Real Estate Game Changers Show
From Single Rental to $50M Empire
Lucas has transformed his real estate portfolio from a single rental property to a staggering $50 million empire. He also flips 20 houses monthly! Plus, he runs a successful education company. Tune in for his insights!
Lucas has transformed his real estate portfolio from a single rental property to a staggering $50 million empire. He also flips 20 houses monthly! Plus, he runs a successful education company. Tune in for his insights!
All right, everyone. Welcome to the Real Estate Game Changers show. I'm your host, Mike McKay, based in Jacksonville, Florida. And each and every week, we do this show with people who are changing the game of real estate all over the country. And If anyone is in Jacksonville and working in sales and thinking about getting into real estate, send me a DM on Instagram. We are looking for some more sales reps for our team and we are actively hiring. Uh, this week on the show, we have Lucas Walls. Lucas, welcome to the show.
Lucas:What's up, Mike? What's up, everyone? Thanks for having me.
Mike:Of course. Um, so for the people who don't know you, could you tell us a little bit about how you got into the real estate business and how that led you to where you are?
Lucas:Great question, Mike. Thanks for asking. I think, um, yeah, so I'm an engineer by trade. So I went to school to play basketball and become an engineer. Why not, right? So, uh, I thought I was set, got a job out of school, moved to Kansas City, and I was like, I'm set for life. Um, like a month into that, I'm like, all right, this is, uh, not exactly what I thought, you know, being in the real world would be like. So, uh. Uh, I kind of started doing some calculations and, uh, Hey, if I get a 3 percent raise every year, you know, put 10 percent on a 401k, how long is it gonna be, gonna take for me to become a millionaire? And it was really long. And it was, uh, I wasn't, I wasn't cool with that. Uh, around the same time, I was looking, uh, to rent a house near my office in Kansas City area. And, uh, I was only making 44 grand a year. And, uh, All the houses were going for like 1300 bucks a month, something like that. And that's a lot on 44 grand minus taxes. But one of the houses I went to look for to rent the house next door to it was a for sale by owner. So, um, I ran some numbers and was negotiating with the seller. I can buy that house and have a, you know, mortgage payment taxes and insurance for 740 a month. And I just started to think about the difference. It's like, I can own it and pay this. Or rent and pay this why it's such a big gap and I just kind of kind of dove in and fell in love You know cliche but all the bigger bigger podcasts podcasts and just self development finance books So then I called my my best friend and now business partner. I'm like, hey i'm moving back to st Louis and we're freaking doing this thing. So, um I think we moved back to St. Louis. I moved back to St. Louis in December 2013, uh, moved in to my, uh, mother and future mother in law's house, girlfriend, uh, at the time three dogs and, uh, in like a 900 square foot house. And I was just having a blast. She just got her real estate license. I was at look, I was out looking at, uh, investment deals, you know, probably 10, 10 a weekend, give or take. And then one, one night, um, my future wife comes in. It's like, What are you guys doing? I'm like, we're making all for us on investment properties. And, uh, my wife was like, we're not living in my mom's house while you were out buying investment properties. So we made a deal. If we bought a house together, uh, I could get my first investment property. So that worked, uh, bought it, bought our first house May 2014, uh, for, for Ash and I, and then bought our first investment property, August, um, August 20. And uh, our plan was to, uh, uh, buy a house, flip it, take those profits and put as a down payment on the rental. Rental was always the long game for us, but we didn't understand like the cash out, refinance, the birth strategy, all that stuff. So we kind of learned that as we were rehabbing and we, uh, executed the birth strategy and we still own that house to this day, 10 years later.
Mike:Gotcha and have and have you guys stuck with building rentals as your focus over the years or have things change.
Lucas:Yeah, that's a great question. So that's how it started. You know, I got an engineering job back home, back in St. Louis, so I wasn't a full time investor yet. And I kind of started doing the math and building up the rental portfolio. Got it up to about 60 before I was able to leave and go all in. That was in 2017, but quickly realize like, really as you're growing, it's really not enough cash flow to live on, nor do you really want to take that cash flow to live on. So we had to figure out more active income strategies in the real estate world. And that's when we started wholesaling and flipping and all that stuff to really expedite the active income while we're, we continue to build rentals.
Mike:Gotcha. And what is your business look like today?
Lucas:Yeah. So we have a wholesaling and flipping business faster house here in St. Um, we, we operate. in the main seven counties around here. So pretty local here. We're not nationwide, but we flip about 20 houses a month. Um, although that we wholesale, probably 15 of them and the other five, we have an awesome in house construction team that takes those down. Rehab, rehab themselves and retail. Um, of those, the best ones as rentals, we pick off for a rental company and we have an in house property management company with about 50 million in assets right now. Um, Single family rentals, uh, mid sized apartments, a couple storage facilities, and about 23 short term rentals. Um, and then we got real good at flipping, got real good at, um, you know, building a rental portfolio. So we, we decided to, uh, to start an education business to teach other people how to build rental portfolios as well. So we have 1, 700 students. nationwide that are part of our community that we're empowering them to go create financial freedom for themselves. So pretty much flipping rentals and education. That's our, that's our three main for profit businesses. That's
Mike:Gotcha. And then, so you say you get brain about 20 deals a month in, you wholesale 15, you decide to flip five. How do you make the decision about which ones you're going to wholesale and which ones you
Lucas:a fantastic question. You know, that it's an important decision. You know, we have what we call weekly deep dive meetings into every single house and we're constantly analyzing, you know, contractor availability. Um, Our short term leverage is out there. Is it in the range that we want to be in? Um, We also kind of look at, like, the month, like, how are we projecting out for profitability this month? Do we need cash now, or can we wait three or four months to get a bigger check? And then, um, the other financial aspect of that, we have to make, or projected to make, at least two times, uh, uh, A wholesale fee if we flip it and if it's not going to be that, then we put in the wholesale automatically and then, um, in our rehab buy box, you know, we're not, uh, out there putting additions on new constructions, you know, pop in the top, you know, we like cosmetic rehabs for the most part. And we like to stay in a particular ARV for the most part. We're not more luxurious type flippers. Um, but we're not, you know, at the bottom of the barrel either. We like to be somewhere. Maybe 20 to 30 percent over the median house price in our, in our area.
Mike:Hmm. So I'm curious, how did you come up with the metric of you want to, if you're going to flip instead of wholesaling, you want to make two X, like what's the significance of that?
Lucas:Yeah. Super arbitrary, honestly. Uh, we just had to come up to be able to stick to it. Yeah.
Mike:Yep. Okay. And then you said that you have an in house construction team. What made you decide to build your construction team in house versus, you know, handing things out outside to GCs or subs?
Lucas:Great, great question. So we, we still solve a lot of things out. Um, no, we have, you know, in house maintenance techs to project managers, to maintenance directors, to director of construction. So. All of the high level leadership in the house and then some of the, um, um, maintenance into project stuff as well. Um, but for the bulk of that rehab, we still sub out. Um, but we keep bringing more and more in house and it's, it's just the cost analysis really. Um, looking at, looking at what you spend on labor for what we could bring that in house for is a, is about half honestly. And, uh, the controllability factor as well. Even though we have great partners with our subcontractors, Um, they still have other clients that aren't us, and um, though they rarely push us, but even a day or two or three on, you know, 50 houses a year, 60 houses a year, really adds up. So, controllability and the financial impact
Mike:what was the first position that you hired in house for construction? Thank you.
Lucas:of the project being good, by far, most important to me. Um, because I was doing that, and um, You know, I was decent at it, had a project management engineering background, but in order for us to grow, it's the piece that I really needed to let go. And it's a, I think it's one of your main first two or three hires period, um, because you can bake their cost into the deal and not treat it as true overhead. Um, so we, you know, when you're, when you're out there estimating costs of construction, you can just, you know, You know, add a sub, uh, add a project manager fee. It's an extra two grand for this house, an extra three grand for this house, whatever you decide. And, uh, it was a huge for us to continue being able to scale when we hired that first hire.
Mike:Gotcha. Um, so I'm curious. We're actually in the process of looking of hiring a project manager over the next few months. What were you looking for in that person when you hired them?
Lucas:Yeah. So we, um, we, we run personality assessments on everybody that we hire. Um, it, it's very different from like a maintenance tech to a project manager to a director of construction. So project manager, what I. First you got to define what a project manager is and define their exact job description and day to day tasks for what they're going to be doing. But, uh, project manager to me is different from a general contractor because they're not managing one project, they're managing multiple at one time. And that, that is the, uh, The difference of why people can't scale right there. They're real good at managing one at a time, and that's great. Nothing's wrong with that. They can give everything they have to that one project, but once you start to spread that out over multiple projects, they start to lose accuracy and quality and timeliness. So, um, super important. Uh, so, you've got to be a great communicator because this is your number one line of defense with your subcontractors, and if you don't have a good relationship with them, you've got pretty much nothing. Um. They have to be assertive, assertive in a very tactful way to be able to ask, ask for what they need and to get things done. Um, they have to be organized, uh, and, um, some attention to detail, but it doesn't have to be like through the roof, like an accountant. Um, some attention in that they have to have some sort of eye for design, so we call that aesthetics here. So, it doesn't have to be through the roof like a true designer, but some sort of eye for design. Organized and, and decent with numbers'cause they're gonna be tracking budgets for you.
Mike:Gotcha. And what kind of personality tests were you using?
Lucas:Yeah, we, we have a, um, it's not proprietary, but it's a, it's a gentleman local here that's a, a combination of several different tests. So I'm sure you've heard of the disc assessment, right? So the disc is like 25% of it and then, uh, the other 25% is motivators. Other 25 percent is skill set and then the other 25 percent is called dimensional balance. How you see yourself versus how you see the world. Um, and we kind of come, we know how to read those all together with the help of this gentleman that introduced it. His name is Art. Art Snarczyk and, uh, you know, I got him pretty good at reading them, but, uh, he's an excellent resource too. If we ever have a tricky hire, like, when you hire this person, he helps us, like, you know, compare candidates, but There's so many out there, uh, to me, it's just, you gotta get good at reading one of them. It's not the tool that matters, it's your understanding of the tool, and then, uh, then that's what matters most. Yeah,
Mike:Yeah. And what's your, what's your hiring process? I guess now for hiring a project manager when you need to hire them.
Lucas:so, uh, pretty, pretty in depth. We've gotten pretty good at hiring, you know. We've built our team from, you know, just us two to about 50 people now. Um, number one, it's just like recruiting, that's on the front end. So, um, we, we, uh, We love to hire people within our network or that, that next layer out. So, what we've done is, you know, it's kind of taboo, but I went out to all my friends and family that are the most talented people I know, who are just sick of the corporate world and pretty much recruiting them to be on our team to help build this business. So, that's one. Utilize our social media presence to, to, um, share the hiring. And then we also do paid ads like Indeed that just started getting linked in a little bit too. Um, so they fill out a, you know, an application, submit the resume. And then we follow up right after that with a questionnaire. And, uh, the questionnaire really, I don't really care about the answers on it too much. Unless there's like a giant red flag. They worship the devil or something like that. Um, but the questionnaire is how serious are you in this? What's the timeliness of when we submit the questionnaire versus when you're getting it back? Um, and it's a phone interview. If that goes well, it's a first in person interview. If that goes well, we send you the disc or the personality assessment. Uh, we review and we can disqualify or qualify from that. And then we bring in for a second interview. And go through, um, you know, ask some pointed questions around some concerns on the personality assessment. And then we like to do, uh, one final informal check, like a coffee or a dinner or anything out of the office to try to get to know this person as good as possible. Especially if they're going, uh, coming from out of our network. And, um, at that point we'll, uh, we'll offer a, uh, a verbal offer. And then we'll, uh, Send an application, put a background check, and if that comes back clean, we'll do a signed offer. So, it's pretty in depth, but uh, we got it down pretty well.
Mike:Yeah, are are you only looking for people with construction experience? Because you mentioned people who are looking to get out of the corporate world.
Lucas:Well, yeah, we have, we hire for a lot of different roles. That's not the only role we hire for. Um, with uh, project manager, yeah, we're gonna need some construction experience. We've, we've tried to hire a few tech, like maintenance techs, actual doers, and like coach them up, and it's uh, it was a challenge. So, um, yeah. For the project management role, they have to have some level of construction, but there's some other key skills that are probably more important than actually, uh, you know, being involved in construction your whole life.
Mike:Gotcha. What are some of those skills that maybe you had, didn't mention before the key ones? Okay,
Lucas:I, I mentioned before.
Mike:Um, so you guys have. Uh, I'm curious, actually, what's the difference in in your business when you're a director of construction and and a project manager.
Lucas:Yeah, so, um, that's actually a newer hire that we did. Um, the director of construction, like, comes up with the entire construction interface for us, pretty much. Um, Project managers out in the field working with contractors, maybe ordering materials, um, maybe, you know, delivering materials, uh, maybe doing a couple little handyman things here and there. Um, Director of construction is above him, making sure our metrics are being hit, timeline, budget, helps with design a little bit, and just really, um, just that intermediary leader between them and who's running the company to kind of speak that business agenda.
Mike:What point, like, I guess when you were scaling, did you feel it made sense to make that additional hire versus just a project manager?
Lucas:Yeah, pretty recently. So, um, you know, we kind of got stuck around those two things. houses and with one project manager, you could probably do that. Um, so we wanted to get to that 75 mark and we kind of just looked at our team and trying to figure out where are our holes and uh, that's a role that we needed to kind of double our output.
Mike:And are they like, um, working on your rental property like maintenance as well, or is that treated as a totally separate entity?
Lucas:That's a great question too, man. I think it's something that we talk about every day, literally. Um, So right now, um, our director, our construction team for our flipping properties handles the front end of the rental rebates. But at that point it goes to the property management team and our maintenance techs for occupied rentals are under the property management.
Mike:it. what made you guys decide to start your own property management company versus using an existing one?
Lucas:It's another great question. We probably talk about almost every day too, but you know, from, from a true cost analysis, It probably would be cheaper to hire it out. Um, we've always looked at, um, managing our own rental portfolio, uh, and building a property management company that just can support that. We recently have made the shift to look at the property management company as a separate entity and try to maximize the value of that company as well. So that includes getting some outside owners and more doors to manage. Um, So that is part of it and really just the control. We, you know, earlier on in our career, we had some, some bad, uh, instances where we hired it out and it would just, you know, zero visibility, no transparency, the stuff wasn't getting done. So, uh, that's why we decided to build it up. So,
Mike:Gotcha. Okay, well, what were some of the challenges as you scale the property management business? Okay, well, what were
Lucas:yeah, um, that, that's a great question. So the, the margins in property management business are just not very big. If you're running at 10, 12 percent margin, that's pretty good. Um, So, Um, yeah, I would say some of the biggest challenges came from us because we would throw assets into the property management company that we never really had the skill set or knowledge to be able to manage. Um, so we're getting real clear on what we want to own and a lot of, a big portion of that comes from what we're great at managing. We're great at managing single family rentals. And in midsize apartments, that's what we're great at. Uh, but we bought two storage facilities and try to figure it out. And it's a completely different animal. Uh, we tried, uh, from Reynolds and trying to figure it out. And it's a completely different animal. So, uh, we're going to end up outsourcing those and just double down the things that we're great at.
Mike:Okay. What made you decide to, like, get into the buying storage?
Lucas:I just thought it was a good investment. I was like, this looks easy. Put it on autopilot. Um, we had to go. Well, number one, we bought a apartment complex with attached storage. So that kind of got our foot into the door. And then, uh, we had a deal get brought to us by a broker friend of ours. And, uh, but yeah, this looks like an awesome value at deal. It was like 66 units, but it came with like an extra three acres. Uh, so we built two buildings and did over the road storage on about two acres of it. And, um, We made an offer that, Hey, if we get at this, we're super happy. And they said no. And then that was early 2020 and then COVID it came back. We're like, Hey, yeah, we'll take it. So we're like, yeah, well, let's figure this out.
Mike:Ah, I gotcha. Cool. Uh,
Lucas:We bought a resort down in Branson, Missouri, and it was the same way. I'm like, this is a deal. We'll figure out the rest. And that probably stresses the hell out of my team, but that's my job job, right? It's to grow and drive revenue. So that's what I'm here for.
Mike:do you still own the resort?
Lucas:Yeah. Yeah. We just, uh, we bought it last year actually. So we spent about a year and about 1. 2 million on renovating it and making it like a, a nice resort and, um, really just started like marketing getting the website out this past month or two. So working on driving, I can see higher there.
Mike:What kind of resort is it?
Lucas:It's a, so it used to be a little like boutique hotel, um, 18 units. Um, we took the hotel away from it. And, uh, you know, made actually the office into another unit, and it's just all 18 individual short term rentals right now.
Mike:Gotcha. Okay. Um, then, so the, you know, the, the other side of your business is kind of obviously before it hits the flipping side or the, or the rental portfolio is, is the wholesaling business. So what changes have you made over the wholesaling business and call it the last two years as, I mean, I can't speak for, you know, where you are, but obviously in a lot of areas of the country, things have changed significantly.
Lucas:Oh, yeah. Yeah. A lot, a lot of change. And we, you know, end of 22 through all of 23 was a, was a huge challenge for us. Um, so the majority of, so we, we have a unique model where about 70 percent of our deals that we buy are through relationships. Um, that could be other wholesalers, um, real estate agents, you know, uh, other contractors, mold remediators, whoever. Uh, and we, that's a big part of our, our, our, our focus and attention in marketing is, is, is getting our name out there, branding, stuff like that. Um, the other 30 percent comes from, uh, paid advertisement, you know, like everybody, direct mail, um, SEO, paper, clay, fencing, TV, fencing, radio. Um, but, um, we bought 60 houses, I would say, in 2022 from wholesalers. And, like, 23, we bought, like, 20. So, um, as the, like, the smaller wholesalers kind of dried up, we had to kind of refocus our efforts on some, some other things as well. And just volume in general, right? We're, like, at two thirds the volume of what we were pre COVID. So, really figuring out a way to maximize the deal more. Uh, whether it's taking it down and rehabbing it or taking it down and cleaning it, cleaning and listing to the MLS, um, that's been, that's been huge for us. So as volume kind of didn't grow to where we want it to, maximizing each deal. And then also like our, our buy and hold investors kind of, kind of dried up a little bit. It's a lot of good flip, uh, investor buyers out there still, but. Um, as, as you guys know, it's hard to get a rental with cash flow these days. So, um, those bread and butter rentals are what people use to eat up. They don't, they don't, they're not as, uh, um, appetizing.
Mike:Sure, gotcha. then, um, like what made you decide to build your wholesaling business in that way that it was 70 percent relationship focus as opposed to most wholesaling businesses, which are probably 90 percent marketing focused.
Lucas:Yeah, I, I think that's a great question. And, um, it, it kind of just started happening. And then we're like, okay, I think we have something here. So, um, it really just limits our, our overhead a lot. Um, you know, to get the number of deals that we're doing now, we probably have to. Quadruple our marketing budget. Um, so we're able to, you know, stay a little leaner that way. And then we're also able to, um, pay our acquisition guys a little more and get the best talent out there as possible. So, uh, we, we incentivize these, these networking leads and buys without, with a higher split on the back end. Um, so that they'll work out well for us.
Mike:Gotcha. And do you have your acquisition team members? Like, do the, do some of them focus just on direct to seller or do they both do the relationships and the to seller? Hmm.
Lucas:we've thought about is to separate them, but right now they do both, so we're looking for this, like, unicorn person that's an excellent closer on in the kitchen or living room with, uh, you know, a seller. And a person that likes to get out there and network and drum up business themselves. So we've kept it both now, but it does make it challenging to find those, those avatars.
Mike:Yeah, are you pulling that avatar from a certain like other type of business or other type of sales role that you're looking to hire people from?
Lucas:Yeah. So we, we just did a round of hiring right now. Um, so a couple of our guys came from the liquor business, uh, selling booze. Uh, and then, uh, we're hiring, uh, three more right now. And two of them came from the, the car sales world.
Mike:Gotcha. And then how does that kind of work? Do you, do you bring them in and then you kind of tell them the types of people that they should be building relationships? Like I, I, I, I never heard someone run that model, so I'm curious how you, how you do that.
Lucas:Yeah.
Mike:I think that's you. You're good. I'm good. I'm
Lucas:Um, anyway, um, yeah, that's a great question. So we kind of figure out their strengths. So there's so many different niches you can go at. And, uh, we kind of do a shotgun approach first. You know, whether it's drive for dollars, cold calling, uh, real estate, uh, probate attorneys, uh, senior living communities, other wholesalers, real estate agents. Just kind of shotgun approach first and figure out what works real well for that person. Uh, we have a director of sales. Um, who is really good on relationship building. It's that specific metrics, um, channel that they should be building in. And, uh, and focus on those indicators. You know, how many connections have we made? How many copies have we had? How many handwritten letters? And we focus on those versus, you know, how many houses, so we can create some small wins, and we know that eventually lead to the results that we want. Man,
Mike:Yeah. I'm curious, what are your kind of KPIs in, in that type of setup? Like in terms of how many, like new connections they're supposed to make every, every week or how many letters or handwritten letters supposed to send?
Lucas:that's a great question. I could probably pull it up, but it's not a good one for me. Um,
Mike:No, it's all good. Yeah.
Lucas:Yeah. And we have, I don't know the exact ones. Um, but what I do know is, um, we have with guidance, our, our, our acquisition managers set those benchmarks for themselves and we hold them accountable for what they said.
Mike:Yeah. Okay. And then how big is your acquisitions team at this point?
Lucas:Uh, seven, uh, gentlemen, all guys right now love to find a rock star female. We just haven't found it yet because I think it would crush it. But, um, seven gentlemen with a, uh, kind of an asset manager to help them like Run comps, run construction budget, and then, uh, direct sales that holds them accountable to those methods.
Mike:Gotcha. So, so they're each expected to bring in about like three deals a month. Is that kind of the.
Lucas:That's almost exactly right. That's like our status quo. Like, if you don't bring in nine deals a quarter, then, uh, you're, uh, on a performance improving plan.
Mike:Yeah, and are you target? Like, I, again, I don't know. You're the St. Louis market, but is there a certain spread that you guys are targeting on on each deal that they bring in?
Lucas:We have a buying criteria. It's pretty, pretty basic really. It's, you know, ARB times 0. 75 minus repairs. Uh, we go with the conservative ARB and a conservative budget on the rehab. And then when we sell, we sell off a possible, but more aggressive ARB and a possible more aggressive rehab at 80%. So we kind of build in the spread with the discount factor, the comps and the rehab budget. Once we get to a certain price point, usually let's say 400, 000 and we're looking at it as a possible rehab on the front end, like, Oh, this would be a great rehab. This lead just hit the funnel. Then we'll run a different little different, uh, analysis where we're looking to make at least 10 percent on our money return. So if we're all in on a house, uh, 400 grand, um, with purchase and rehab, we're going to want to make at least 40, 000 on that house.
Mike:Gotcha. That's what your money's all in that not, not, not 10 percent of the ARV it's okay.
Lucas:Yeah.
Mike:Gotcha. Okay. And then, um, you know, like what were some of the challenges, like as you kind of scaled up that acquisition side the business.
Lucas:Yeah, Um, just, just the right people you know, um, we have a, uh, you know, we, we, we train a lot, people learn a lot, so, um, them thinking that they can go do it on their own after a year or two, and just kind of protecting that a little bit, figuring out ways to do that. Um, with our networking side, uh, just, uh, there, there's a lot of, uh, you know, lines to get crossed as far as, like, who's which connector and all that stuff. So it's kind of some clear, um, guidelines there so we're not fighting over the same deal. Um, yeah, I think, um, those are our main ones, I would say, yeah.
Mike:What are some of those, um, guidelines that you have to make sure that, yeah, you don't have three different reps saying that, well, that's my relationship when a deal comes in.
Lucas:Yeah, we used to have, like, really strict, like, this person is this person's connector, right, and don't touch it. We kind of went away from that, and um, except for like a few really key people. Um, for the most part, you know, whoever has the best relationship, that's who they're going to send the deal to. And um, and if they don't send the deal to you, then you're not doing something right on building that relationship.
Mike:So it's not like the one to sign. It's just like, kind of who gets the call on the deal first.
Lucas:Exactly.
Mike:Gotcha.
Lucas:Yeah, those leads majority directly to the acquisition manager, and they put it in the system. Whereas our marketing leads call like our main number or our main website, and those get round robin throughout our, uh, current pool of acquisition integers. Yeah, that's
Mike:Gotcha. Okay. Uh, did you always, uh, run the business that way from the beginning with the relationships being about 70, 70%?
Lucas:everything. Uh, yeah, our, our goal initially was 50 50, and, uh, there was times, uh, in, in the beginning where marketing would way outperform, uh, the relationship side. And, uh, You know, we, we just, and we didn't, we knew we didn't have enough leads to keep these guys busy 100 percent of the time, so we're like, hey, what are, what are you doing with the other half of your time? Um, so we, then we shifted and put a huge focus in on networking, and then that flip flopped, and then we were behind on marketing and then trying to get that to catch up, and as we were trying to get that to catch up, we were just doing a whole bunch of, uh, you know, analysis for the business on what's, what's the most healthy and profitable. And, uh, it's, it's not 50, 50, it's that 70, 30, 65, 35 split. And that's, that's where we want to stay.
Mike:Gotcha, okay. What other challenges have you faced as you've scaled the, uh, the purchasing side of the wholesaling side of the business?
Lucas:Yeah. I would say we've always been really strong from an operational standpoint. So we scaled the upside and by the upside, I mean, you know, marketing this bow contract to close lead management, um, um, the, uh, project management team leadership, we've scaled that a little quicker. Then the acquisition. So we've been ready for this big upper volume for a long time. Um, so, uh, just the deals out there have been very challenging to get. So, um, our current acquisition team, uh, though great guys, we just have to grow that and overstep that to be able to fill the operational pipeline that we have. So we never really scaled back down after interest rates change. So we're ready to, when we get a little. You know little tailwinds, we're gonna be ready to go.
Mike:Yeah, what are, what are some of those operational pieces that you put in place ahead of time that allowed you to scale?
Lucas:Yeah, I would say number one is just the Leader for the business, you know, I ran the business for a long time And I'm I'm good, but I'm not great at it Especially with practice focus on other businesses that we have so we hired a super high level COO is my brother in law actually he was a Vice president of sales and marketing at like a 500 million company. And I've been driven on for several years. And, uh, he finally hit the board and took over, uh, started in Dispo, which is a great role to get to know all aspects of business acquisition, both contract closed rehab in a sense. So he started there and learned the business. And then, uh, first part of 2023, he took that over and kind of just really transformed us into an actual business. And, uh, it's like a whole group of wholesalers, you know what I mean? So, um, all the financial metrics and leadership and accountability that he's put in place over the past 18 months, let's say, has really allowed us to dial in operationally and allowed me to elevate into my genius zone as well.
Mike:Gotcha. Okay. Um, and you said into your genius zone, so, so what is your genius
Lucas:Yeah, man, I, what do I love? I love, uh, I love building a team. So, you know, people have to tell me to not hire because I just, like, Look at all the opportunities like, Hey, but if we hired this, this and this, imagine what we could do. So that's my mindset. But then I have the finance team and operational team to like keeping it checked. Like, Hey, what about the budget? Have you heard of that? Um, so, uh, uh, just building a team and keeping our culture as strong as possible. Um, yeah, that's a huge focus of mine. It's going to be a huge driver in our success. It has been. As we grow, keeping that culture strong, make sure we're bringing the right people on board and then just the big picture finances as well. You know, uh, making sure we're hitting our, you know, net profit numbers, making sure our, our balance sheet is strong. Um, all that type of stuff,
Mike:What are you doing now 50 people to keep that culture strong?
Lucas:80 percent of it is hiring the right person. If we bring a bad apple in here, then we have to, we have to cut it quick. Um, um, So, um, I think we could be a little quicker to let go of people that we know we're not going to work for. My general personality is the coach up. Like I can't, like I don't want to fail. I can get this person to where we need to be from a cultural, cultural or performance standpoint. Sometimes that's the case, but most of the time it's not. So just understanding quicker, the right time to, uh, part with people and just, um, you know, we do, uh, all team weekly meetings where we all get together, uh, And just, just be around each other, you know, with this, it's like a virtual world, right? And a big part of our culture is being here at least once a week together. Um, we do core team outings where we have like a cornhole tournament or, um, you know, office Olympics or a bowling event, something like that, you know, quarterly updates to the team. Um, so culture to me is the right people on the team, number one. And then also a big part of it is like the vision. Like, uh, you know, getting, setting a vision for a team and communicating that. So people are excited to come into work and do their job every day and in a very uplifting and positive environment.
Mike:Yeah. Okay, what is your vision for the next three years for your company
Lucas:Three years. That's a little, a little tight for me. Um,
Mike:longer or shorter you pick?
Lucas:so we gotta, we gotta, so we want a billion, billion in assets under management. Um, um, we want to be a top five, um, education business in the country. And then, uh, another one of our big goals is to bring an NBA team to St. Louis.
Mike:Bring an NBA team. Are
Lucas:We put that out there.
Mike:gonna own it?
Lucas:Yeah, or at least part of the ownership team.
Mike:Sweet. That's awesome.
Lucas:Yeah.
Mike:And, um, let's talk about the disposition side. How, how has that changed for you guys over the last two years?
Lucas:Yeah. Um, great question. I mentioned a little bit, but fix and flip investors or buyers, let's call them, are, are still out there. So a quality fix and flip product people are making good money on. And, you know, our, our model has always been, we don't, we don't sell to hedge funds. Yeah. We very rarely sell to out of state people, um, because we do care about our community. We want to sell to people who are going to jump in on that rehab quick, not let it sit vacant for three, four, five months, and um, and then go make money themselves. If they're not making money, we're not, they're not coming back to buy from us. So, um, we would rather, you know, take a little bit less of a profit and sell to someone that we know is going to take care of that house. Um, And, and those are going to close as well. And then it's going to come back and do it again. Instead of going out and finding all these one off, two off buyers that are, are making mistakes when they buy and then we're setting them up for failure and then they're never going to come back to us again.
Mike:Yeah, and how have you gone about building those relationships with those right buyers that you want to continue to do business with?
Lucas:Yeah, um, you know, it is a numbers game. So we, the volume or the quantity of our buyer list is important to us. It's very powerful. We've got about 4, 000 people on that. Um, you know, like, just an example, like this one house we bought a little tight. We went to our best buyer. Not a huge wholesale fee, but it was like 15 grand. We're like, hey man, we need you to buy this house for this price. If you do it, we'll take you out for a steak dinner. Um, so he did, and we did, and hopefully he goes and makes some money off it. But, um, we're just trying to be that, not the wholesaler that's trying to get the best deal. Price for everything but someone that has the good deals that everybody comes to and you just see that authoritative Influencer in this space and and provide, you know, we're working on providing a little more marketing and information about the property As well put the cash flow calculator on our website just so kind of the one stop shop is what we want to be Our disposition manager is a great relationship with you too. He's good at that He's right people, right? So, he's the guy to build those relationships.
Mike:Yeah. So what does that disposition process look like for you guys? Let's say you're gonna, let's say you're gonna wholesale it, not a retail disposition.
Lucas:Yeah, so we got it under contract, obviously. Maybe within a couple of days, we'll do a deep dive, figure out, are we gonna rehab it? Are we gonna wholesale it? Majority of the time, if we're gonna rehab it, we don't, we don't shop it. Um, every once in a while we'll do, we will, like, hey, if we can get this, let's do it. But, not usually. So, um, got all the information loaded in our CRM and, uh, the buyer or our acquisition manager will touch base with the acquisition manager to make sure that that isn't anything. They'll load everything up and it'll blast it out in an email and a text message, um, with a little in description on each house. Um, so when we're trying to wholesale, obviously we gotta set up some type of showing at the house. So we have the Patient with the Acquisition Manager who already has a relationship with the seller and our Dispo Manager. So that's like a little triangle that they gotta stay real tight. Showing Tuesday at 2 o'clock, blast it out. He goes to the showing, the Disposition Manager, sometimes the Acquisition Manager too. They show the house and hopefully sell it. I guess what's different about us is if we don't sell it, the majority of the time we're still going to close on it. For more information visit www. FEMA. gov And, um, figure out another exit strategy with that house.
Mike:Gotcha, and, um, are you guys finding that you're still, you're kind of always able to sit or not always, but most of the time able to sell from that from that first showing that you're doing.
Lucas:Yeah, I would say, I wonder what that percentage is. I would say definitely over half of the time, yes. Um, there's a lot of times, you know, sometimes it's vacant. But, uh, I would say on like 30 to 40 percent of ours, we have to do a price drop and re blast. Um, and we do that until about 8 weeks, 8 days of closing, give or take. Um, you've got to get a contract usually about 7 days before closing. Okay. Sometimes we'll go back to the seller and try to push it back a little bit if it makes sense. Um, but, uh, yeah, we're doing everything we can to price drop last season and price drop last season. At least get two or three blasts out there before we have to close on it.
Mike:Gotcha. Gotcha. Um, yeah. What, what, what other stuff? And I keep asking about changes in the last two years because I'm just curious because, you know, obviously in Jacksonville, there's been a ton of changes. What other things have you guys changed in any part of your business that, that we haven't talked about already?
Lucas:Ooh, good question. I think, like, uh, big focus of ours is, is the rentals right now. And, uh, we're balancing cash flow and equity. That's what we're doing. So we have, uh, Tremendous amount of equity, but our cash flow is obviously not great. So we're trying to figure out a way to maximize that cash flow in this high interest rate environment, which is, which is challenging. So, uh, we've gone to more, you know, national lenders with, um, DSC DSCR products and even interest only has really excited me lately. Um, because our equity is there. We'll still get some upside in appreciation. Maybe we don't get the debt pay down, but that shouldn't be our focus right now. That'll grow, not at the exponential way it grows with debt pay down, but it'll still grow, but focus on cashflow with some interest only type loans right now. That's one of the things that's in mind.
Mike:Gotcha. So just, is it buying just the properties, like really steep discount? And then are you not leveraging up all the way that you normally would with 75 percent or? Okay.
Lucas:Yeah, that's a great option. If you're going to local banks right now in the back end of a per value ad refinance, um, at 75%, 80%, it's not going to cashflow. If you're going to get 8. 5, uh, 25 year in, right? But if you, if you're able to build up a portfolio of these single family houses, you can go get interest only, 30 year, if it's not interest only, at 6. 75. And that's, that's, 6. 75 is probably like, uh, 6. 75 interest only is probably like a 4 percent 25 year, from a cash flow perspective. Um, So, if we can figure out a way to buy a whole bunch real quick, bundle them before we have to go to the local banks and go straight to those national lenders, that's what we're trying to figure out right now, the best way to do that. Yeah,
Mike:Gotcha. And you're finding you're getting a lot better pricing from the national lenders with the packages, even versus doing one off with the national lenders.
Lucas:the nationals, you can get similar, but it's a lot of work for one deal. There's, you know, red tape, and with a local bank, you just, you know, Send an email and it's, it's pretty much done. Um, but they don't have the terms for it. So if I'm going national type lender with the better terms, I need to make sure it's worth it in a one off deal.
Mike:Yeah. How did you go about building those relationships with those local banks?
Lucas:Yeah, Um, yeah, local banks are a huge part of what we built here. We have 30 million dollars worth of debt, give or take, and I would say 20 of it, at least, is with local banks. So, um, Yeah, we, we, we did it the, maybe not the wrong way, but we struggled at first. That very first house I talked about, which we planned to flip, middle of construction, I'm like, oh, let's keep it as a rental, let's refinance. So I was calling, like, Bank of America, um, uh, U. S. Bank, uh, regions I think might have been available at the time. And I was like, hey, do you, uh, uh, the Burr strategy?
Mike:angle for
Lucas:look at me like they had no idea what they were talking about. So, number one, you have to find the bank that likes to lend on these type of products. And, uh, you do that by getting plugged into your local real estate community and figuring out who everybody is using. And that's what we did. We got a few referrals after talking to like 20 banks that didn't know what the heck we were talking about. And then, um, we kind of just met with them in person. And We developed a business plan and kind of just pitched our business plan. And we did that to, you know, five or six banks and we finally got one person to say yes on that first deal. Six percent, 20 year in. And, um, hey, we didn't care. It was, uh, someone said yes. And after that first person said yes, uh, we were able to go with them a little bit. But then you had the experience and all, just like your first deal. After that first one, everyone else after that is easy.
Mike:Yep. Okay. For sure. Gotcha. Well, uh, we're getting close to the end here and there's always two questions I always ask at the end. The first is, uh, what is the craziest or most uncomfortable situation that you have ever experienced in a real estate deal?
Lucas:There is, there is so many. Um, I don't even know where to start here. I can do the deal that just happened, or I could, uh, Um, let's, let's talk about a, a stellar situation. Um, so this, um, this lady was, um, had, had some sort of learning disability. And, uh, she was an adult woman who, who, who's both parents passed away in a, in a span of about a month, leaving this house to her. Um, and she had no idea how to navigate it, didn't even know, like, you know, personal finances hardly, you know. So, she, she had a car, and a driver's license, and a dog, and just drove to Nashville. Um, so, uh, she ended up calling us, and we kind of walked her through the situation. You know, sell this, you get this, you know, did all the research on her title, on her mortgage, on her parents mortgage, all that stuff. But we ended up, um, finding her a place to live for a little bit in Nashville, her and her dog. And then, uh, for a few weeks, we signed a contract. And then she, when she came back to close, uh, we found another place for her and her dog to live for several weeks. And then we lined her up with, um, the appropriate resources that we think, uh, would help her get through this situation. We also have, uh, a non profit here in our office focused on. Uh, mental health and wellness, so we have a lot of good resources there. So we help line her up, uh, with everything and just help her through the process. But, uh, that was a, that was a, that one pulled on the heartstrings for me. And that's just the kind of stuff we do to go above and beyond for our sellers.
Mike:Yep. Gotcha. Um, then the other question I always ask is, um, if you could go back in time, give yourself one piece of advice when you were looking for your first real estate deal, knowing what you know now, what would you tell yourself?
Lucas:This is such a tough question because, you know, we, we, we teach real estate, right? So we get to do this pretty often. Um, but the, the number one thing to learn is to go through what you went through. Um, and I don't know what I would have learned, what I know now, without having to go through all this shit that I went through. I don't know if you can trust me on that, so sorry about that. Um, well, yeah, to me, I guess what I believe is, you know, it all starts at home. Alright, business is just a game, it's just fun. Uh, if your, if your key relationships at home with your spouse and your children are not right, then none of this at work matters. So, um, that's, that's number one to me. And I wouldn't say I lost track of that at some point, but it definitely wasn't as big a focus as it is now to me. If that's right, I can just come in, come into the office and do what I love. Um, but that's all the challenges. So really carving out time for connection with your, your closest personal relationships around the house. Yeah,
Mike:Gotcha. Great piece of advice. So, um, Lucas, if people want to connect with you after the show, uh, maybe they've got some houses they're selling in your market or they're interested in learning more about uh, your coaching program, how can they go about getting in touch with you?
Lucas:um, Lucas Faster Freedom. Faster Freedom is our education company. Um, So, uh, reach out to me there on Instagram or TikTok. I've just started those. Don't really know what I'm doing, but hopefully I'm posting some valuable content for you guys. Um, LinkedIn, LucasWallz, reach out to me there. Just kind of got that back up and running. But, uh, yeah, those are, those are pretty big places.
Mike:Cool. Awesome, man. Thanks for being on the show.
Lucas:Yeah, that was fun, Mike. Thanks for having me.