Invest The Right Way With Investway.com and Tim Smith

Mike: Welcome to the flipnerd.com podcast. This is your host Mike Hambright, and on this show I will introduce you to VIPs in the real estate investing industry as well as other interesting entrepreneurs whose stories and experiences can help you take your business to the next level. We have three new shows each week which are available in the iTunes store or by visiting flipnerd.com. So without further ado, let’s get started.

Hey, it’s Mike Hambright, back with another FlipNerd VIP episode. Today I have with me Tim Smith, who is the CEO and founder of Investway, which is a real estate service company. It’s basically a software that helps people analyze deals, find comps in certain markets, and they have a growth plan to roll this out across the country. Before we get started, let’s take a second to recognize our featured sponsors:

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Please note, the views and opinions expressed by the individuals in this program do not necessarily reflect those of FlipNerd.com or any of its partners, advertisers or affiliates. Please consult professionals before making any investment or tax decisions as real estate investing can be risky.

Hey, Tim, welcome to the show.

Tim: Hey, Mike. Glad we could finally connect on here.

Mike: Good to see you, good to see you. Yeah, so for those that don’t know Tim, we’re actually friends. Tim used to live in the Dallas market, and he has relocated out to Park City, Utah and trying to escape the heat, I guess, a little bit.

Tim: Little bit.

Mike: And go some place a little more scenic than Dallas. Tim, I obviously know you better than a lot of folks, and I’m a user of your product and have been since I started real estate investing. Why don’t you tell us a little bit about who you are, and we’ll start talking about Investway as well.

Tim: Well, it’s kind of funny. I think it starts with a story. Back in the early 2000’s and how I came to this business-and how we came to meet quite frankly-I started in real estate, commercial real estate, for a couple of years as an analyst. I left that, landed in a private equity firm, an asset management firm, and was doing that-so I was doing a lot of big commercial projects with other peoples’ money, having fun and wanting to get in on some of the action.

Basically, started by night, if you will, moonlighting foreclosures at auctions and that sort of thing, and what I found was, I had these really cool tools during the day, really expensive software but very powerful things. I was trying to evaluate houses, of all things, and look at buying some real estate. It couldn’t even get comps, didn’t even know what the value for something was. Actually, my first purchase, believe it or not, was a house at auction, and I based my purchase on the tax value, and driving the neighborhood, and calling on some signs.

This predates MLS. I hate aging myself here, but this predates MLS online where it was all easily available and that kind of thing. MLS in those days was dial-up modem and just some DOS type interface. There wasn’t stuff you could go do, and I wasn’t a member of the board. I had a broker’s license at the time but didn’t subscribe to the club, so to say, or part of the local realtor organization, so I was as blind as anybody in evaluating properties. Luckily, that first deal, I actually made out okay.

Mike: Yeah.

Tim: It was a $12,000 profit. I was hooked at that point and said “Okay, we’ve got to make some better decisions.”

Mike: So what year was that? What year would that have been?

Tim: That would have been, probably, I want to say 2000, 2001.

Mike: Okay.

Tim: Exactly, so it was pretty early.

Mike: Okay.

Tim: Then, out of that…

Mike: It was a couple of years after Al Gore invented the internet.

Tim: That’s right.

Mike: Just a few years after that.

Tim: Of course, in real estate, it’s cutting edge with technology. They’re always leading the way.

Mike: Yeah right.

Tim: With everything that goes on…

Mike: We’re going to talk about that. We’ll talk about that some more too. So yeah. So go ahead.

Tim: Exactly. It was an interesting time, and out of that I came up with this system. My first exposure was borrowing a buddy’s MLS login. I probably shouldn’t say that over the public airways, but doing what you needed to do to evaluate these properties, and I actually made some better, more informed decisions.

Very shortly thereafter, within a year, maybe two, I connected with another guy who had some similar interests. We ended up seeing this need for data on the internet, for real estate. We actually started a company called My Castle, My Castle Realty. We’re one of the pioneers in putting MLS listings online.

This is just, not necessarily for investment, but just putting real estate data online. There was a big fight at the time. You had the old, entrenched school that was fighting to maintain the status quo, and then you had new people like us coming in and saying “Hey, there’s a better way to do business.”

Mike: Right.

Tim: It was fun. It was fun times. At that time I was a witness for the Department of Justice and suing anti-trust MLS’s. We got nominated by Inman News; they’re a real estate publication organization- for Most Innovative Business Model. It’s kind of cool. I was young, 20-something at the time, and I was sitting on the MLS Board, for making policy. I’m some young 20-
year-old sitting with a bunch of 50-plus year olds. That was interesting discussions.

Mike: Yeah. You had started with brokers at that point, right?

Tim: Yeah, exactly. We started with typical, residential brokerage. Well, it’s not typical, but we started a residential brokerage with the idea of doing internet-based brokerage, providing data online for trying to move the transaction to a lot of online.

Out of that, my partner and I had, always an interest in investing and doing investing on the side. We’re still looking and buying properties. We made available a part of our company, a division if you will, to focus on real estate investors and provide a product where they could have similar tools that the real estate agents would have available for them. That was the first venture into providing information services for real estate investors, or brokerage services for real estate investors.

Mike: Yeah.

Tim: It was something we knew. We knew what people were interested in. We knew what they needed. So we launched a product before we had one. It was kind of a manual service, where if someone wanted a comp, we’d have someone sit behind a desk and pull it up and send it out. We sold that as a service and pumped through a bunch of those very quickly. We built some technology to keep up, and that was born. It did pretty well for a couple of years.

Mike: What was that called? What was that called then?

Tim: Back then it was My Castle, and we had My Castle Investor Services, which was our investment site.

Mike: Right, right, right. Okay.

Tim: That, unfortunately, is not a tale of great success. It didn’t sell out publicly or anything. Actually, my partner and I went some different directions, unfortunately, and that got mired down in some fights, if you will, and what the future of the company might be.

Then we had some employee and agent challenges. Maybe it was our novice in dealing with the brokerage side of things, but there were a lot coming at us. Ultimately, we ended up just closing that business. Out of the ashes of that came Investway. Basically, I launched that service just focusing on the investors. Got rid of all the residential brokerage stuff. That was in 2007. We launched in the Dallas market, and that’s where you and I met.

Mike: Yep.

Tim: That had a great stellar first year. Just growing like crazy. Started opening up a couple other markets. Then 2008 came along and threw a wet towel on the top of that. It kind of slowed down a little bit with our model. It was either reinvent the model, because the number of people that make this worthwhile just wasn’t… not a lot of interest for it.

Mike: Right.

Tim: Or figure out how to make this work. So we did go through a few years of hibernation and just kept the service out there and available, but not a lot of continued investment in the product. That’s changed over the last year, year plus, where, as the market’s come back and actually, during that period, and you know a little about this, I got involved in marketing automation and that side of business.

What’s interesting now is I’m coming back into the real estate side of things and have this vision of building real estate investing automation and taking that to the next level.

Mike: Yeah. Yeah, with Investway it’s interesting. I guess I subscribed in, roughly, the summer of 2008, which is when I got started as an investor. I had the same need that a lot of real estate investors have. I need access to comps, and real comps. Real MLS data. In most markets across the country, still, you have to have access to the MLS or have a friend that’ll help you get your information with a wink, or whatever.

There’s very little data that you can get without having access to the MLS other than Investway. I’ve been fortunate in this market, and obviously you’re growing in the new markets and have some pretty bold plans to grow this into additional markets. The other thing is, it’s not just MLS data. It’s displayed in a way that’s very friendly for real estate investors, rather than somebody looking for a home for themselves, let’s say.

Tim: Right, right. Yeah, and kind of our tagline, if you will, but really it’s kind of our driving vision, we call it Find, Evaluate, Seal the Deal. When we’re looking at something, hey, does it make sense to add this or what do we want to do with this? Does it help an investor find a deal? Does it help them evaluate their deal more effectively? And does it help them take action on it?

Mike: Yeah.

Tim: So they can actually do something to buy this thing, whether that’s to take a look at it, make an offer on it, whatever.

Mike: Yeah.

Tim: It’s been interesting, because the background we had with My Castle and the different focus with Investway of being completely investor-
centric. It makes it real easy and much more clear on what the mission is and how we’re going to display this information, what we’re going to do with it.

Mike: Yeah. Some of the challenges, I’ll tee this up for you-some of the challenges I know you face are getting access to MLS data across the country.

Tim: Right.

Mike: Because every MLS is different, and you have to get into each one individually, right?

Tim: Yeah, it is a really challenging… any model that any brokerage, not just what we do, but any general brokerage, it’s challenging enough just getting the data. It does come in different formats. In Dallas there’s not too many oceanfront properties in Houston. That’s a little different story. The data may be a little different…

Mike: With global warming, though, that may change.

Tim: That might change. Basements is another fun one that we deal with in some areas and others not.

Mike: Right.

Tim: The data’s not so tricky as the MLS regulations. Rules vary per MLS, so going into a new area we’ve got to make sure we understand the rules. A lot of times, our model is not one that people embrace. The typical real estate community, they don’t understand it and may be threatening.

I don’t think there’s an area we’ve not gone into, and we’re in three currently, where we haven’t had a nice conversation with the powers that be questioning “What are you doing? How’s this working?” Or “Here’s what’s going on.”

We constantly have this battle, and between what our investors want and what the MLS, because we use their data, we license their data, will allow us to do-and investors have one need, and the MLS, obviously, has what they do and don’t want with that data.

Mike: Yeah.

Tim: Our model has had to adapt for that. In some other businesses it might be easy to say “Hey, this is what the customer wants. Let’s just give it to them.” We can’t always do that. Sometimes we had to get quite creative in how we go around to “Hey, let’s really meet the need of what our customer wants, but be held to all these regulations and standards in what we do.”

Mike: Yeah. Before we get any further into this, why don’t you explain what Investway is and how it works, and essentially what’s the need that you’re solving for real estate investors typically.

Tim: Yeah, so the need comes, really, from my story of not having good information to make investment purchase decisions.

Mike: Yeah.

Tim: At it’s core, that’s where it starts. Our service, our system, provides an MLS-we do have MLS data that we allow investors to search and filter, and we build search tools that appeal to investors. It’s not so much of “Hey, how many fireplaces does this property have,” as “Is this a vacant property that’s been on the market for 120 days,” or other ways that investors are going to find something that is going to be a good investment, potentially a good investment-opportunity.

Mike: Right.

Tim: The search tools are catered towards that. You can get MLS data now on the internet, anywhere. It’s everywhere. That’s not the issue. How do you sort through all that massive data to get to the stuff that you want to spend your time on, chasing? That’s key. And once you’re looking at something that looks interesting, how can you quickly know if you need to take it to the next action?

So really, it starts with armchair, we kind of like it, armchair investing, where you can either sit behind your computer, look at properties, get a good idea of what you need to go look at and have a good idea of what are good opportunities before you start up the car and go drive neighborhoods.

Mike: Right.

Tim: That’s kind of the first tool. Certainly, with real estate investing, you’re going to want to look at the property at some point and look at what it’s going to need for repairs and that kind of thing. That’s a part of the business you just can’t do online. There’s just not the information, reliably enough, to make those decisions. But, once you do that, the next hurdle there is usually: what do you do next? “Oh, got to go back, got to start printing this out, got to contact the agent, got to do…” whatever.

So we’ve tried to streamline that part of it as well, where you can make an offer, you can have pre-formatted stuff where you can send out, and we’ll help you actually close those. Our customers and clients come… we get the new guy who’s coming in and wanting to make a difference financially like you were four or five years ago in 2008.

Mike: Yeah.

Tim: We’ve had people in here now that I’ve been working with for 13 years that are still in our system, that have been around. It’s a real tool that investors use day-to-day in their investing. It’s not a scheme with a lot of fluff and feathers of, hey, this is going to change your life. It’s just a really hardcore tool that can help you get to the information you want, to make…

Mike: Yeah, I know you’re continually building more functionality. I know there are some folks that are… Specifically, you’re pulling an MLS data, so trying to help folks find deals on the MLS.

Tim: Right.

Mike: For me, actually, that’s not what I do. I’ve bought nearly 300 houses. I bought three or four off the MLS. We’re usually dealing with the sellers that are contacting us because of the advertising I do and things.

Tim: Right.

Mike: We use them to evaluate comps, and I think one of the cool features of… I remember-it was one of those “There has to be a better way”
moments, when I first started. This was when we were just trying to get started in real estate-had no idea what we were doing. We had found a broker, I don’t think he was a broker, he was an agent that we thought would be helpful. We would ask for comps, and he’s say “I’ll get them to you by tomorrow morning,” and we’re like “No, no, no. I need comps right now. What can you do in one minute?”

Tim: Right.

Mike: That was the realization that we had to find… Two things happened. One, my wife became an agent so we could get access to whatever we needed and not have to have somebody else in our way. Two was we started using Investway. In fact, even though my wife has been an agent from the very beginning, we still use Investway; even though we have access to the MLS directly. For all these years we’ve paid a subscription price. So I think you at least owe me a beer, Tim, whenever we see each other again. At least.

Tim: Yeah, but wait, wait, wait. How many deals have you been able to buy because you were quicker to the punch?

Mike: Yeah. The great thing about it is, again, it’s a very user-friendly format for real estate investors. The cool thing about it is, and everybody probably uses it a little bit differently, you effectively order-I’m doing a commercial for you here, what’s going on-you effectively order your comp. So I could put in an address and do a search, just like you do in a Google search, and I can filter it if I want to, and I order a report. It immediately e-mails it to me.

I’m not a one man shop. I have a team. I have admins; I have sales people, and things like that. We have a go to a distribution list, so effectively everybody on my team can get it and access that information without us having to… come to me and me to e-mail it on to other people and somebody to say “I didn’t get it. Can you send it again?” and all that rigmarole.

We have it set up so our entire team can order comps and get access to comps when they’re ordered. Or one person can order them and tell the other person it’s on its way.

I think that format of being able to just receive a link effectively and click on it from a mobile device or… Five years ago we were toting around big, thick laptops with a Wi-Fi card, trying to get online, and now we’re rolling around in iPads and stuff. Just the functionality of it, from a real estate investor perspective, to be able to see proximity to a specific house, for us, is something that the MLS hasn’t been able to do.

Tim: Right. Yeah, and it surprises. With the resources those MLS’s have that, how clunky, sometimes, their systems are… Good technology is about making things simpler and easier to use. I’m just shocked. Sometimes these organizations take so long to make it more useful. I guess that’s where the opportunities for entrepreneurs lies in.

Mike: That’s right.

Tim: You jump in and make a better mouse trap, so to say. There are people that appreciate that.

Mike: Yeah. Tell us a little bit about, just generally speaking, not just MLS’s. I know that’s who you’re primarily dealing with, but there’s also tax appraisal offices and stuff like that. They all operate differently. They all have different technology. Most of them don’t feel the pain to improve, so what they have no is okay.

I know part of the challenge of growing your business is getting access into different MLS’s and helping them understand why you’re trying to use their data, and how you’re going to use it, and maybe how it’ll help them. Talk a little bit about some of the challenges of tapping into those different markets. Tell us the markets that you’re in right now.

Tim: Sure. Yeah, we’re in two markets in Texas, in Dallas and the greater Houston area. Those comprise many counties, probably 60, 70 counties between the two of them in Texas. We’re also in Indianapolis and several counties around there. Those are the areas we’re in right now. As far as getting into an area, yeah… We’ve refined our business model through the years.

There was a point we had a product that we provided for closure data. We were going out and grabbing tax data locally, as well as MLS data. Trying to be, sort of, a one stop resource for property information, if you will, for investing. What we found, though, is that’s really tough. It’s already hard to go in with MLS and get your system and working.

So we’ve really, tailored back I guess, our business model. The one now is really, mostly, MLS-centric investing. While we welcome people like you on the system that need to just evaluate properties, and you’ve got other resources, whether that’s mailings or advertising or other things going on, foreclosure auction buying-whatever it might be, we can certainly be a part of that.

Our focus, at this point is let’s get what we can out of MLS. That’s who we’re going to be. Then with the other service providers, the other information providers out there, we can still work with and integrate, to some degree, our systems as an investor, which you might use there.

So yeah, that has made a little [inaudible 00:23:11]. If you take tax data, for example, every county is different. And quite frankly, hats off to Zillow. Pre-Zillow and post-Zillow. They’ve done amazing things. Of course, they’ve had big budgets to do that, but to be able to compile nationwide tax data like they do is quite amazing.

That’s one of the services we’re actually piggy-backing off of to some degree, because it makes it easier for us to pull down some of the tax data, at least in a general sense, to get information about property that we might not know anything about.

Mike: Right.

Tim: Yeah, so those are challenging. Then, depending on what you… The foreclosure market, that’s where I kind of grew my roots in this market, was buying at auction. Those vary per state dramatically, in requirements and where the data sources might be.

What we found is if we want to grow, let’s define what our product is, what we can grow and go after that need and do it real well. We’re not going to be everything to everybody, and, actually, we have no desire anymore to try and do that. We want to do that core piece.

I think there is value on the MLS. If you didn’t have all the great advertising you do with the program you belong with, it could be a good sizable part of investing, particularly in residential business.

Mike: Sure, sure. So talk about your plans to grow in to new markets, and you’re trying to form more of a partnership model now, right, where you find boots on the ground in various major MLS’s and try to expand your footprint that way.

Tim: Yeah, exactly. That’s a key piece of what we’re doing, is meeting good, quality people who understand real estate investing and have a license and trying to find some real good individuals like that we can partner up with and bring our technology and bring our model and have a win-
win.

At this point, we’re kind of ear-marking, if you will, 20 of the biggest markets to go after. But we’re certainly open to finding the right connections with people. We’re always on the look-out for that.

Mike: Yeah. Great, great. I know you’ve got some… why don’t you talk a little bit about… it’s interesting we’re talking about how some of the MLS’s and data sources are a little bit behind the times in terms of technology. In all honesty, a lot of real estate investors are behind the times.

I mean, we have developed this awesome app that’s the best app that there is for real estate investing within the home investors system. There’s people that come in, and they’re like a caveman with a laser gun. They don’t know how to quite use it yet. So there’s also a learning curve, or a technology curve, for end-users as well that you have to be cautious of not being to far ahead of people that just don’t know what to do with it.

Tim: Right. That’s a challenge, and it’s a fine line, and someone like us that’s an app provider where we’re providing our application. It’s tricky. I’ll give you a couple of examples. We rolled out one of our newer interfaces to Investway in the fall. While that was mostly greatly well-
received, and now it was mobile friendly. You could do it on your phone or your iPad quite easily. We got our fair share of people still on old versions of Windows.

Mike: Right.

Tim: It’s a challenge for a technology company, because there’s some really great new technologies, but if your customers don’t have the devices or some of the things for them, you either leave them behind or… It’s very challenging. You can’t do both, so you have to make some of those decisions. It’s a good mix. I don’t know that I would throw all investors in the same boat of [inaudible 00:27:13] out there…

Mike: Of course not.

Tim: …but we have some very advanced folks, and they appreciate some of the new stuff.

Mike: Yeah.

Tim: I think with anything, and maybe that’s more of a human nature thing of and particularly when you have a physical asset you’re dealing with, like in real estate, there’s the data, obviously, that’s all manipulated in technology. But then you have this other physical thing and so often the way you paint a house is still the way you paint a house and you’re dealing with tech that doesn’t change and evolve very quickly.

Mike: Right.

Tim: I think maybe some of those processes and things that we’re used to not changing very quickly, maybe they can help some of the mentality to slow down a little bit.

Mike: Yeah.

Tim: I will say, one of the things I think, as an investor, is worthwhile and I think this could separate anybody out there, in whatever business and that’s going through this validated learning process. Whether I’m an investor and I’m buying houses, the first ones you’re going through, you learned a lot, and you learned what didn’t work. Those lessons are just as important as the ones that do work, and I think that’s just a natural part of success, quite frankly, is how quickly you can iterate through what works and doesn’t work. I think technology’s role in that is critical. It can allow you to accelerate that process.

Mike: Right.

Tim: I have visions, I guess, of grandeur, of taking some of the offline stuff for real estate and looking at ways to make those more effective, maybe technology that you can do with that. I think there’s a lot of opportunity out there, and those that are willing to pony up and learn a little bit and feel out new technologies like that are much more ahead.

Mike: Yeah, I’ve talked about it a lot in interviews on the FlipNerd show lately and just outside of that-about how for a lot of folks for a lot of years, the big opportunity has been just how fragmented this industry is and how fragmented the data and information is to make decisions.

There’s definitely a movement, maybe behind other industries, but a movement to consolidate information and to make your time to making a decisions much more quickly. Unless you can adopt, and you could say this for every industry, unless you can adopt to using new technologies, you’re just going to get left behind.

Tim: Yeah. Peter Drucker, I think, said “Change is risky, but not to change is riskier.”

Mike: Right.

Tim: It’s one of those things… Yeah, I absolutely agree.

Mike: Yeah, yeah. I know you’ve got some other things that are on the horizon, but you’re not prepared to talk to me about them, so we’ll let everybody know.

Tim: We have to keep that on the hush, hush, yeah.

Mike: Yeah, I won’t tell anybody. I won’t tell anybody. But when it comes out I’ll tell everybody for you. Yeah, we’ll have links below to get to investway.com. It’s a subscription model, and folks can learn about if they’re interested. Partnership opportunities, do you have any links on the site for that or how do they get to them?

Tim: I believe there are, so you can go down where there’s Partners and Affiliates and just contact us that way. Yeah, we’d be tickled to hear what you’re doing in your local area and talk further to see if there’s some opportunities for us both.

Mike: Do you still have a trial period on investway.com?

Tim: We do, yeah, so you can jump on there, particularly if you’re in one of our markets that we currently cover. Definitely jump on there. It’s interesting, though. In the markets we’ve done in Texas, usually always in, even in Indiana, we just get, we do get, investors from all over. Those seem to still be good investment locations, so from coast to coast we’ll still get people coming in.

Mike: Yeah, even if somebody’s outside the area and they’re interested in partnership opportunities, maybe they could just pretend like they’re in Houston or Dallas or Indianapolis for a week and try it out.

Tim: There you go.

Mike: Awesome. Hey, Tim, I really appreciate you being on today and sharing some of your insights.

Tim: Yeah.

Mike: Good to see you.

Tim: Yeah, good to see you again. Thanks for the patience. I know you and I were trying to connect here for a couple of months.

Mike: Yeah. Well hey, when you have a skiing incident and tear your ACL and stuff, what am I going to say? I’ve got to be patient, right? Anyway, hey thanks for being on. I appreciate your info, and for those that are interested, check investway.com. We’ll have links down below the video. Tim, we’ll see you around.

Tim: Okay.

Mike: All right, take care.

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