats to their business. And I saw a lot of people get burned really bad a couple years ago, like it’s like the music’s just stopped. And the inefficiency in that market was their operational effectiveness. Like the way they were operating, they were soft and lazy, and the time and the time on market was just it was taking them out. The prices were going up. It was fine. Extra three or four months, no big deal. We went over budget, 10 grand, no problem. And when the music stopped, they got stuck, and everything just kind of fell out. And, you know, different markets, it’s very hyper local, but for us, specifically, it’s about operational efficiency now. If you’re going to be flipping, we’re getting in and out as fast as possible, make as much money as we can. We’re analyzing it in every exit strategy possible. How long are we going to stay in? What’s the risk? What’s the downside? How much margin do we have? And saying no to bad deals, people said yes to bad deals for many, many years, and they made money. And you just get lulled into this, everything’s going to be fine. And so we’re all looking now at a strategy of everything might not be fined, and if it’s not fine, we can get real estate if you’re in there, if it’s not dropping by 10% a month. So if I can get in and I can get out, I can offload this inventory or have a backup plan, then we’ll say yes. If we don’t know, then we’ll just like Bruce said, we’ll increase the margin, we’ll make a lower offer, and we’ll stick to our numbers. It’s very simple. I don’t fall in love with the houses anymore. It’s really just math. And then I’ll just wait for Bruce to tell me what’s happening next, and then we’ll keep going.
Marck de Lautour  I would echo, I would echo that. I would echo that a little bit in the sense that the sellers now. Like you’ve got to get to the node quicker. We’re coaching all of our acquisitions agents. I don’t know what happened. Mic. Mic. Okay, turn me off. It’s a kiwi thing. So we encourage all of our acquisitions managers to be willing to say no, anytime you go through such a massive market shift of interest rates, specifically in 2023 it was very difficult for sellers expectations to marry up with our very professional buyers offers. So we were giving them a professional, reasonable offer, but it was such a massive gap between where their sellers expectations were, and so we had to just say no more often and be willing to take fewer deals slowly. And it took about six months where sellers expectations finally caught up and were started buying aggressively. The other thing, so there was one point. The other point on this topic was cash conversion cycle. Never more important to understand that the cash conversion cycle when you’re flipping houses is something you should be monitoring all the time. So we used to be all flips, all turnkey, and I was introduced as a turnkey provider. We still do some of that on the new construction side, but our our existing home sale inventory now we’re actually wholesaling, whole tailing so that we have an average days on market of 15 or days held of 15 or 16 to for about 50 or 60% of our inventory. And we’ll only do about 40% of our inventory as full fix and flips. And we’re obviously picking the cherries. And when you sometimes get a bad deal, just get rid of it. You move on. You get on to the next one. But really monitoring the cash conversion cycle. We didn’t have a wholesale arm of our division, and that was one of our pivots to get through this time period, was making sure that we had a wholesale and wholetail division so that we could, you know, cycle cash quicker.
Bill Allen  And I have one more thing, a little quick military reference for you guys. There were wartime generals and peacetime generals when I was in the military for 20 years, and I look at that as a CEO, like a wartime CEO and a peacetime CEO. And so for probably the last, like, I don’t know, seven or eight years, up until about a year and a half ago, there’s a lot of peacetime CEOs just delegating a lot of things down to their people, and not looking at the numbers and being really on top of the P and L and where the business is going, hiring COOs working two hours a week, that kind of stuff. And I really feel like I’ve become more of a wartime CEO now, where I’m actually pulling up some of the decisions that have to be made that were made by my people before that are now being made by me, because it’s so important for the business, and the hardest part was actually pulling those decisions back up. It was a conversation that had to happen with the team to know that I still trust you, but these are now decisions that I have to make because, I mean, we’re spending my money when we run payroll, and we’re not making money like that comes out of my bank account. So hopefully that helps somebody in here, this kind of wartime, peacetime CEO, and understanding that there are times where you have to pull up the risk decisions and risk mitigation back to you as the general of the business. I prefer Admiral as a Navy guy, but.
Narrator  We’d also like to thank our Gold Sponsors, Inland Valley Association of Realtors, Keystone CPA, NorCal REIA, NSDREI, Pasadena FIBI, PropertyRadar, The Collective Genius. Thompson Group, Aloia Roland, Coldwell Banker Town and Country. See, isurvivedrealestate.com for event details.For more information on hard money loans, trust deed investing, and upcoming events with The Norris group. Check out thenorrisgroup.com. For more information on passive investing through the DBL Capital Real Estate Investment Fund, please visit dblapital.com.
Joey Romero  The Norris group originates and services loans in California and Florida under California DRE license 01219911. Florida mortgage lender license 1577 and NMLS license 1623669. For more information on hard money lending go to thenorrisgroup.com and click the hard money tab.