Operating A Real Estate Business With Rob Fuller

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Are you one of those that have a real estate dream they want to realize but just don’t know how? Then this podcast is for you! Join us as Rob Fuller, a real estate developer, investor, and visionary, shares his journey on getting into the business of buying and selling homes and gives exclusive takeaways on operating a real estate business!

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Operating A Real Estate Business With Rob Fuller

Welcome back. Thank you so much for deciding to spend your time with me again. I am joined by my good friend Rob Fuller. Rob, thanks for coming down.

I thought I was going to have to remind you of my name. We’re that good friends.

Rob, tell everybody a little bit about yourself.

In 2007, I was graduating from college, thinking I was going to med school. I applied and was accepted for five interviews. I went to the first and pulled all my applications out. The funny thing is when I was dating my now wife then, she said, “You’re not going to go to medical school.” I was great at the courses and I scored well. I did well in the MCAT enough to get interviews, but I didn’t have the passion for it. What I had a passion for was real estate. A couple of years later, in 2009, my wife and I together bought thirteen houses. As time progressed, by 2016, we were buying 30 to 40 homes per month at the peak of what we were doing.

At the time, there were a lot more distressed homes than today. We may see some in the next few months, who knows? I certainly haven’t seen many for the last couple of years, especially with the forbearance. There was none to speak of. As time passed, we were buying so many homes. It actually became a burden to operate with that many homes that we were buying and selling, and so we started looking at other opportunities.

We had some rentals. We had quite a lot of rentals. We tried to hold on to as many of them as we could. Time passed and we started moving into land acquisitions and building from the ground up. We still sold a number of those units that we built to institutional rent groups to the point that now we have a number of communities that are in some phase of annexation, rezone, entitlement, horizontal development, or home building, all across the span where we’ll hire site contractors to do the horizontal work.

Right now, we have three developments in horizontal construction. There are a couple that is supposed to be coming into that within the next few months. We’ve got a few that are in vertical construction. We’re building homes. That’s what we do now. We try to buy early. We make our money by buying right. That’s what I talk to investors about. There’s the old adage of location, location, location, which is imperative. It’s the right location in the right city at the right time.

Also, it’s buying it right. You don’t speculate that this house is going to be worth $1 million in twenty years or in six months. It’s more like that for a fixed and flip. “This house is going to be worth 200% of what it’s worth today in six months from now,” just based on value increasing if you’re going to actually build into the value by increasing the asset. Some of that is probably jumping the gun a little bit about what we want to cover here, but that’s my story with investing and how I got into it.

I can’t wait to ask you more questions. I start every episode with the segment I call the bottom line up front, the bluff. In the Marine Corps, when I used to brief generals, they always said, “Don’t bury the lead. Tell the most important thing up front in case they have to get up and leave.” I would like you to tell the audience the most important thing they should be focused on today, what they should be doing, what they should be avoiding, or things they should be on the lookout for. Good to go?

Yes.

Go.

I think this goes back to what we were talking about, which is buying right. Over the last couple of years, you can make a lot of mistakes. With the market appreciating and what it has done, those mistakes could be covered up. With the market in its current state of affairs, lending is more difficult. The declining home values are potentially more dramatic in some markets, depending on where you’re at. Buying right is more imperative than ever. People have a tendency to over-project their ability to get things done in time, in money, in dollars, and in the costs of rehab. Those numbers are tight.

Whether you’re buying to hold or you’re buying to flip, you want to make sure you get the numbers right on. Take a step back and maybe even take it to a mentor, a friend, or somebody else who can look at those numbers and say, “I don’t think that you’re being realistic here, here and here.” Listen to those people. There’s a saying, “Haters will hate.” That sometimes is the case. Sometimes we need a dose of reality. To say we’re going to do $50,000 worth of renovation in a month is probably not realistic. We need to take a dose of reality and step back.

The economy is changing. I don’t think anybody knows exactly where it’s changing, how it’s changing, how long it’s going to take to change entirely, and what the long-term effects are going to be. There’s a lot of speculation. After something happens, everybody will be able to look back and say, “I told you so,” but from this day forward, they don’t have solid answers that we can rely on. What I would say is buy right. Take the advice of others and be cautious in your efforts.

I love that because you said, “Be cautious in your efforts.” You didn’t say, “Be scared.” You didn’t say, “Operate out of fear.” You didn’t say, “Sell everything and burn the boats.” You’re saying, “Be cautious in your efforts.” That leads me to something you did not cover when you were talking about your background. I’m not sure when, but a couple of years ago, you started a software company. Correct?

I sure did. Housefolios.

When did you start that?

That’s a little bit murky.

When did it become a business?

Within the last couple of years. Prior to that, like many investors, we were using spreadsheets or Google Sheets or some version of that, Airtable or whatever. The problem with that is especially as we grew to where we were doing 30 to 40 homes a month, you have fifteen people in the spreadsheets who are touching it. We use Google Sheets a lot so multiple people can manipulate it. Person X deletes a cell that affects five other people. We don’t even know it’s happened. We make an acquisition based on the rehab budget being deleted from the spreadsheet on tab one.

The reason we started the software was to hopefully curb some of those mistakes that are there, but also, it makes it much more transparent, the math. For me, math is unemotional. That’s the nice thing about it. I have one broker who would bring houses to us, “This is good. This is going to sell.” In fact, he was one of our first adopters of Housefolios because he brought me a deal that was so good. “I was buying it for $60,000 and it was $20,000 worth of renovation, and it’s going to sell for $100,000. I’m definitely going to make money on it. Right Rob?” “Did you do the math on the finance costs, the acquisition closing costs, the disposition closing costs, and all of the things that aren’t there?”

I broke it down with him and I said, “You might make $5,000 if you get $5,000 more than what you’re thinking you’re going to sell it for.” He said, “I thought I thought it through.” This guy has done hundreds of fix and flips. My point is that the math doesn’t lie. The math is what it is. It’s not emotional. It doesn’t tell me how beautiful the front looks. That’s all important when you’re selling a house, but the math is the math and it won’t try to mislead you with tales of a pretty front door.

Speaking of math misleading, I’ve been telling as many people that will listen to me, “Be careful with percentages.” I feel like we’ve gone from a period of false statistics to a period of almost real statistics. For example, I heard that the days on the market in Boise, Idaho were up 200%. When I looked at it, it had basically gone from 7% to 20%, which you and I know historically is incredibly low.

I don’t get a lot of people to read my article. This was Government 101 that they taught me in ninth grade. A lot of people aren’t going to read my article if I say, “Days on the market in Boise are halfway back to normal.” I want to know about Ukraine. When they see it’s a 200% increase, more than double, now everything is horrible. Foreclosure homes are up 184% year over year. There were none last year.

There are some very respected real estate publishers that I follow religiously because their stuff is so good that have been guilty of this. The leading headline is, “Foreclosure starts up 184% year over year but still well below historical norms.” I get it. You need people to read your article, but you said the math never lies. I got to tell you all these stories.

This billionaire that I knew, I mentioned percentages to him one time. He was from London. He goes, “I don’t want to know percentages. You can’t buy a cup of coffee with a percentage. I need to know dollars.” I love that though. I say it all the time and still, people are like, “No, tell me the percentage.” Did we do $100 million or did we do $80 million? I need to know that because if the goal was $100 million and we did $80 million, don’t tell me 80%. I don’t care.

That could be $100 out of $1,000. That can be $80,000 out of $100,000. I have a mentor who says the same thing, “What are the dollars?”

You talked earlier about passion and I love leading with that. What was it about real estate that made you passionate about it? Was it the deal-making, the creativity, the structure, or the construction? Here we are sixteen years later. Is that passion still there or has the passion grown or moved somewhere else?

That’s part of the reason I moved out of doing fix and flip. I loved it. It was nice because it allowed some creativity. The answer to your question is I don’t know where the passion came from, but it is all of those things like the ability to make a deal, see an opportunity, and turn it into something that’s different, that’s more usable, that’s nicer, that somebody else wants to have. It was all of those things that have driven my passion. That’s partly why I ended up out of fix and flip. It got to a point where it got to be a little bit of a drag when we were doing so many of them.

We had a lot of organization. I felt more like a manager than being in real estate because of how many people we had to help manage the organization of all the rentals and all that. To keep my passion, I moved into development where I went back down to fewer people, and we could see on a grander scale, affecting the entire community development. The passion for me is still there. I love it. Even still, we get involved in some fix and flips sometimes, but it certainly wasn’t what it was a few years ago when we were flipping hundreds of homes.

I want to talk about some of the development stuff you’re doing. I find that highly intriguing and ultimately, it’s something I want to play in my investment career. I want to talk about data. I want to talk about systems and processes, and then also cover a little bit about your experience through The Great Recession. Rob, I want to jump right into data. Housefolios, I’ve demoed your product, so I get it. You’re doing all this volume. I guess I should say, I’ve demoed your product and I like it. I left that hanging there.

Thank you. I appreciate that, Tim.

What was the process that took you from “Let’s get rid of Google Sheets” to licensing this software out? I’m assuming it’s software as a service. Could you talk about that part of your entrepreneurial journey?

The first thing is understanding where we came from. We had these spreadsheets that were cumbersome. Not only that but we also had multiple people inputting data that if you went to their browser at any time, there were multiple tabs. This website, that website, this one that we’re pulling data from all different sites to get data for one particular house.

As I said earlier, somebody deletes something from this cell. It basically obliterates its value because they’ve deleted the property management cost out of the long-term hold or they’ve deleted rehab costs. Sometimes it was something smaller but regardless, those mistakes made errors in the calculations, which was problematic. We started moving to the software.

As far as data, it’s so expensive. First of all, to the extent that as an investor, when we were flipping houses, we had people going and looking at all those different sites. We wanted to try to get it more or less from one source. That data is $250,000 a year in expenses. These are real data expenses. I’m sure some software pay even more for their data, but you’re getting MLS data and assessor’s office data, which is free. It’s gathering all this data together and getting rental data from property managers.

There are different ways that different companies source that. All of that data goes to play to create a stronger advantage for an investor, which with our particular software, there are other ways to do it, which I did when I started. For an entry-level price of say $40 or $100, depending on what they want to achieve, you get all the data. That would be crazy. It’s crazy cheap relative to what it is.

Those data, regardless of whether or not you’re getting it from somebody like our software or from finding yourself, are essential to making good decisions. Without the data and you don’t know what the rents are, how can you project whether or not the investment is going to be a good buy if you’re going to hold it?

If you don’t know what the comps in the neighborhood are, how do you know if you’re fix and flipping that you are paying the right price, and after you fix it up, that you’re going to be able to get a solid sale price? You have to have that much data. Data is essential. I’ve met enough investors that go by their gut. That work sometimes until it doesn’t.

I like that you talk about both internal and external data. Internal is the stuff that you generate and external is the stuff you rely upon. As a large national lender, we rely on a lot of information from others. We have a lot of salespeople that are entering information constantly. We go through that struggle. As you can imagine, we have thousands of loans in the pipeline right now. We’ve closed 5,000 or 6,000 in a year. It gets to where you’re like, “This data is important.” You can’t have someone changing something they weren’t supposed to change.

As part of my growth in this industry, I’ve done some consulting for some of these large funds. It is amazing how many of them still, at this stage of maturation, are using Google Sheets with no cell protection. The way we make this $500,000 decision is someone has to highlight it orange. I have that power too. As you said, there’s no real audit trail. There is an audit trail if you enable it. You go back and look at it.

That’s usually after mistakes have already been made and executions have already occurred.

Even if you don’t “buy the bad deal,” you may have earnest money. You may have option money there. Also, you said earlier from the assessor data and assessor records, which are free. All of this points back to something that I love to harp on. I tell people, “Either way, you’re going to pay.” You’re going to pay in mistakes. You’re going to pay in time, time to go get the data yourself, time to go verify information and time to go do it yourself, or you’re going to pay to leverage someone else for their system.

I don’t think I’ve made that point in a couple of episodes. I have to drive that point home. If you’re not going to pay for advertising, you’re going to pay a wholesaler markup in the house-buying business or you’re going to pay a realtor commission. You’re going to pay. You just have to pick what you’re going to pay.

Roberts C. Allen lives in my neighborhood and he wrote the book Nothing Down in the ‘80s, ‘90s and the 2000s. He refreshed it. The reality is somebody’s putting money in. Even in that book, he acknowledges that you might be able to get zero down, but it’s because I got my buddy Bill to put up the money. Somebody’s putting money into this thing. The lender’s going to be putting money and you’re going to be paying interest on that, so somebody’s going to be putting money in. Things don’t happen without money changing hands.

There’s a currency that enough entrepreneurs do not value. It’s time. If you have to go knock on doors for two months and you could be making $80,000 a year or let’s call it $6,000 a month to make the math easy and it takes you two months of full-time effort, you’ve got $12,000 in that. Plus gas, phone, and expenses. I tell people all the time, “Value your time as much as you value that credit card bill.” Land development, it’s quite the jump from 300-plus houses a year flip to 1,300 acres. Can you talk about that transition in your life? I’m sure you didn’t go straight to 1,300.

Essentially, when we started, we were still flipping houses. We were buying infill lots and started building homes as well. We started buying lots in 2014 or 2015. Distressed homes were still around and there were still a pretty decent number of them. For us, especially as home buyers, we’re willing to pay more. The margins for fix and flip went down. The number of rentals that we could buy went down because we still had to figure a margin in there at the acquisition, all the effort, and all the people we have. We had to have some dollar amount in there too. We started by buying infill lots and building homes. Even those became more scarce in the markets we were in. We started buying parcels that could have multiple lots.

One of the parcels we bought has six lots. We had to finish the entitlement process. It already had a preliminary map on it, and we had to get that final map on it. That wasn’t that hard. We did the next deal and the next deal until four and a half years ago, we bought 825 acres. That particular community was large lots that were selling to retail home buyers.

That process took two and a half years to get to lots. Annexation, rezoning, entitlement, all of that takes time. Also, some money relative to the time if you value your time. It takes a lot of time. The cost of the land was far less than the cost of a piece of a finished lot that you could go and build a home on right away. It takes a little bit of money and patience to get to that point. Now we’ve got a 1,800-acre parcel that we’re closing on.

Rob, time for the Money Minute. Imagine there’s a young entrepreneur that has stuck around with us in the last twenty minutes or so, and this is the only piece of advice they’re going to get all month. Imagine you were talking to maybe a young Rob, maybe it’s someone that’s important to you or the young entrepreneurs out there that you want to influence. They’re going to get 60 seconds of advice. It doesn’t even have to be about real estate. It’s up to you. Go.

You did give me some warning on this question, which helps because there are so many things that I wanted to share. The thing that I took away as the one thing that I could share is finding a mentor. I personally experienced it. There are a lot of people who are willing to give up their energy, their time their knowledge, and the things they’ve gained. For me to boil it down in a minute, the thing I would say is to find a mentor that does or has done what you want to do.

You want to get somebody who will believe in you and somebody who’s willing to give back. There are a lot of those people around. Somebody who’s got the wisdom that can help guide you away from the potential mistakes and help guide you into profitability, especially when you’re young and ambitious like I was. I wish I had this advice for myself to go find a mentor who would teach me.

Rob, when I look at the reason I’ve been successful, I was on a podcast called The Underdog Podcast and I shared my story. I haven’t shared a lot of my story and I actually shared enough of it that I had my kids listen to it because there were a lot of people that helped me that didn’t have to. There were a lot of people that gave me advice. Albeit, it was on me to listen, that has put me to where I am as a kid from East Texas with no money and no real parental influence. Ed Mylett talks about this in his book. I am the one in my family. I’ve changed the course. I get a little very non-real estate on this. I don’t think enough people will listen to a mentor.

They don’t listen anymore. They want to validate and verify everything with Google. I don’t think there are enough people out there willing to be mentors anymore. I think if you’re reading and you have something to share, I highly encourage you to share it freely. You don’t need to launch an eCourse to share your information. If you’re out there and you’re struggling, what helped me and what made me was having mentors. Sometimes it was a mentor I was paying through training or education, but more times than not, it was someone I was adding value to their business or their life. Ultimately in exchange, getting a PhD in whatever it was I was interested in.

I still have mentors that I speak with frequently. I’ve got one that I probably speak with every week about different things in real estate. He’s much more cautious than I am. He’s in his 60s, but he gives me sage advice about being careful. This isn’t my first time through this. He can help guide that. I think that’s invaluable. To your point, sometimes you have to pay for those mentors. I would say there are a lot of free resources out there, but be careful of the free ones because you get what you pay for. Sometimes you have to pay for some, but also be careful of those too because sometimes they’re just looking to make a buck.

Be wise and find those people who are willing to give back. I’m maybe a little less skeptical of it because maybe I’ve been fortunate to find a lot of good mentors in my life, and maybe because I interject myself in their lives. There’s one I think of that’s a multifamily investor who had his dental practice destroyed in San Francisco in ‘89 and took that $1 million and started buying apartments.

He took all new loans on this dental equipment, and then started buying apartment complexes and kept his dental practice. The gentleman has done very well. He has well over $1 billion worth of real estate assets with that $1 million. He doesn’t partner with anybody. I interjected myself into his life by saying, “Can I take you to lunch? Can I ask you questions? What do you think about this?” I bought him lunch and I was a young kid. Sometimes people are willing. If they aren’t, they’ll say no.

We’ll leave with value. If you’re out there reading, be careful about asking for too much too fast without adding some sort of value. You didn’t get to a weekly conversation with that mentor from the beginning. It’s now a relationship. I was in mediation with an HOA that I’m in a lawsuit with. I’m doing it pro se because it’s in my personal name. It’s my old homestead. It’s probably all ego. I’m suing him. My buddy Scott, who’s a mentor of mine and also a real estate attorney, said he’d be available if I had questions. I called him, but he didn’t answer. He was on a plane. He forgot to tell me that part.

It was funny because I thought, “I had a settlement proposal in front of me,” and I felt like I was getting what I wanted, but I also felt like I didn’t know what I didn’t know. What’s the trap here? That was too easy. We did that in 3 or 4 hours. I picked up the phone and called one of my mentors named Hudson. He’s also an attorney. He used to own a bunch of title companies, and it’s very quid pro quo. He’ll call me when he wants to talk finance. He’ll call me when he wants to talk a lot about single-family because he’s mainly a multifamily guy. It’s not quid pro quo. It’s not favor for a favor, but we help each other in different realms and it’s a mutually beneficial relationship.

I called him, but he didn’t answer so I texted him. I was like, “I need some quick free legal advice. I’m in a mediation.” He called me back within a minute. I was like, “I got this settlement. It’s this and this.” He goes, “It sounds fine. I’m hearing what you’re telling me your problem is. It sounds like it may not taste good to you, but this may be as good as it’s going to taste.” I needed to hear it. I didn’t want to hear it. I wanted to keep fighting.

I want to move on that now and then we got to go into the rapid fire. You talked about gray hair earlier in a different conversation. Hudson is older than me. My mentors are all older than me. When I started this business, I was the young twenty-something that knew everything and had no gray hair. As you see me, looking at me, we’re working on the gray. How important do you think experience is in general in real estate?

You’re going to pay for lack of experience. I talk to anybody who’s been in real estate at least that I know has done a significant amount of real estate. Either they have the mentors or the people to help them not fall into those pitfalls, or if you’re like me and maybe like you, I don’t know, I didn’t have a lot of that when I started as much.

I made some mistakes that cost me a significant amount of money. Not having an attorney review certain contracts or talk to an accountant about something before I sold it, and realized the tax consequences that next year. Those are all mistakes. You’re going to pay for them one way or another. When we were talking about it over lunch. We didn’t always think about it at the time. You think, “I’m not spending $50,000 to have an attorney review this on a $25 million deal.” You better spend the money because it’s going to be something that you’re going to regret later if you don’t.

Either way, you’re going to pay.

That’s a big deal. Small deals are the same way. Sometimes it’s maybe finding somebody who can help you out or you can ask the legal questions that will guide you moving through more transactions in the future, so you know for the future. Sometimes there are questions title companies can answer and they’re more likely to answer them early and for free essentially as part of their service. Anyway, you’re paying for it one way or another. That has been my experience.

What’s the most money you’ve ever lost on any one transaction?

I don’t know. That’s a good question. Is it transaction being individual houses?

No. Transactions like $5 million, $1 million, 5 or 6 figures.

On our big deals, we haven’t had any big loss-type setup. On the smaller ones, we did. Hopefully, we learn enough to be wise to see multiple exits on our path on these land deals and say, “If this doesn’t work, we don’t get it rezoned. What do we do if we don’t get this? What do we do in multiple exit strategies? If we can’t see a way to make a profit, then we don’t do it.” Those are the big deals. For the smaller ones, unfortunately, there are plenty of homes we lost money on.

I’ve lost six figures. I’m happy about it.

Here’s what I will tell you. A property management company cost me seven figures and that’s because I had hundreds of homes with them. They had some transitions that hurt us. Lots of delinquency and they fired the broker, and they had to bring in all new, and I was under contract. It was not a good situation for me to the point that the corporate property management company called me and was like, “It’s time for you to move your assets here.”

This is rapid-fire still. Shorten your answers. Planning or passion, which one do you pick? Following a plan or following a passion.

You’re going to have to clip this one down.

You got to pick. This Is my show. I get to make this decision.

I guess passion.

If you could only do one ever again, are you building new constructions or are you flipping houses?

Building new.

If you had to pick a business, the land development business or the software business, which one would you pick?

Land development.

Just so you all know, his software partner is in the room. He is like, “I know where I stand.” Rob, we’re out of time. I always enjoy being around you. How do people get ahold of you or do business with you if they’re interested in talking to you?

You can reach out to us through our software Housefolios.com or you can email me at our company Info@ROIPropertyGroup.com if it’s real estate related. If it’s software related, we always want to talk with you as well. If you’d like to be a customer, you can visit Housefolios.

Any parting thoughts or parting shots?

Have fun. Enjoy. Don’t sweat the small stuff.

If you’re still here, which a lot of people don’t until the last minute, Rob and I are recording hours of content on real estate investing dos and don’ts, tips and tricks, and advice. Make sure you follow Rob, his companies and their growth, and make sure you watch those videos when they’re available. We are out of time. I appreciate you sticking around. Thank you for stopping by. Remember, your network is your net worth.

Important Links

• Rob Fuller
• Housefolios
• Nothing Down
• Info@ROIPropertygroup.com

About Rob Fuller

Rob Fuller began investing nearly 15 years ago in residential real estate across many national markets. His real estate experience includes the acquisition, financing, development, and sale of real estate.

In 2015, he formed ROI Property Group, LLC (ROI), which develops and builds residential communities.

Rob Fuller began investing nearly 15 years ago in residential real estate across many national markets. His real estate experience includes acquisition, financing, development, and sale of real estate. In 2015, he formed ROI Property Group, LLC (ROI), which develops and builds residential communities. ROI currently has 10,000 lots in various stages of entitlement, development, and home building across multiple states.

Mr. Fuller is also a co-founder, majority shareholder. member of the Board of Directors, and CEO of Housefolios, Inc., a real estate technology company (housefolios.com).

Rob Fuller grew up traveling as the son of an Air Force Colonel. He graduated Magna cum Laude with a BA in philosophy from Brigham Young University. He lives with his wife, Nicole, and their 3 children in Utah.

The following podcast program is furnished by RCN Capital LLC.  The information provided is for general educational purposes only and does not constitute any legal, tax, financial, investment or other professional advice. The views, thoughts, and opinions expressed of any speaker are the speaker’s own opinion and do not represent the views, thoughts, and opinions of RCN Capital LLC.   No information contained in this episode should be construed as financial, investment or legal advice from RCN or any individual, author, host or guest. You should always consult a financial advisor before investing.

• business data
• business math
• business software
• buying and selling
• Exit Strategy
• real estate