How Anyone, Anywhere, Can Start Buying Profitable Real Estate

J:
Welcome to the BiggerPockets Business Podcast show 104.

Andrew:
For me personally, from a business standpoint, it’s always been to lead with demand. So, try to get the demand first, see if there’s people that are interested at all, and then use that to be able to invest either resources or cash or what-have-you.

Speaker 3:
Welcome to a real world MBA from the school of hard knocks, where entrepreneurs reveal what it really takes to make it. Whether you’re already in business or you’re on your way there, this show is for you. This is BiggerPockets Business.

J:
How’s it going everybody. I am J Scott, and welcome to the BiggerPockets Business Podcast. I am here again this beautiful week with my beautiful wife and co-host, Carol Scott. How you doing today, Carol Scott?

Carol:
Having a great week. Thank you so much. It’s kind of a crazy one with so many other things in the works with BiggerPockets, new, fun, and exciting things. We’re winding this showdown. Loving that we have had the opportunity to chat with over 100 amazing entrepreneurs and experts, learn from them and find out what they have to offer in terms of how we can all lead amazing lives. So, we’re winding this one down and more great stuff to come.

J:
Yeah, and just to put a finer point on that, when we say we’re winding this show down, this is going to be our second to last episode. So, we have an amazing episode today, so please stick around. Then we’re going to have an even more amazing episode next week. But after that, that’s going to be the end of the BiggerPockets Business Podcast. Everything we’ve done will still remain in the catalog. You can go back and listen to all of the shows. As Carol alluded to, we have some fun stuff in the works as well that we will be announcing soon, but let’s talk about today’s episode because I’m really excited about today’s episode.

Carol:
Because it’s a really, really good episode. Love this one.

J:
We do have a really, really good episode today. We have a gentleman named Andrew Luong. Andrew is the co-founder of a company called Doorvest. Doorvest is a prop tech company. We’ve talked about that before. Basically a company that’s in both the property real estate and technology space. Andrew tells us today all about his journey and how he started Doorvest, and he also has some amazing tips for other entrepreneurs out there who are looking to grow and scale their businesses, grow and scale their lives.
Some of the things we talk about on this show, we talk about this idea of lifestyle creep and how lifestyle creep can make it difficult for aspiring entrepreneurs to really have the confidence and the ability to go and jump into entrepreneurship. Especially if you’re younger, listen to this discussion about lifestyle creep, because it’s going to make your entire journey into entrepreneurship easier if you heed Andrew’s advice.
We talk about how you can become an entrepreneur starting as a full-time employee and how you don’t necessarily have to make that choice between full-time employee and entrepreneur, and there’s a way to kind of do things at the same time. We talk about how Andrew was able to take this business that he’s doing, and this is a really high ticket business. His company buys houses for hundreds of thousands of dollars. That’s, obviously it takes a lot of capital. We talk about how Andrew was able to test and validate his ideas for this business for less than $50 a week.
Basically, he didn’t go out and buy his first house until he knew that he was going to have customers and that he was going to be able to sell those houses and make money. We talk about goal setting and how the same strategies that can work for reaching your personal goals can work for reaching your business goals. Finally, for all you real estate investors out there, because this is part of his business model, we have a great discussion about some tips for long distance rehabbing of properties. If you’re a real estate investor, if you’ve ever thought about rehabbing long distance, whether rentals or flips, listen to this great discussion towards the end with Andrew about how to flip houses or how to rehab houses long distance. Great discussion.
Now, if you want to learn anything more about Andrew, about Doorvest or about anything else we talk about on this show, check out our show notes at biggerpockets.com/bizshow104. Again, that’s biggerpockets.com/bizshow104. Okay. Without any further ado, let’s welcome Andrew Luong to the show.

Carol:
Andrew, welcome to the BiggerPockets Business Podcast. J is such a huge fan and has told me so many great things about you. So, I can’t wait to learn more about your experiences and your story. You have so much great information for our community members, so thank you for joining us today.

Andrew:
Carol, thanks for including me, and I’m blushing based on that, so I hope it’s all true.

J:
Yeah. I’m really excited to have you here. Your company is in that space that I absolutely love. It’s a space we’ve talked about before, often referred to as prop tech or property technology. You kind of overlap the real estate industry with the technology industry, which those who know me, I came from the technology and the Silicon Valley Area, and now I’m in real estate, so it’s a great combination for me. Before we jump into Doorvest and your company now, I’d love to talk a little bit about your backstory. Can you give us some idea of where you came from and what your story was leading up to you starting to invest and where you are today?

Andrew:
Yeah, absolutely. I’d say, on sort of my side and I think the story of Doorvest and my personal story, kind of all interweaves into one for better or for worse, but I’d say my personal story goes back maybe seven or so years ago. At the time, I was in San Francisco studying chemistry, trying to be a doctor. As we could see from the outcome, that path did not work out. I was just absolutely terrible at it and I think actually my personal belief is, when you’re not good at something, it’s hard to really enjoy it too. But anyway, I was absolutely terrible at it, but I was fortunate being in San Francisco where there happens to be a lot of jobs and opportunities, etc, so found my way to my first job at a company called Misfit. Had a lot of fun along the way and the company, I think, fortunately, did pretty okay.
I think, as sort of this young energetic kid I walked away with two key learnings. The first of which wanted to be spending my time building companies and things. I think J, last time we talked, you mentioned you enjoyed building as well. I really found the thrill in it and felt like I was okay at it. Certainly better than trying to be a doctor, which I was terribly miserable at. But secondly, like I grew up squarely middle-class, and I’m grateful that we never had to worry about where dinner was coming from, for instance, but we were certainly by no means financially secure, so experienced firsthand financial security or maybe the lack thereof and its ability to maybe block one from pursuing their dreams.
Maybe for my parents, that meant maybe the dreams of having a happy family, because you’re arguing over how much that vacation costed, etc. Maybe for others it’s to launch a podcast like yourself or work at a nonprofit or work on something entrepreneurial, so firsthand, the ability for, I guess, lack of financial security to block one from pursuing their dreams. Look for an avenue to generate some income security or cashflow or passive income, what-have-you, build a long-term nest egg. I think some of those words might resonate with real estate, but I think that’s where the two worlds sort of collided.
By day, going forward was like a tech worker, and then by nights and weekends became this DIY real estate investor, kind of the … I don’t know. The pinnacle of that was built up a small double-digit portfolio for myself along the way and did a lot of things. I mean, was an agent, did some mortgages. I mean a lot of stuff, I think, up and down the stack. Then along the way, I think because I lived at the intersection of the two worlds, through organic conversations, coffees, dinners, what-have-you, saw others that were busy working people, maybe they traded some socks and then had wealth front account, and had a 401k, a high yield savings account, maybe some crypto now.
We’re kind of thinking about the next progression in assets. I think real estate is kind of natural there, and I think the both of you probably know this better than I do, but due to things such as the friction-filled process, along with the capital barrier to entry, many folks weren’t able to participate in real estate. one of those people along the way was my good friend, and now good friend and co-founder, Justin. Started Doorvest to make it easy for anyone anywhere to buy and own income generating real estate sort of entirely online with sort of this broader mission to democratize access to financial security for all?. Oh man, that was a mouthful.

Carol:
I loved it though. I loved it.

J:
No, that was great. I want to talk about Doorvest, but you hit on a lot of things there that I kind of like to discuss a little bit more because it probably applies to a lot of our listeners, whether they’re in the real estate or the prop tech or the technology or whatever industry they’re in. One of the things you mentioned was you grew up basically securely middle-class. Maybe that wasn’t the exact words, but squarely middle-class. It sounds like for you, that wasn’t enough, and when you said you wanted financial security, you basically were thinking you had to make a lot of money. You had to jump from middle-class to the next level up.
A lot of people I know though that get into entrepreneurship, or maybe I should say people that don’t get into entrepreneurship, a lot of times the reason is because they are financially secure to the point where they’re scared to take the risk. They’ve got a full-time job, they’re making a decent amount of money, maybe they’re securely middle-class. Then they think to themselves, well, if I were to jump in and actually start a business, if I were going to try to become an entrepreneur, if I were to quit my job, I’m taking a big risk. I’m potentially throwing away the comfort that I have, and so I talked to a lot of potential entrepreneurs who, because they are comfortable, and that’s often the word they use, they’re comfortable, they don’t take that next step.
What would you recommend to them or what did you do differently, or how did you think differently to where your comfort that you grew up with and that you presumably had when you were in Silicon Valley starting out, that didn’t lead to you choosing not to go out on your own, but instead led to you choosing to go out on your own?

Andrew:
Yeah, I guess with the benefit of hindsight, I’d say … I mean, number one, I very similarly had I think a good job and lots of savings, so I think number one was being able to make sure sort of my personal burn was under control. I think a lot of what you’re talking about, and I think we all have heard of this term, but sort of the concept of lifestyle creep. As you, maybe you make $10 and then you make an additional dollar, and then you spend that additional dollar, and then 10 years goes by, and then you make $20, but you’re spending an additional 10. It’s pretty tough to go from that and then trim all that back to be able to afford maybe an entrepreneurial lifestyle, etc, where you presumably don’t make as much money.
I’d say number one is, being really cognizant of where you’re spending your money as an individual sort of from this personal burn lens. Number two, I think that the second function to that is also income. I think a lot of busy working people have the benefit of a good W-2, which means maybe you could use your day job earnings to invest, or maybe you could do it as a nights and weekends thing while you’re building up this base. You have a strong day job, keep your day job. You also probably are not working, I don’t know, 80 hours a week where you don’t have any other free time, I hope.
Do as a nights and weekends thing and experiment on something small, something that might be interesting. Maybe five out of 10 of the things that you experiment on, you’re going to hate, and that’s great because then you can move on quickly. Then there’s a small handful that you enjoy and maybe you could generate some sort of income or return from it. Double down on those and then maybe the five becomes three or two, and then keep doubling down on the ones that you find compelling, and then keep doing it as sort of this nights and weekends thing while your day jobs subsidizes it. Then hopefully, at some point, you kind of have enough of this income to take a swing and take the plunge.

Carol:
I love it. While you had your other day job that you weren’t … It was good, but you weren’t loving it, and you are controlling your personal burn and making sure that lifestyle creep didn’t get the best of you, were you using your time outside of your regular 9:00 to 5:00 to begin doing other things, and what were those things that you were doing to get started?

Andrew:
Right. I guess a quick comment is I’ve certainly had jobs that I disliked. I’ve been fortunate to have jobs I enjoyed as well. Maybe that enabled to me to go the distance because I found jobs that were very much enjoyable. So, it wasn’t like, how do I get out of this thing really quickly? I think, to your question of, what the side, I guess, the side hustles or the nights and weekends projects were, there’s a lot. I mean, I’ve always been fascinated by building these small businesses. At one point, I think I owned eight cars.
Not because I’m a car aficionado, but because I had this passive income hack where there’s like rental car platforms. They’re called Turo and Getaround. I used to … Yeah, built up a small fleet doing that. I remember, at the time, this is a little bit longer ago, and I think earlier in the internet where there was this sense of arbitrage, but I would go to outlet shop and then buy clothes at the outlet and then resell it at some sort of markup on online on eBay, etc. But the one that I always … I felt like I was okay at and came back to was real estate investing. Income generating real estate was something I really enjoy doing and I felt like I was okay at it.

J:
I love that. This led you to start your current company, which is called Doorvest. You mentioned that essentially the goal at Doorvest is to democratize investing, real estate investing, so that anybody anywhere can get into real estate investing. Can you talk to us, and I do want to go back and hear the evolution of Doorvest, but I think people probably would love some context, can you tell us a little bit, how does the platform work? What exactly is your product? Who’s your customer? What is the business?

Andrew:
Yeah, I mean, you, you hit the nail on the head there. Doorvest is a platform that makes it easy for anyone anywhere to buy and own income generating real estate entirely online. I mean, to your question about, who’s our customer, I think we have sort of two sets of customers. Typically, working people. People that don’t have endless hours to do this themselves is kind of our core customer. This could mean individuals that are maybe early in their career and are really focused on their jobs or mid to late career that we’re thinking about sort of another angle or another income stream for retirement.
Kind of how we serve them, is we make it easy for them to, to own income generating real estate. We’ll sort of work with our customers, often everyday individuals. Maybe we’ll work with Carol and we’ll learn more about Carol and her investment objectives. We’ll learn more about what you had earmarked as a down payment, so what sort of returns were you hoping for? What’s your general risk profile? Then with that, we’ll then go out into the market. We call it production. So, we’ll go out to the market. We’ll identify and acquire, usually uninhabitable homes.
We’ll purchase it, we’ll renovate it, and we’ll lease it out. The goal is to give you Carol sort of this finished product, because again, you’re a busy working person. You don’t have the time or the knowledge, maybe sometimes the knowledge, to do this yourself. We’ll kind of tee this up for you and then we’ll walk you through the transaction process. So, the title, the mortgage, the insurance, etc. You’ll close it and take title and then we’ll operate the homes. We’ll manage it for you ongoing. This full service end to end approach. Where we position ourselves as a business is hopefully, if we’re performing, so you buy a rental from Doorvest, you love working with our team and you’re generating the returns that you expected, hopefully you come back as you build out your nest egg or your portfolio, and hopefully you buy more homes from us over the years.

J:
Got it. So much to unpack there and so many things I want to talk about, but I don’t want to go too far without getting into the origin story of the company. Let’s take a step back and then we’ll come back to the business as it is today, but let’s take a step back. What led you to say, this is the business for me, as opposed to there’s a million real estate adjacent businesses out there, but you pick this one. What led you to this business? What was the origin of this business? How did you get started?

Andrew:
I say that our story is a bit unique. It was sort of very organic, very much this slow burn. I guess back, maybe my personal story from earlier was like spent my days working at various companies busy working person, spent sort of these nights and weekends investing in real estate, but I talked about it a lot. Maybe you could tell over the recording, but I’m a pretty, I guess, talkative person, so talked and shared with others what I did with my time. Oftentimes I’d talk about real estate investing and passive income and that sort of thing. So, lots of dinners, small meetups as I’m sure you’re familiar with, hung out on the BiggerPockets sort of forums and whatnot, did BiggerPockets meetups.
Met up with my coworkers and my friends and sort of other people that maybe were hoping for “advice” etc, and so we talk. Maybe we’re grabbing a coffee or we did dinner or what-have-you, and they’re like, “Oh my gosh. I have some savings. I’ve been working. I have X dollars set aside. I heard you do real estate. I’d love to do it.” I’m like, “Oh my gosh, this is so exciting. Let me show you everything.” You got to go on BiggerPockets, here’s how you look at it a home. Here’s how you write offers. Here’s what an agent is. Here’s how you get a mortgage. Here’s how you get insurance. Here’s how you fix it up after. Here’s how you lease it out. Here’s how you manage the home. Here’s how you do the accounting.
Then we’ll finish the dinner. They’re still very excited. I’ll send them an email. Maybe there’s 20 items on the checklist, and I’ll send them off on their way. We’ll do dinner again maybe four months later. I’m like, oh my gosh, I sent you all of the podcasts links to BiggerPockets. Here are my favorite ones. I sent you an intro to a mortgage loan officer and my real estate agent and here’s how you get an inspection, etc. How did we do? Show me how we did. Then, time and time again, and I should’ve logged the numbers. Maybe one day I’ll go back and find the numbers, but probably 40 or 50 conversations like this, time and time again, the answer was like, hey, this is great. Thank you so much.
I actually have more cash saved up than I did before, because we had four more months of my W-2 job in savings, etc. I couldn’t get started. Can I just give you this cash and you do it for me? I’m like, oh my gosh, thank you, and I feel honored. I can’t do that. There’s nothing to kind of serve that, but good luck. Then, these conversations happened so frequently, and happened with Justin, my good friend and now co-founder too. I think, as we talked through his experience, that’s where it dawned on us that maybe we could build something, piece all of these pieces together and make it easy for anyone anywhere.
It’s a lot of work, and maybe it’s no surprise that a lot of people aren’t able to sort of get started, but I think we’re making some good progress, which is exciting.

Carol:
That is very cool. Justin, he was your partner in the beginning. Is he still your partner now?

Andrew:
Yeah. Actually, we’re kind of in our small office space in SF right now, but yeah, he’s still a partner and a good friend. I think someone commented on the fact that we hug a lot. So yeah, we’re still very much partners.

J:
The best partnerships.

Andrew:
Right.

Carol:
There you go. It’s as good as it gets. Did you and Justin, what did you do when you said, wait a minute, there’s all these people who have this common issue, we’re going to solve it for them? You had kind of an idea, so how do you kind of flesh out that idea, and then did you test it before you launched something formal? What were those beginning conversations like and what were the steps you took to really get this company going?

Andrew:
Right. Topic that I actually care a lot about is sort of the … We had this big idea, like, how do we make it so anyone anywhere can participate in America’s number one source of wealth generation? I mean, you look around and you read the articles and there’s all these Wall Street Private equity firms, etc, that are all participating in this and they own a lot of homes. How do we make it so anyone could do it? There’s this big sort of dream that we had, but how do we get there? I think it’s easy for one to have this big dream and then rattle off, I don’t know, a hundred steps that we’ll take before we become this massive business that’s actually accomplished this. It feels almost impossible.
Our sort of philosophy, and this is how we still, I hope, are operating the business is, how do we take this sort of big dream, chop it up into a couple early increments and then experiment? Because we might have this hypothesis, bring it to market and fall flat on our face. There’s no point in trying to map out the next hundred steps. Let’s just figure out the first three and then get it out there. What that meant for us started as a landing page. We found an easy way to put up a single page website. It was so bad, and I’ll grab the … One of these days I should pull up an old screenshot of that website, but it was really bad. It was to the tune of, do you want passive income and live in awesome life or something like that?
Put your email here. We’re building a way for anyone to buy real estate online or something of that nature. We put it up and then we started putting, call it $50 a week in ad dollars. Not nothing but also not an insane amount of money, and then we put it up. We started seeing this really janky website attract emails, and then we’d take the emails, we’d look up the people, and we’re like, whoa, these are actually real people that kind of fit the hypothesis. Then we kind of kept running experiments, and the ones that worked, we doubled down. Then, as the doubling down worked, we tripled down, and then at some point we’re kind of where we’re at today.
Again, I think we have a long way to go and lots of experiments left, but it’s always been the philosophy of sort of getting something out there really quickly.

J:
I love that. We’ve talked on this show so many times about the fact that, even for businesses that you think it’s impossible to start small and without money, I mean, you picked a business where literally the inventory that you’re transacting with is hundreds of thousands of dollars, and all over the country. Presumably, you’re not buying stuff just in your backyard, even if you’re buying in your backyard at all. You picked a business that is nationwide, hundreds of thousand dollars just for the inventory. Not to mention, I mean, you’re probably spending more than that for your office space in San Francisco, but it’s a high overhead business.
You figured out how to determine whether there was a customer base for it for less than $50 a week. That’s amazing. Let me ask you a question. Now you have a list of people who say, I want passive income. You verify that these are real people. Maybe you verify that they actually might have some money. What was the next step? I mean, I assume you weren’t ready to just go out and start buying houses at this point. What was the next step to determine whether those people were actually interested in the specific idea and would potentially hand over money to you for this product?

Andrew:
The next step is the next progression. Now we have this email. There’s still a long way to go from an email to buying a $200,000 home from Doorvest, many steps along the way. The next step is like, now that we have emails, how do we get to the next step with these folks? For us that meant, let’s get them on the phone. I spent most of my career in sales and business development, etc, so it’s a very natural sort of space for me to be in, but let’s email these people, let’s talk to them. Are they even going to talk to me or are they going to think we’re … I don’t know. Maybe they’re just going to blow us off, etc.
Figured out a best way of getting on the phone with them. Then we talked, we listened to their … Well, number one, they somehow ended up scheduling time and being on the phone with me. I remember the first time we had someone agreed to a phone call. I was like, “Dude, Justin, someone’s actually scheduled a time for me to talk to them. What do we even talk about?” Then we figured it out before getting on the phone. Then we talked and then there was interest, which was kind of the next step.
Then I think we just gradually built from there, sort of this natural progression of the customer journey.

J:
At some point, though, you had to make that decision, we’re going to buy a house. We’re going to offer a product. Tell me about that. What was the evolution like to the minute you said, okay, we’re doing this, we’re getting ready to spend money, and where did that money come from? Were you self-funded? Did you raise venture capital? Did you raise money from friends and family? What did it look like when you said, okay, we’re ready to move forward and you actually did?

Andrew:
Yeah. At some point, we got to a customer that was more or less interested. Our personal hack was that I was a “real estate investor” before. I own some income generating real estate that fits squarely in this profile because the home itself has been stabilized and it has a resident that’s been paying good rents for me over the last couple of years. So, our first couple customers were homes from my personal portfolio. Again, sort of this concept of validation. Then once we got through that, then we’re like, okay, I feel like we have something here.
How do we take it to the next level? To your question, initially, it was more or less self-funded, so my personal portfolio and some of Justin and I’s personal cash. The disclaimer is we weren’t really wealthy or anything, so there was only so far that we could get with our personal cash, but then the next step was, like you said, it’s a very capital intensive business and we’re dealing with real estate, which is not cheap. We needed to raise a little bit of venture capital to get us to the next couple of set of vials.

Carol:
Very cool. I’m loving that. You essentially, by using your own houses, your own portfolio, it was a really great way right off the bat during validation to make sure you were reducing risk. Do you have any other great tidbits, any great hacks like that, just great ideas that you can share with our community members that are other things you can do in those early, early stages so that you’re not risking everything that might help encourage these people? That yes, you can do it too, because there are other ways you can get started without being risky in doing something that could ultimately be just struggling.

Andrew:
Right. I don’t know where I heard this quote, but I definitely think it’s a good one. I think one can diligence themselves out of any investment, any opportunity, etc, there’s always risks associated. Then actually, the bigger … You think about a problem, the more risks that you find, and then at some point you’re like, you have this checklist of 20 risks, and then it makes no sense. I think a lot of this goes back to like taking this sort of big aspiration, dicing it up, and then what’s the smallest, lowest risk and quickest to implement way of validation?”
I guess, for me personally, from a business standpoint, it’s always been to lead with demand. Try to get the demand first, see if there’s people that are interested at all, and then use that to be able to invest either resources or cash or what-have-you.

J:
I’m going to steal that line. One can diligence themselves out of any opportunity. That is so true, and it’s something I’ve never heard anybody say that succinctly, but it makes perfect sense. If you don’t stop doing due diligence until you find a reason not to move forward, you’ll eventually find that reason. You’ll invent that reason if you have to. I love that. It’s always important to do your due diligence to make sure you’re crossing your Ts and dotting your Is. When you get to the point where you realize this is a good idea, believe yourself.

Andrew:
Yeah. I wish I could give credit to whoever that was, but yeah, it’s a great quote. I think, I mean, any opportunity and anything that one would want to pursue that’s meaningful, will come it’s set of risks. There’s no way around it. Actually, I think that, that’s what makes human life interesting, is you’re taking these calculated bets and whatnot.

Carol:
Excellent. At some point, after taking these risks, but in a minimal way by using your own portfolio, you validated your idea. You realized there was demands in the marketplace to make this happen. At some point you decided, wow, maybe we need to start purchasing more houses. Right? How did you even go about that process of making that happen? Where did you decide to buy houses and how did you reach those decisions?

Andrew:
The philosophy has always been to lead with demand. So, spending a lot of times with our soon, hopefully soon to be customers, learning about their pains, their struggles, what they hope for, and how we can serve them. I guess, the concept of leading with demand led us to meeting and spending time with a lot of working people that have, call it 30 to 50K or so saved up and ready for real estate that are hoping to generate some income so that they’re not looking for a negative cashflow home. But they want some income as a buffer, but they’re really optimizing for sort of this long-term nest egg and participating in sort of a little bit of cashflow.
Fine, maybe it’s not a game changer for them but it helps pay the bills, etc. They want to be able to participate in really cheap mortgages and tax advantages and equity buildup and long-term appreciation, etc, sort of this long-term nest egg. Again, leading with demand, that’s kind of what we heard from our customers. The next step was, what sort of homes fit this profile? I don’t know, multimillion dollar home in LA does not quite fit this profile. A home that is a 40K home that rents for $800 that might have a lot of deferred maintenance probably doesn’t fit that profile either. So, landed us in this profile of a home, call it 160 or so, up to maybe 220, that rents for anywhere from 1,400 to maybe 2,000.
Then that was kind of the profile of the home. Leading with demand, we garnered up enough interest and then we went out into the market to define homes that fit that profile, and then kind of got to work on the real estate.

J:
Exactly what were you doing to find those homes? Were they listed on the MLS and you were working with local real estate agents? Were you doing your own marketing to find off market housing? Everybody knows that these days it’s difficult to find deals and it’s especially difficult when you start going into markets that you’re not intimately familiar with, so what did that process look like for you guys?

Andrew:
Yeah, I think it’s ever evolving. In the beginning it was a lot of MLS homes. This was maybe early last year or so before the market feels like it’s kind of gone very hot. So, early last year, maybe, and when the volume was lower, we were doing a lot of MLS. We ended up finding our niche in sort of homes that are significantly distressed. For context, we do about 30% of acquisition price in renovations. We’re usually taking care of all the major components. We’re, of course, doing the cosmetic work along with like the HVAC, the roof, the flooring, the painting, etc.
This makes us competitive because a lot of folks, without the balance sheet of a business, aren’t able to kind of rehab these homes. We found our competitive advantage there from a business standpoint, but this also leads to higher quality end product for our residents, because when you’re moving in, things aren’t falling apart left and right, and same thing with our owners that are hoping for this more sort of passive investment. Ended up in sort of significantly distressed homes, primarily off market, primarily through wholesalers is kind of the main source of inventory for us today.
Experimenting with a couple of different angles. So, we’re beginning to buy some from the larger institutions is a smaller portion of our business now, and then experimenting with direct buying which we haven’t done that before. I personally haven’t either. If you have any tips, maybe we can take it offline too.

Carol:
I love it. Andrew, I’m curious too, like since we have so many real estate investors who listen to this show and they’re always looking for great tips on rehabbing and renovating their properties, your sweet spot, like you said, are these severely distressed homes that, in which you spend about 30% of acquisition costs to do a significant renovation. How are you managing that long distance? Are you building teams in your different markets? Are you getting on an airplane every week? How are you making that happen? So, our people out there listening know how they can do it too.

Andrew:
In the early days, I personally was getting on an airplane, maybe not every single week, but two or three weeks or so. Yeah, so that was the early days. I’d say number one, systems and processes. A lot of this has been done before. There’s no point in reinventing the wheel, there’s inspectors out there and there’s trusted inspectors. There’s trusted agents or folks to work with. There’s trusted maybe companies and service providers out there that have done this before. Learn from them and take their playbook, see what fits your profile and what you’re hoping for and what doesn’t, but I bet the answers tell a lot of these questions have been done before, is kind of the first tip. Then number two is systems and processes.
Like, what are the checks and balances along the way? Do you have an agent? Then you certainly need an inspector to look at the home, and then once the inspector views it, maybe you need a contractor’s bid. Maybe instead of just having one contractor that you’ve never worked with before, that you found on Yelp or so, maybe you should get three and stack them up against each other and use that as a way to weave it. Then I think thirdly, technology has just been so awesome over the last couple of decades.
Thank you Zillow and Redfin and Google Maps and all of that for bringing a lot of this stuff online. I think you know what the homes around the neighborhood look like and are selling for because Redfin brought it online, and you know what the inside of the home looks like because there’s Matterport reports, and you get a sense of what the neighborhood looks like, because you could use Google maps. Use sort of the tools that are out there, and most of these are actually free too, which I think is awesome.

J:
You mentioned technology, and I have a feeling, since you’re in Silicon Valley, that technology probably isn’t just an afterthought for you and Justin and the company. Can you talk to us a little bit about how you are using technology to either make your business more efficient or more successful, or whatever you’re using technology for, I’m sure you are, can you talk to us about that technology and how you’re using it to differentiate?

Andrew:
Right. So, yes. Probably yes to all of the items that you listed, but I’d say number one, again, it starts with the customer. We see our customer as a busy working individual that might or might not be able to drive and visit their home, so there’s this concept of entirely online and anyone anywhere. The only way that you can do that is using sort of various technologies to be able to make it easy for folks to do their diligence and see the home, etc. I guess some specific examples is we certainly invest a lot in internal tooling, anything from, how do we accurately ask a GC from our trusted network to go view a home to give us a bid on this extensive reno all before we place an offer? By the way, this is at a wholesale auction too.
We have to figure out how to do all of this really quickly so that we could be able to buy a home and with reasonable rehab projections, etc. I guess that’s one example of how we use it from an internal tooling standpoint. The next point is sort of, I think back to what I shared earlier, but aggregating from the folks that have been there before us. Data sources that inform how much rent is and how much this home should be worth if we do extensive reno and where this is projected to go and where the historicals were.
Some of this data we have in-house, in store in-house, some of which we’re working with other companies that have them pioneers in the space. Aggregating Google Maps so that a customer that, maybe they’re living in Mexico now, because their company went entirely remote, can effectively see what the neighborhood looks like and walk around through Google Maps, or getting matter report reports so that customers can validate that when we said we did this kitchen, you could walk around the house and see what the kitchen looks like. I guess these are all examples. I hope that answers your question. I feel like I just spewed it a lot.

Carol:
Well, I think that’s really cool. I would absolutely suspect that this whole concept of entirely online, anyone, anywhere, where there’s so much transparency, there is so much ability for customers, for example, to show their friends, hey, look at this investment that I’m a part of, and this is what it was like before, and this is what it’s like now, and this is the type of money I’m earning off of it. I would really suspect that it plays into your overall marketing and customer acquisition in some component. Can you talk to us more about what you’re doing for marketing, how you are targeting those two specific customers that you talked about earlier, and maybe how technology is playing into that?

Andrew:
Thank you, I guess Facebook, Google, and a lot of those folks that have sort of been there before us, like a lot of our customers find us online as well entirely digitally. I guess, going back to the theme of experimentation and sometimes things shock you. Going into this, I would have never thought that Doorvest would be a company that can sell homes this early. I think, at some point, people would buy homes within a matter of clicks entirely online.
I did not think that people would be willing to buy a home off of maybe a Google Ad or a newsletter article, etc, but most of our customers find us online, often digitally. Through the various marketing channels that I think folks are familiar with, and then sort of over time, I’m excited for sort of this post COVID world. I’d love to go back to the meet-ups and meet people and spend time and hang out and hear their stories and sort of the more traditional real estate market marketing avenues.

J:
Obviously you can use online for marketing, but when it comes to real estate and customers, a lot of it is distributed in different markets, and sometimes it can be really tough to hit people in different markets and to find teams in different markets. Can you talk a little bit about your operations and basically, is most of the stuff that you’re doing centralized in San Francisco, and then you just have contractors and various markets, or have you actually built teams and have employees in different markets? What does it look like from an operation standpoint and the fact that you’re doing something that’s so distributed?

Andrew:
Right. That’s a great question. It’s both. We have sort of some team in SF, some teams scattered throughout the US, and then sort of teams in operating markets too. From a business standpoint, I think that technology gets folks to call it 85%, 90% of the way there, and then people make the remaining 10% or 15%. There’s certain things that I don’t think you can get correctly entirely online, which is okay. Maybe for some folks that’s okay.
When I was investing personally, I just acknowledged that there’s 10% of things that I’ll miss, which often means maybe it’ll cost me a little bit more, but for me to be able to do this online and scale while I have this intensive day job, maybe that’s okay. But from a Doorvest lens, we have sort of a grounds team that span sort of project coordination and some acquisitions, etc, that are actually going out to the homes and inspecting sort of the physical parts.

J:
Cool.

Carol:
Andrew, this is fascinating. As I’m sitting here listening to, I’m thinking about, and I keep coming back to something you talked about in the very beginning of this interview, and you were talking about the importance of having these big goals in using financial security as a way to be able to go after those big goals, but also the importance of breaking those big goals into smaller ones that are achievable and that you can actually accomplish and get out there. I’m finding such an interesting parallel about the fact that, as a Doorvest customer, for example, you could have this big overall goal of financial security, and like you said, be part of investing in one property, and then maybe breaking that down to another one and another one.
Can you talk more, was that intentional from the beginning? Did it just organically grow in that manner, and am I even interpreting that correctly?

Andrew:
Yeah. Your last question about, was this intentional or was this organic? I’ll have to ask my therapist that. I think all of this is interweaved into one, so maybe subconsciously it all came into fruition or manifested itself in Doorvest, I’d say. I guess, to your question about sort of having these large schools and then breaking it up into the quickest, easiest, lowest risk, most affordable way of getting started in order to validate whether or not this is even a reasonable goal. I guess, if it’s okay, I’ll give you two examples. First would be, I mean, personally, when I started real estate investing, I had sort of this goal of buying 10 homes by the time I was 30. There might be a website out there.
I tried to blog, but I was terrible at writing, but I wanted to own 10 rentals by the time I was 30. The reason was because I assumed maybe I can make $400 of cashflow per month per home. If I have 10, then I make four grand, and maybe that’s enough for me to live in, I don’t know, live in South America and be “financially secure.” So, had this massive goal. I think, if you just start with the massive goal, you’re like, holy smokes, I can’t even get one home, and then this is 10 homes, and how do I get all of the down payments? How many offers am I going to have to write it? Etc. Then go into this spiral where you’re like, wait, this is not feasible.
I should just go stick with my day job, etc. That was sort of my big goal, but then, as we break it up into increments, maybe the first major milestone is, how do I get my first home? Maybe a smaller milestone before that is like, how do I talk to an agent? Then, how do I write my first offer? Then, how do I get my first contract? There’s all of these tiny steps along the way. Then quite frankly, I mean, at one point, and I’m very fortunate about this, but at one point, I got to that goal. As you can tell, I don’t live in South America.
Quite frankly, I still have a job. This is the hardest job I’ve had in my life. I guess what I’m trying to say with that is like, goals evolve overtime as well, and so I wouldn’t be hung up with this big goal and how insurmountable it is, and also be sort of flexible as it plays out. Same thing with the company. I think we’re still a small company. We’re 16 people as of today. Small but mighty. We have sort of this aspiration to doing something really big and really meaningful for the world, but how do we kind of get to the next step?

J:
I love that, and it’s so true. I mean, treat your life the way you treat your company. Treat your company the way you treat your life. Baby steps, and don’t try and accomplish everything in one day and set goals. Really, it’s not rocket science, but sometimes we all just need to remind ourselves of the obviousness of it. Andrew, 16 employees, selling a lot of houses, buying a lot of houses. You’re doing some amazing things. Tell us what is on the horizon for Doorvest. Where are you headed? What’s next? What are your plans?

Andrew:
I think there’s sort of this multi-decade dream. When we talk about sort of these audacious goals, there’s sort of multi-decade where we’re headed, and then there’s sort of the smaller one where we’re headed and call it the next six to 12 months. If it’s okay with you, maybe I’ll start with the larger one and then we’ll kind of go backwards. I think sort of the larger dream is, how do we sort of build this platform that makes it easy for anyone anywhere to buy and own income generating real estate, but more importantly, bring more and more folks to financial security sooner so that they could begin taking these big swings at life, and maybe they could work at a nonprofit or again, start a podcast? Etc. That’s kind of the longterm aspiration, and hopefully this is a multi-decade very big business that impacts a lot of lives for the better.
That’s the 20 plus year vision there. Sort of, as we think about the day-to-day and the next six to 12 months, I think we found something that customers really resonate with as measured by how much demand we have, and we’re fortunate that we’ve built something that’s compelling to customers. How do we serve them and how do we get more homes into the hands of people more quickly, more efficiently and more in line with kind of what they’re hoping for? The short to medium term is, how do we get more homes in the hands of more customers?

J:
I love it. Absolutely love it. Okay. Well, we’re getting to that point in the show where we want to do what we call the four more, and that’s where we ask you the same four questions that we asked, pretty much all of our guests, and that’s the four part, and then the more part is we’d love to hear more about where our listeners can connect with you, learn more about you and about your company. Sound good?

Andrew:
Yeah, that sounds great. I’m a little bit nervous for these questions.

J:
Oh, yeah. This is [crosstalk 00:49:20].

Carol:
It’s tough I’m telling you.

J:
Yeah, you should be nervous now. Okay. I’ll take question number one. Andrew, what was your very first or your very worst job, I’ll let you pick which one, and what lessons did you take from it that you’re still using today?

Andrew:
I can’t say which job this was, but there was a job. Quite frankly, I remember, and very fortunate, again, but I made good income. I came to work and we played ping pong for hours. I still remember bringing a new t-shirt so I could change out of because I’d be drenched at the end of a long ping pong session. I had great medical insurance. Actually, health insurance in general and lots of great benefits. From the outside, I think this sounds, and maybe this is, and again, very fortunate for this, but from the outside, it seems like this is sort of the dream job, but I think inside, and this actually interweaves with the 10 by 30 stuff is, I wanted to be working on something that felt more meaningful. The last thing I wanted to be doing is a clocking in, clocking out, and sort of just here for the paycheck. It just didn’t feel like the way I want it to be spending my life. Yeah, I guess I’ll leave you with that.

Carol:
Awesome. Okay. Question number two, Andrew, is, what is a piece of advice that you have for entrepreneurs or investors, those seeking financial security that you have not shared yet here today?

Andrew:
I’d say to operate your life similar to business in terms of cashflows. So, you have income, which is generally your job. Maybe you have supplemental income, which is maybe a rental or two, maybe some other hacks or businesses, or what-have-you, and then look at your burn or your expenses. Maybe you have your rent, probably no way around that. Maybe you have your … How much you spend on food and how much you spend to go have dinner with your friends, and then, if you have kids, maybe you have something around that too. Look at all of these numbers, pull up the major items, and then try to make sure that the bottom line isn’t growing, and then how do we kind of add to the top line?

J:
Love it. Okay. Question number three. For our listeners out there that like books or podcasts or YouTube channels, what would you recommend? What is your favorite or best recommendation, or a book, or a podcast channel or a YouTube channel that our listeners should be listening to be getting better at this thing we call entrepreneurship?

Andrew:
I’d say, and actually this goes back to the answer from before, but Tim Ferriss’s Four Hour Workweek book really defined, I think a lot of my personal viewpoints around life and business, and how we should be spending our time, etc. Lots of good nuggets there, I think. One of which was sort of this experimentation, like what’s the easiest way that you could get out there to validate? Yeah, Tim Ferriss’s Four Hour Work Week I think is a good one.

Carol:
Awesome. Okay. The fourth and final question, which is a fun one, and one of my favorites, what is something that you’ve splurged on along the way, whether it’s in your personal life, your work life, wherever, whatever that was totally and entirely worth it?

Andrew:
This one’s good. Let me think about it. Yeah, I’ll share this one. I mean, I owned … All right. Yeah, about to sell it, but I owned a Tesla and it was very much a splurge for me. Part of it, and in my defense, it was rented on Turo, so I think a lot of my monthly payments were covered. Albeit, there were bad months, and COVID was very bad to rental car businesses, unfortunately, but I own a Tesla. It always felt like something that was unobtainable. There was sort of this moment of gratification, and I come back to it too. It’s like, wow, I can’t believe I’m driving this car.
Then, I think, with that, I also learned that, more money, maybe I get a newer Tesla or a nicer Tesla, but maybe that’s not going to be the game changer for my life.

J:
Love it. Alrighty. Well, that was the four part of the four more. Now for the more part of the four more, tell our listeners where they can find out more about you, find out more about Doorvest, where they can connect with you, if they want to be a customer of Doorvest, how they can do that, or anything else you want to tell us.

Andrew:
Yeah, doorvest.com is probably the best one, door, as in front door, vest, as in invest.com, or shoot me an email, [email protected]. Happy to answer any questions. I don’t have many answers. Happy to re redirect you to the folks in experts on our team.

J:
Awesome. Andrew, thank you so much. This was awesome. We appreciate, not just your info about your business and what you’re doing, but just some tremendous advice as well for all of our listeners out there that are looking to do the same thing with their businesses, so thank you for being here. We wish you the best of luck with Doorvest and we hope to talk to you soon.

Andrew:
Yeah. Thanks for including me. This was a lot of fun.

Carol:
Thanks, Andrew. We’ll see you soon.