Join me for another great interview, this time with Mark Bloom, CEO of NetWorth Realty. NetWorth has overcome great obstacles over the years, and has grown to become one of the largest suppliers of wholesale real estate in the 8 markets (and growing) that it currently serves. In this interview, we discuss the NetWorth business model, learn more about who they serve and how you can work with them, and talk about what Mark expects the real estate market to go in the years ahead. Mark’s a great, knowledgeable guy…make sure you don’t miss this show!
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.
Without further ado, let’s get started. Hey, this is Mike Hambright, welcome back to the FlipNerd VIP show. Today I have with me Mark Bloom, who is the President of NetWorth Realty and a fairly high volume real estate investor himself. And helps facilitate a lot of other real estate investors. Before I introduce Mark, let’s take a moment to recognize our featured sponsors.
I’d like to take a moment and recognize our featured sponsors
Advertisement: RealtyMogul.com is an online market place for real estate investing, connecting borrowers and capital from accredited and institutional investors. Get a rehab loan fast and close in as little as 10 days. Rates start as low as 9%.
We’d also like to thank National Real Estate Insurance Group, the nation’s leading provider of insurance to the residential real estate investor market. From individual properties to large scale investors, National Real Estate Insurance Group is ready to serve you.
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 Mark, welcome to the show.
Mark: Mike, thanks for having me.
Mike: Yeah, how are you doing?
Mark: Doing good. How are you doing?
Mike: Good. Good. Yeah, hard to believe that I remember just a few weeks ago thinking I can’t believe the holidays are here and I caught myself a couple days ago, this is we were pushing January 14th now, and I said happy holidays to somebody and they looked at me like the holidays are over. I was like, yeah, I couldn’t believe it.
Mark: So at what point do you stop saying Happy New Year to people? I’m vexed about that.
Mike: I don’t know. Actually, it’s been the last couple of years where I’ve caught myself. I don’t know when to say a girl. Like, I know this girl, it’s like well most of the girls I know are women.
Mark: They’ll take the girl. I think they’ll take it at that point.
Mike: That’s right. That’s right. Well, hey, welcome to the show. I know you because we operate in the same market here and just wanted to see if you could introduce yourself a little bit and talk about what it is you do today and then maybe we’ll go back a little bit further and talk about how you got started.
Mark: Sure. My name is Mark Bloom. I started out generally education wise, I’m an attorney. I have a Master’s in Finance specializing in investments none of which you really need to do kind of what we do on a daily basis. Although it comes in handy at one point or another, what we do is we strictly facilitate transactions for investors. I shouldn’t even say that.
We source product and help investors through their transactions. We’re actually in an arm’s length transaction with an investor buyer who wants to purchase a property. They’re usually either going to buy it, fix it, and rent it. Buy it, fix it, and sell it or buy it, fix it, and owner finance it. What we’ve done is we’ve gone out we found this property, we offer it up for sale at a fixed price. There’s no highest and best. There’s no bidding.
We do an analysis on that property in terms of value. We provide back up for that. We do an analysis on that property in terms of rehab. We provide backup from independent third parties on that. Then we try and help that buyer investor go through that and navigate their way through the bumps and bruises that can’t be a buy, fix, and exit strategy on a property.
Mike: Right. Right. Awesome. I guess, what are your primary sources? You focus on, is all of what you buy off the MLS or a good portion of it is?
Mark: I would say probably at this point, it’s going to right around 50/50, 60/40. Maybe at this point, 60 percent coming from non- MLS, 40 percent coming from MLS. There was a point where I would say and overwhelming majority of our inventory was coming from the MLS, but I think that was also a point when there was just so much foreclosure inventory out there that you could not look at.
Mike: Yeah, yeah. As you know in this business you got to continually ebb and flow wherever you get deals you got to go.
Mark: Well, especially right now, margins are tight, inventory’s tight and so that makes it difficult for some people who either can’t get efficiency or aren’t willing to flex to the new business environment that’s out there.
Mike: Yeah. Yeah. How long have you been investing, you invest in real estate yourself as well, right?
Mark: Yeah. Yeah. That’s right, of course. I fully believe in practice what I preach. I’ve been in investment real estate myself of one shape form or another probably for the last fifteen years give or take.
Mike: Do you remember your first house you bought?
Mark: First house I bought. It’s funny that you say that. I was talking with my wife about which one was the very first one and yes, I think I do remember which one the first house was. It was this little three one. My first few houses were in Florida that we did. It had a big two car garage that we turned into an in- laws quarters.
There’s always bumps along the road. I’ll give you, I know people like to hear the stories, always loves to hear the roughest stories. I have a pretty good worst. It wasn’t quite my property, but it was probably one of the first half a dozen so I was in South Florida and my family was in Central Florida. Myself, my father and a guy that I went to high school with. He was doing rehab and through him the acquisitions and the remainder of it.
Long and short, I wasn’t there. I gave them an address, they drive down the street. Now, this was 15 years ago when GPS was just getting going. So GPS bings, you were at the location. Well, back then you weren’t necessarily right at the location it was kind of in the general vicinity. So they’re driving down the street and they see a house that fits exactly what I told them, the same colors looks like a deferred maintenance house, overgrown grass, milky screens.
I tell them the back door is open. They go around back, the backdoor is open, it’s vacant. It’s beat up. The rehab matches about what we had been given as an estimate. Great. We contract on the property, we close on the property, we go in and as a lot of investors do we start before the power’s on, we start with a generator. So we get in there we start doing the demo. We’ve got pretty good crews there. The crew at this time was Vietnamese, very big language barrier.
My sister is trying to turn on the power and the water and this is going on a week into the project and we’re having some issues getting the power on. Finally, she gets to the bottom of it, calls me and says, listen man the address that the guy at the property that’s rehabbing it is giving me is different than the address I’m showing on the HUD and I’m calling the city and it’s not matching up.
I get on the phone with my partner, hey, go out to the property and tell me what the hell is going on. I’m thinking a screw fell out of the six and it’s a nine or vice versa whatever. He gets there and he tells me, man, we’re rehabbing the house two doors down basically is what he told me. We had done the demo and started to put the house back together. We made every attempt to try and contact the owner. We could not reach the owner.
They were an out of state owner. I mean we really tried to reach the owner. We took the house that we hadn’t touched it. It was a little more work than we had been told plus we had already just put into this other house. It was a good market so luckily we were able to flip out of it, sell it to another investor and so we lost a little bit of money. I mean listen, if you can get over that kind of mistake and have a successful career in real estate I don’t know what any other investor is going to encounter that’s going to be much worse than that.
Mike: Yeah, and it’s funny before we started this I was responding to an email from one of the guys that I coach and he said, this has never happened to me before, what do I do here and it’s always something that’s never happened to me either. I mean it happens all the time. There’s never a dull moment in this business and I think the key is obviously just to keep pushing through and take bumps when you need to and just keep moving on.
Mark: I’m a big analogy fan. A bicycle man, I mean listen, if you put it away the first time you fell off of it you’re never going to learn to ride that bicycle. You got to get back on it and you learn from your mistakes. Hopefully, they don’t kill you and what doesn’t kill you it makes you stronger.
Mike: That’s right. That’s right. Well tell us a little bit about the background. I guess how started you went from first investing there in Florida to starting NetWorth Realty and kind of get it up to just getting that started. Let’s talk about that.
Mark: Sure. I came out to Texas from Florida in 2006. Kind of saw the writing on the wall of what was going on in Florida. I don’t think I was seasoned enough at the point to realize that what I saw happening in my local and regional market was also happening across the nation. Long and short, I saw what I felt was a problem with our market and I looked for a market somewhere in the country that had different characteristics, factors to that market.
Dallas and Houston always struck me for numbers and specifics. We had already had an office in Houston for the company that we were working for at the time, which was called RealNet. I came out to Dallas to work the office for RealNet as a broker. They ran into some major trouble in late ’07, beginning of ’08. Their hard money lender out of Florida obviously with what was going on over there with values you can see where that would happen.
Myself and the gentleman in Houston decided that we wanted to buy out from the existing structure, took the offices, changed the name, tweaking what we liked and didn’t like, removing the things we didn’t like, changing the things to be more customer friendly, service-oriented, on point. Got that up and running. We were Dallas and Houston as we were opening San Antonio, I had kind of a, as you know, we talked about a little bit. I had kind of a mutiny within my office, some really good friends of mine that wanted to show me their appreciation.
Out of the middle of know where, kind of blind-sided, no warning whatsoever went from having a full and effective office in Dallas to having kind of at best a skeleton crew with a very large overhead. That was I want to say it was July, August of 2008. I mean we all know what happened in October of 2008. 2008, was a very, again, what doesn’t kill you makes you stronger, right? So that was a growing year for us.
Tremendously, we got Austin up, I’m sorry San Antonio up and running. From there we’ve kind of spread out. We’re now about to open our ninth office in Denver and that should be open within the first quarter of 2014. Hard to believe it’s 2014, but it is. That’s where we are at. I mean it’s the story of any business I think, which is you wake up every day and you bust your tail.
You put one foot in front of the other, hopefully a couple more feet than the guy next to you walked that day. Five, six, eight years back you look down and you’ve come a long way. We really just strive to deliver a good product and a good level of service and try to treat our investors, our clients, our customers, with a level of respect that they deserve and that they need to be successful investors. Hopefully, it all works out.
Mike: Yeah. Yeah. From a kind a fellow wholesaler a lot of people, don’t really realize how hard it is to really source houses and how hard it is to find houses. They’re kind of caught up in the mentality of well, you bought it for that and you sold it for that and whatever the difference is, is your profit.
Mike: It’s like, well, yeah there’s a bunch of advertising in there, there’s people, rent, all sorts of stuff and so there’s definitely some people that get it and they value buying from guys like you. To say, hey, if I don’t have to do any of that stuff I’m happy to pay a premium. No different than Walmart buying from P & G. They’re not manufacturing their own laundry detergent or whatever.
They understand there is a markup in there. So who is your kind a core customer? Is it somebody that’s just getting started or maybe a veteran person that recognizes, that I just want someone to hand these things to me and I don’t have to worry about the sourcing part?
Mark: Yeah. I think we have presently I would say we have I’ll say we have three clients to be really thorough. One of them is diminishing rapidly as time goes by. The other two have always been our core clients or customers whatever you want to refer to them as. The reason I say customers not clients is we don’t represent them as a real estate agent, so I don’t want there to be any, I’m not imputing that we do.
Mike: Right. You’re an attorney so that’s how you talk.
Mark: No practice. No practice. No practice, but yes, educated in the legal field, which it does help with our negotiations, which also gets passed down to our investors. The two big groups of investors that we have are yes, as you said, they’re seasoned guys and usually they’re not the newly seasoned. They’re the really seasoned guys because like you said, whether it’s a little bit of ego whether it’s a lack of understanding or vantage point, when people get further down the road people realize that what we do is really difficult to do.
It takes really an extraordinary amount of time and energy as well as dollar resources and to be able to bring that to the table for someone and say hey, look you don’t have to go look at 82 houses for the next 60 Sundays every weekend and completely blot out your schedule. You can say, hey what do you have this weekend to go look at two or three things and that’s it and you can buy them immediately. It makes it easy.
It does take people usually a little more time to get to that place. That or we have the very new investor who understands listen, either I have a nine to five job, I just don’t have the time or this isn’t my core competency. My core competency is whatever I’m doing. Let me make money doing that and then invest it in real estate. Let these people go do what they’re good at. Those are our two big clients.
Now, I will say I think those spheres are coming closer and closer together kind a that newly experienced investor’s getting used to using a wholesaler for two reasons I think. One, we’ve just been around and he longer we’re around the more it becomes common place and two, I do think that single family, multi- family residential investments is becoming a more formal investment vehicle.
Therefore, people are realizing that it isn’t just something that you go out and do. If this is actually a career that people focus on and spend 15 hours a day, seven days a week in order to get the proper pool of properties to be able to choose from.
Mike: Yeah. I mean I think at least in my business we have bad days, weeks, and months, quarter maybe and it’s just a lumpy business when you’re out huffing it try to get deals. Of course, I’ve got a great team in place, but it couldn’t be more unpredictable in terms of when deals are going to come in. To have relationships with people that can feed them to you and accept the fact that you probably will make less money because there is another mouth to feed and that’s okay.
Mark: Yeah. Well, it’s like the guy you talk to that says, I refuse to pay more than 70 cents on the dollar minus repairs for a property. That’s a wonderful ideal to have. What that means in today’s market is you’re not going to buy any property.
Mark: You can accept a slightly lower margin and do your deals because someone else is there operating efficiently for you and use that efficiency or you can do maybe half the deals, but take a little larger margin. It really doesn’t make sense.
Mike: Right. Right. I have a question for you. I saw somewhere, did your wife work with you in the business with you? Does she still work with you in the business or is she starting off?
Mark: My wife and I are we’re partners basically in the sense that we’re as crazy as it sounds we’re life partners. I mean she is involved in my business; she is involved in the day to day. She is involved in all of our personal investments. She helps me make better decisions and helps me run a better business. We try to keep a little separation as far as she’s not in the office at my desk and I’m not in her office at her desk. We kind of talk to each other when we need to and then we see each other at dinner for the most part.
Mike: The reason why I asked is that I work with my wife and it’s funny when you said you’re not at each other’s desk. As I, where I’m sitting I’m in my home office right now. Of course, we have our main office, but I’m in my home office right now. We actually have a two-person desk. She was in here a little bit ago. There’s no way we would’ve made it this far without her because she keeps me reined in for sure, but she just, it’s interesting working with your spouse. There’s a lot of great benefits to it too, but it definitely can either make you love each other or hate each other I guess.
Mark: You have to have a strong relationship, but I think also what it comes down to, kind of what you’re talking about is there’s so much to do in this in this business there is no way that you can do it all yourself. That’s why not necessarily you need a wife or a husband, but that is why people come to wholesalers is because they need someone, a partner, or partners really to operate properly. As you said, you have a team underneath you. You have someone who focuses on rehab. You have someone who focuses on acquisitions and back-end sales and/or renting. You can’t do all of everything.
Mike: Right. Yes. Tell us as you grow into new markets how are you training people kind of in-house there in Dallas typically and then they’re ready to kind a partner with and open up a new shop in a new land, go conquer a new land? Is that kind of your model?
Mark: What we do is we do only allow people to go open offices that have worked in our offices. Doesn’t necessarily have to be Dallas, but for the most part we pull from our Dallas, Houston, or San Antonio offices really because those are the more established offices. They’ve been there for a while. We require our agents to get a lot of seasoning under us before they can go open another office. They go and then they come back. We do most of our training in Austin. That’s where our corporate headquarters is. When we train our agents, our sales associates, our acquisition guys, that’s all done in Austin. Then general managers, guys will go run offices in Minneapolis or Atlanta or Denver, they’ll come back and train in Austin as well.
Mike: How many offices did you say you have right now?
Mark: Presently we have eight and then Denver will be nine. That will be opening I hope no later than the first quarter of 2014.
Mike: Okay. Okay. What are your plans from here for over the next year or two in terms of growth? New offices, new products? We talked about that a little bit before in terms of it’s a natural fit to start to add on some additional stuff like lending or other services to service the same clients you have, but what are your plans for growth from here?
Mark: Of course, lending is obviously something that we already have started to do and will we continue to grow that end of it. We’re relatively conservative business people, so given the established company that we have with NetWorth we’re able to kind of test things. The hard money we rolled out in Houston, Dallas, San Antonio, and Austin. I should say Dallas-Fort Worth.
Now, that we’ve added a successful year we’ll start to roll that out at our other offices and we’ll be doing capital raises for that. As far as new offices, yes we have on site to open hopefully one other office, I would say, I would like to do it in 2014.
Whether or not it gets done in 2014 or the tenth office comes at the beginning of 2015 we’re not pushing. We’re not in any rush. We want everyone to be ready and people to be properly trained so that we’re able to keep some level of control and consistency over the product and the level of service.
Mike: Yeah. Yeah. Great. What do you think to kind a reach outside of just the Dallas-Fort Worth area even outside of Texas for your other markets, what do you think is going to happen in 2014. What do you see happening with inventory and interest rates and stuff like that? I always ask everybody that’s kind of in the know to get their take on it. What do you think is going to happen here over the next two years?
Mark: Here’s my and we can look at this in a smaller window or a bigger window. Little bit bigger window maybe two, three years out and looking maybe a year back or so. We’re topping off of a trough of it’s called a hundred year low for the real estate market. There’s really no where down for our real estate market to go. Dallas-Fort Worth, Texas generally, did we see huge run up? No. Did we see huge retreat? No. Technically, could there be room for us to depreciate in a world of all possibilities? Yes. Knowing what I know about real estate, supply, demand, and what’s going on in DFW, no.
There’s no way that our real estate prices are going down over the next year, two years, even 36 months. Again, nationally, I feel the same way. Is that going to be true in every city? No. I mean of course, your Detroit’s and things like that are going to come out of that equation and then I also think you’ve got cities like Arizona let’s say, I’m sorry like, Phoenix or Vegas that are really tight little anomalies that just bounce all over the place, but your big markets.
The ones who saw a lot of down turn in the run up and then Texas generally, very stable moving upward over the next few years. You know you buy low you sell high, coming off the trough it’s not going to get any lower. Now, is a perfect time to step in especially because you don’t have the down side risk the way that you did a year, two years ago, where people were, I don’t want to step in yet, who wants to catch a falling sword. We’ve stretched past that point. Now, it’s just you have your financing in place and are you willing to wait for the appreciation to come down the road.
Mike: Yeah. Most Texas markets the benefit we got is the influx of population from the coast. I mean it’s hard. I moved, you don’t know this, before I started real estate investing we moved to DC for a couple of years. You’re looking at homes that are three to four X easily the cost of what it is in Texas. When things get tight if your family’s not pinning you to stay in that market, life is good in Texas. When you’ve lived somewhere else and you see the type of values, how easy it is to get around and things like that. So obviously, everything I’ve seen says Texas is going to be one of the fastest two growing states for as far as we can see.
Mark: Yeah, well I think price wise we’re if you look at your New York’s. You got your Chicago’s, your LA’s and your Vegas’s, your Miami’s. We got your Dallas and Houston. We have comparatively speaking a long way to go and we’re becoming a more national real estate market. Investors will look at Dallas compared to New York and look at where their returns are.
So you’re going to get money that goes in because it’s less expensive and then as more people are able to do their jobs from different locations, like you said, you’re flexible. You live in DC, if you can do your job from a computer, Skype, via a fax machine, a scanner and email then you don’t need anything else. And if it costs you a quarter to buy a house in Dallas as it does to buy a house in DC, why wouldn’t you move and use that money for retirement etcetera. I think that Dallas, Texas generally is located geographically perfectly positioned. We have lots of dead dinosaurs under us. I really applaud our state government for going out and being extremely business welcoming and actually even going out and pulling them into the state, inducing them. It’s all going to help the real estate values.
Mike: The crazy thing is a lot of parts are the more first time home buyer markets. I mean we’re buying houses for half or less then built cost. I mean at some point and there’s obviously inflation that’s happening, that’s going to happen regardless of what anybody says. There’s cities in this metro area that they’re never going to build a house again because it’s immediately worth half of what they built it for.
Mark: It can’t be duplicated.
Mike: Yeah. Awesome. So, anything else you working on? Anything else you want to share that’s coming up or?
Mark: I mean there’s plenty of opportunity. I know like you said, people are already worried about inventory I know that we’ve continued to have a pretty consistent flow of properties for investors. Margins like I said, a little bit tighter but that’s what you have to do if you want to buy the deals. We’ve got the Real Estate Expo coming up. I know we’re going to be there. I think you guys are going to be there as well. I think if anybody’s interesting in learning more about this, Tim puts on a great show over there. I think it’s a really good thing for people to go.
There’s good and bad in an environment that big. Look at it all and most of the people I believe will be able to tell themselves who the people are they should be paying attention to and who they shouldn’t, but there’s good info there.
Mike: Yeah, no doubt about it. So if somebody wants to find out how to buy property from you guys, where do they go?
Mark: Of course, you can always go to networthrealtyusa.com. There’s going to be a lot of testimonials, before and after pictures. They’ll be some information on recent properties that we’ve had. If you’re interested you can call our office ask to speak to me directly, Jodie will probably answer the phone. Her name is synonymous with our office because she pretty much runs everything. The number is 214-373-9000, that’s 214-373-9000 or networthrealtyusa.com. As you know we take a really hands on approach. I will personally sit down with anybody that wants to spend the time. We’ll have one of our advisors sit down and walk them through some of the options and how we operate.
Mike: Awesome. Awesome. Well, you pass along all the info, websites and phone numbers and stuff, we’ll make sure we put it below the video here so everybody can get access to it. Hey, Mark thanks so much for joining us today. Good to see you again.
Mark: My pleasure as always. I appreciate it and I hope everybody has some happy hunting there in 2014.
Mike: Awesome, awesome. Well take care I’m sure we’ll see you around soon.
Mike: All righty. Bye-bye. Thanks for joining us on today’s FlipNerd.com Podcast. To listen to more of our shows and hear from incredible guests, please access all of our podcasts in the iTunes store. You can also watch the video versions of our shows by visiting us at FlipNerd.com.