Hedge fund buyers and pivoting for the downturn

January 30, 2023

Episode Transcript

Hayden Vance is the partnership director at Cash Geeks, who did over 330+ deals in 2021 🚀 For the last several years, he has focused on building deep relationships with hedge funds and iBuyers 🤯

👉 He'll be sharing his insights and how the Cash Geeks team has been adapting to a rapidly shifting market.

Business

See full episode transcriptTranscript is autogenerated by AI

Mike: 0:00

Welcome to the Real Estate Game Changer Show. My name is Mike McKay, based in the Jacksonville, Florida market for anyone in the Jacksonville, Florida market. If you need help on anything, feel free to reach out to us. Send me a message. We are actively buying rentals in the Jacksonville market, so if you have any properties to sell or wholesale, feel free to send me a DM or a message. And I will send you our buy box each and every Friday at 4:00 PM Eastern on this show. We will dive deep with guests all across the country who are changing the game in real estate. And this is a live show. So please make sure to comment with any questions for our guests to answer. This week on the show we have Hayden Vance, who is the partnership director at cash Geeks. They're based in Jacksonville. They did over 330 deals, in 2021. And for the last several years, Hayden has really focused on building relationships with institutional investors. So hedge funds, IYS, it's actually one of the most knowledgeable people that I know in that space. And I've talked to a lot of people who are selling to these institutional buyers, and he just has an incredible pulse on, the constantly changing, adjustments that the institutional buyers are making. He is also gonna share insights onto, how the Cash Geeks team has been adapting rapidly in the shifting market. So, Hayden, welcome to the show,

Hayden: 1:12

Yeah, man. Thanks for having me. It's a p.

Mike: 1:15

Thanks for making the time. So let's start it off with a nice softball question. What got you. Start in real estate.

Hayden: 1:21

Yeah. So I'll try to condense it as much as possible. It started because I was flipping cars in high school. So when I was like 14 grew up on a farm, had access to tools and was mechanically inclined. Growing up on a farm, you're fixing stuff here and there. So, I wanted to, just own cool cars and work on them, and that was kind of how it started. And so I started buying cars in high school and kind of was turned onto the business aspect of it where, I could negotiate down price on a car, estimate how much to repair that car, and then resell it. And really that's the same model that house flipping is. So as the kind of years went on and you know, from 14 to 18 I went from flipping maybe 10 cars a year to when I was a senior in high school. I was flipping like, a good 25 in a year, 30 ish. So I had an a passion for kind of the business aspect of it and also just cars in general. But I knew kind of coming out of high school that wouldn't be a long term thing. And initially thought that I would do the college thing. I had, saved up this chunk of change that I was gonna put myself through college with and was gonna stay in my hometown up in Moscow, Idaho to go to college, which I did do for like a quarter of one semester. So once we get into some technical stuff about hedge funds, which we will, I'm gonna disclaim right now, lightly educated kid off of a farm in Idaho, right? So, a lot of the stuff that I'm gonna talk about, I mean, it's stuff that's publicly available and it's stuff that. I just got obsessive with when I was, like 18, when I discovered it. And so for the past, five years, I've self-educated on what all that is. But to be clear, I'm not an analyst. I'm not a economic mind. I'm a self-taught individual, from humble beginnings. That's kind of how it started, man. I was bent outta shape that I had to stay in my hometown for college. I wanted to branch out. I wanna see what else was out there. So I ended up taking that summer after I graduated high sch high school. And I just lived in the back of a Subaru Outback. And I drove around the country and I start listening to bigger Pockets, podcasts on that car ride. Spending about 120 hours in the car. and yeah, I'm like, wow, this is the same business model that car flipping is, it's just bigger numbers and I'm gotta learn different types of repairs. And I remember getting to Kansas City, so I'm coming from Idaho through Montana, North Dakota, all that good stuff. And as soon as I get to Missouri, like something changes. I'm like, I'm looking around and all these houses look terrible. There's a lot of really rundown real estate, which I'm from the west coast things are generally a little bit more taken care of. Property values are generally a little higher. And so it was like this whole new world was opened up where it's like I'm learning on this car trip that in the same way I target distressed cars, you have to target distressed houses. There's none in Idaho and I'm driving through the south and there is tons of decrepit homes everywhere you look. So that's kind of what sparked it, man. And I couldn't get that outta my brain. I ended up going back up to Idaho. I tried to do school, it just couldn't get away from me, man. It was all I thought about. And I made it to about October of that first school year and I couldn't do it and I decided I was gonna drop out. Like in high school I almost didn't graduate cuz I skipped school so much to go buy cars in Canada and Seattle and whatever else. That was what held my interest and I had supportive parents in terms of like, Hey, if you're interested in that and it's, you're learning stuff, go do that. We don't care. So that kind of set me on the path. And then I had a cousin that was flipping houses virtually and he had done some deals in Indiana and he had done a deal in Louisiana and a couple in his hometown in Bakersfield. And I had, heard it from a a another cousin who was kind of closer in my age. And so we started just chatting cuz I was planning on, you know, hey, I'm gonna move somewhere and flip houses. And eventually we formed a partnership, where I really just ran acquisitions and I funded some of our marketing campaign and we picked a city that he wanted to buy in. He would handle the financing and the flip management and I would do the prospecting, get the contracts be boots on the ground. So that, that was in late 2017. We reached that agreement. I moved here in 2018, like January, February, and yeah, that's kinda how it started, man. And then obviously tons of twists and turns between then and now

Mike: 5:29

And here, meaning Jacksonville at that.

Hayden: 5:32

Yep. Yep. Jacksonville.

Mike: 5:33

So you said before you kind of chased distressed properties, like you chased distressed cars. When, I'm just curious, when you were in the car business, how do you go about chasing distressed cars?

Hayden: 5:43

Yeah, so I had a bunch of different keywords alerts set up. So there was like apps that would, scrape through Craigslist and if your keyword would hit, then you would get like an email notification., it's so funny cuz it's a lot of the same stuff that's in that's in real estate. A lot of the same keywords that you wanna look for, like people that are buying wholesale deals off the mls. It's a very similar So I had keyword search, need to sell quick, moving, blown engine blown transmission, needs work special, all these keywords. I would sit in class and I would get get notifications as far south as Portland, all the way up into Canada and Boise. And yeah, you'd negotiate, that was the name of the game. Find the distress and negotiate.

Mike: 6:25

so those alerts would come in, you would just call'em, try to feel'em out on the phone. Would you negotiate the wholesale on the phone or would you get them close enough or like what was your strategy there?

Hayden: 6:34

pretty much every time I was like, I grew up in a fairly small town, so anytime I was buying a car, I was having to drive like five or six hours and I was having to take a diesel farm pickup with a car hauler on the back. It gets terrible gas mileage and I'm filling it with diesel, so it costs money. It would cost me like three or 400 bucks in transportation per run. So if I'm going, I have to be very committed and the seller has to be very committ. So, you know, I'll be very upfront with that. I'd say, Hey, listen, I'm gonna have to blow up an entire day if this is something we wanna move forward on, I gotta drive all the way out there, pick it up. It's gonna cost me money. Last thing I want happening is you selling it from under me. So if we commit, I'll be there tomorrow, but you have to give me your word and whatever else. Same stuff in real estate. And then, yeah, you'd get burnt, occasionally cars weren't if you thought they were. Literally it was the perfect industry, it was the perfect thing for me to do at a young age because there's so many parallels to what we do now. That it was familiar. I think that's why like learning curve was lessened, so much more when I got into it. Cause it just felt familiar.

Mike: 7:34

Yeah, no, absolutely. So you moved to Jacksonville, were you doing anything virtually before you got here or you really jumped into acquisitions once you kind of hit the ground here?

Hayden: 7:44

Yeah, I moved before we started kicking off marketing. I did the whole drive for dollars, door knocking. Did a lot of that in the first year of business. All the gritty techniques that take the most time really started at a ground level in terms of, intelligence level of complicated ways that you can go after sellers. I started at the easiest thing to understand the most base level. And then as business ramped up, obviously you need to spend less time doing certain activities and more time doing others. We didn't do a ton of deals that first year. That's why I Had so much time to go out and prospect in those ways. But I mean, I learned the city, I learned the neighborhoods. Even though we didn't do a ton of business that first year, I mean, the experience of just getting out there and mixing it up with people, being as young and ignorant and naive as I was at that time, fresh off the farm. I'm 18. It was super pivotal. I needed that timeframe of eating crap, doing terrible activities that aren't really the most fun, but they yield the best results. That was huge.

Mike: 8:42

I see a lot of time people, jump in the business, they think they're gonna get a deal in the first week, oh, I sent out a hundred text messages, no one got back to me and didn't buy a house. Right. How long did it take you, when you landed in Jacksonville to buy your first deal?

Hayden: 8:54

So I had to start selling insurance because I was selling to Run Outta Money. Yeah. So I took like a commissioned sales job cuz I recognized that I needed to get better at sales if I wanted to do good in this industry. So I wanted to find supplemental activities to sharpen that iron. And in addition to that I was funding the marketing campaigns partially. So it was me and my cousins kind of co-funding a marketing campaign. And I miscalculated how much I was gonna spend just living. And we had like a percentage agreement figured out on the marketing budget. So I ended up pulling out of the marketing budget five months in, of spending like three grand a month. And about a month after I pulled out, my cousin got a deal. off of that marketing budget. So I was one month away from being included on those profits, basically. So another three months go by and I'm still working the acquisitions piece. And then that's how it ultimately happened. So we stopped share because I couldn't, afford to stay in the game. It took a long time. It was painful, man. lived very cheaply. I'm like, if I would've just stayed in one more month, you know, I could have made all my money back and whatever. Right. So from there, it was just like, I was too far gone. I was so committed. I had this money, invested. I had all this time invested. And something kind of clicked when that happened, that was right around nine months of being here, where it's like, Cortez method, burn the boats, this is what we're doing, regardless of how hard it gets, go all in as hard as you can. And that's what really kind of spurred the growth the next year. We could pretty close to quadruple our volume the following year and it was just because I was in a sense like ready to grow up, ready to be a man, work as hard as I could. and yeah, it was just momentum from that point, just riding that momentum as long and as far as you can. And I still feel like that was yesterday. Like those years have flown by. You decide it doesn't matter the cost, I'm gonna do it. And it makes your life a lot easier once you make that commitment, cuz you're no longer getting in your own head and it's just boom. You don't get emotional about it. And I mean, that's what's really spurred the growth and the ability to learn.

Mike: 10:52

So you said you took that that insurance job to learn more about sales. What did you take away from there that helped you? In acquisitions?

Hayden: 10:59

Yeah. So, a good mentor of mine, I still talk to him to this day. His name's Brandon Wilcox. He was like this manager of five regional offices for AmeriLife, which is a larger kind of insurance brokerage. And I walked into his office just like handing out resumes and I was looking for something with a salary because I was kind of going broke. But I also was like the type of person that succeeds in a commission only position. So like, I needed like three months of runway. And I remember explaining this to him in his conference room, and the dude was just sold on me immediately. He gave me a salary, took me under his wing. He let me like, ended up having me manage people eventually. He was such a blessing in my life at that time. And his sales approach is a lot like the sales approach that I do now where it's question oriented. It's consultative sales. It's how do I serve you and my needs are last. That whole mindset of how you treat sales, where you genuinely care about somebody. And you convey that effectively and you don't have all the answers. And that's okay. And you can tell your prospect that. And all you can do is arm them with as much education to make as good of a decision on their own as possible. And maybe you help them, you know, make a decision, maybe not. It's that whole kind of mindset of. You know, give as much as possible. Don't expect anything back and be a good person, be genuine. And obviously there's a lot of more to it than that in terms of like advanced strategy. But he was just genuinely a good person who, had this sort of philosophy with sales. And I adopted that and it worked really well with real estate. Real estate is typically people's biggest assets. You know, you're not gonna pull one over on people. It's typically one of the bigger decisions they make financially in their lifetime. So, kind of taking that same mindset and thought process and then ultimately really what it was, is just building up the tolerance of not caring to be told no, I was working leads not on my dollar, and I was okay with hearing and no by the end of it. And I think that was probably the most valuable thing. Is getting the repetitions in, getting beat up enough to where it doesn't matter. And that's kind of where I was by the end of that. Selling life insurance is not a fun product to sell. You're talking about death, you're talking about dismemberment. So, you're uncomfortable a lot of the times in that kind of arrangement. And that was the best thing for me. Cuz it's really hard to make me uncomfortable now.

Mike: 13:16

Yeah. So what were you guys doing for marketing for those first deals? Three grand a month.

Hayden: 13:21

all direct mail. And then I would go run appointments and then we had a VA team that would process the calls, see who was motivated and then schedule appointments, in tandem with me to go out and see those properties.

Mike: 13:31

So tell me about your first deal, the first one that you got. What did that look like?

Hayden: 13:35

Okay, so the first one that I actually got a contract, like I got the signed contract, met him out there, walked him through the process. It was about nine months in to me being in Jacksonville. The first deal is probably my weirdest seller experience. So it was all uphill from there. The president was started at a really manageably, horrible level. Could only get better. So like we had pre-negotiated this guy to like 60 grand purchase price. It was a house on Martin Luther King Drive off of Old Kings. There. And, he had bought it from a house slipper like four years prior, so we knew that it was like indecent shape. But the guy was pretty erratic on the phone. So we were assuming there might be, you know, whatever drywall torn up, whatever else that, that you can expect with that type of thing. So yeah, I called the guy like to tell him I'm on the way to the house, and he like starts going off on this tangent about how the Lord sent me and how this was like a holy thing that was happening. I'm like, no I'm just looking at a house, man. But I didn't really know how to handle it. Right. I'm 18, I'm immature and don't know a lot about the world. Can't maneuver very well in that conversation. So I'm just like, yeah, whatever man. Sure. I'll be there soon. Yeah. Yeah. Just trying to get through the phone call. He's going off on this crazy tangent. I'm like, okay, I'll be there in five minutes. Hang up the phone, pull up into the driveway. At the time I'm driving this like 1997 Mazda Prodigy. It's the car that I moved down here with. It's an$1,100 vehicle, no air conditioning. And it's summer. This is like August and I'm wearing like a suit and stuff. I looked like a child. I was very insecure that I wouldn't be taken seriously, so I would overcompensate. So I show up at this guy's, comes out the front door yelling hallelujah. And it's like 5:00 PM So people are kind of like home and on their front porches, seeing this interaction happening where this young white kid gets out of this car. It was like, hallelujah. You're a godsend. Come in like, let me show you around. And I noticed the guy's like super skinny. He's got big welts in his elbows. Didn't know a lot, but I know this guy's on something for sure. I get through the front door, look to the right, there's a bedstand next to the front door, entirely covered in pill bottles. Like, oh, okay, this is what we're dealing with. All right? And, So we walk through the front door, I see the pill bottles. I'm still engaging with him and he's like, Hey, before we really get into it, do you mind if we sit and talk about the Bible, a. I'm like, okay. He has an L couch with a little coffee table in the middle. I'm sitting on one end of the l he's on the other. He's got this gigantic bible, huge thick bible sitting on the edge of the coffee table, kinda at like a 45 degree angle so we both can see it. And, he's starts to read some verses and then he starts going off on this crazy tangent about the Catholic church and how they're the devil. And it's just crazed. It's a complete fever dream. At this point. I have no idea what's happening. I'm very afraid so I'm just like agreeing to everything he says because I sense some like tension forming and I'm not sure why. Cuz I'm like trying to be as cool as possible And he's like saying all these things to me, and I'm kind of just nodding along, trying to keep him engaged, not show that I'm fearful or anything. And all of a sudden he just goes, you just don't get it. And he stands up, slams the Bible shut, and smacks me over the top of my head, like hard, right? So I'm jostled, like, what is happening? He darts into the kitchen. So I'm like, I have two choices. I can go up the front door, I can get here, or I have to go follow him into the kitchen and make sure that he's not getting something to hit me with, stab me with whatever. I gotta see what he's doing. So I make the decision. I'm like, okay, I'm gonna follow this guy. So I turn into the kitchen and I'm like, Hey man, I don't know what just happened. I'm agreeing with you, whatever. I'm trying to talk my way out of it. And he starts cooling down, coming back to earth. And then I'm like you know, why don't you just show me around the house, man? Like I came here to make you an offer. I'd really like to do that. Although I am appreciative of you, you know, trying to educate me on whatever it is you're trying to educate me on. And he's clenching his teeth and he is like just aggressive, trying to calm him down. This is going on for about 10 minutes, going back and forth with him. And, his wife comes home while we're going back and forth in the kitchen. And this is probably the saddest part about this whole story cuz his wife is wearing scrubs. She clearly just like came back from work being a nurse somewhere. Totally normal woman. And he just like changes in an instant. As soon as he shows up, he's like a normal person. They showed me through the house to get them down to 45,000. There was no outbursts after that. And we ended up buying it for 45. And we sold it for 1 0 5, I believe. So, I think now the first deal we did, we made just under or right about 30 grand, but I almost lost my life over that 30 grand

Mike: 18:09

Yeah. Geez, man.

Hayden: 18:10

That was the first one,

Mike: 18:12

So someone just guided home solution just commented how much mail per week or month were you sending?

Hayden: 18:17

Oh, goodness. I know that I was spending like 51 cents per piece of mail. and I know my budget was matched by Brad at that time, so I think it was a total of like$6,000. We were spending at 51 cents per letter. I wanna say that it was like 7,000 pieces of mail a month we were sending. And that wasn't that successful of a strategy. We moved away from that now as time went on.

Mike: 18:40

So, your first deal. You got proof of concept, right? What happens next at that point? I mean, I know you said you fully took the dive in, but what is your next step after that?

Hayden: 18:49

Yeah. So, me and my partner were somewhat loosely working together up to this point. I was. my own prospecting activities to find my own. And he was kind of doing his own thing and then we were combining when it made sense and it wasn't really working out for either of us. So we decided kind of nine to 10 months in, about pulling out and I was like, starting to sell a lot of insurance. By this time, started to make a pretty decent building, just selling insurance. And so was loosely working when needed, would go, negotiate when needed. But I had built up all this kind of sales acumen, in that timeframe. So he flew down here and we decided together like, Hey, maybe we give this one last shot, give it our all. I'll quit what I'm doing. You quit what you're doing. We just centralize all efforts into the same common goal. and really try to, systemize what we're doing. Cuz it was just lead comes in, somebody calls it at some point, there wasn't a business, it wasn't work. So we decided no, like, hey let's build a sales process. Let's, have, credibility packets, let's go on appointments. So we just fully invested our time and our efforts into it. And then since I became a decent salesman in that timeframe, they're like, Hey, we'll just have you run the whole acquisitions piece. Cuz me and Brad were kind of tag teaming, in the early stages. So we'll give all of that. You just worry about all that, handle all the lead flow, handle all the negotiations, the contracts. Over time I got more involved in the flip management and the retail process, in the business in general, in the marketing. I'm very obsessive. My mom used to tell me I'm a dog on a bone, right? Like, anything that I am interested in, I just wanna know everything about. So that's kind of what happened with us over time. Slowly permeated myself throughout the business. Built up a lot of good skills that way. Built up a lot of versatility and we had a good run. A fun run.

Mike: 20:38

This is nine or 10 months after you got your first deal, or this was like nine or 10 months in.

Hayden: 20:43

This was right when that first deal happened. Because that was the first one that I had negotiated, and I got em down a decent amount, right? They were oh, okay, maybe Hayden can be a good salesman. And that's kind of what spurred all that. And I'm like, yeah, guys, I think I can, I've been selling insurance. so yeah. So yeah we like fully set it up. I went to John Martinez training, which is a real estate sales coach, that summer, shortly after that deal happened. And when I got Backman, it was like gangbusters. We were, you know, three, four lockups a month, consistently from that point. And I think a part of that was the sales coaching. But, part of me also thinks that I just know the tenacity that I was attacking it with from that point. And it was a different ballgame for me after I kind of could prove that it was possible and I could do it.

Mike: 21:26

Yeah. So you said at some point you started moving away from direct mail. At what point was that?

Hayden: 21:33

So remember Lead Sherpa? They were like the flagship SMS blast service, and I think they started in 2018 or 2017. We joined a mastermind after that first year of business. My partner did Brad and twin and they would bring me along to those things. And yeah, we just kept hearing about people doing these text campaigns on Lead Sherpa and that we heard that it was very effective. In terms of just marketing dollars, you could hit a lot more people with much less. So we start doing that, and that really became our bread and butter from mid 2018, all the way until like 2020. The majority of our deals were coming from s m s, eventually left. Lead Sherpa Launch Control came out in 2019, I believe, and launch control. We were a part of like, probably the first 50 users. I wanna say it was fairly beta when we started using it. But yeah we were slightly ahead of the curve in terms of like text marketing, but as with any form of marketing, it's only good in the beginning. And then over time it gets worse. And you've gotta pivot or you've gotta have multiple different types out there. So yeah, SMS was awesome while it lasted.

Mike: 22:40

And same sales process, you're still, going in person to appointments at this point.

Hayden: 22:45

Yeah. The sales process was kind of three-pronged. So we had the lead generator which this is for outbound strategy. So obviously direct mail is an entirely different process. It's inbound calls filtering out who's motivated. It's simpler of a process really. but if you're doing outbound, you have somebody who is generating the interest in our business, we had somebody that, had been in real estate for a while and was familiar with what motivation looks like, call those leads and qualify them, and then set the appointment for me. So it was really a generator, a qualifier, and an appointment setter, and then an in-person appointment that I would go on.

Mike: 23:19

And so you're hitting the, as a mess marketing, right? You're getting up to three or four deals a month, which is nothing to sneeze at. Are you flipping all of these at this point, or are you starting to wholesale some or getting, you know, selling to some institutions?

Hayden: 23:32

Yeah. We hated the idea of wholesaling. Initially it seemed slimy to us. We were flippers, man, we're gonna close, we've got cash. There was kind of this level of like, morality to it where it's like, I don't wanna tell a seller that I'm the buyer and not be the buyer. Our perspectives changed on over time was, is that you don't have to lie to the seller. You can do it in an honest way. And that's ultimately how we began to wholesale eventually, but we made feeble attempts to wholesale if we decided we didn't want to buy something. Ultimately, we had a lot of situations where, we'd get a week from close and finally get an inspection done and have second thoughts about closing. So I would, call, pat Flynn or a few other big buyers that I knew in town just to see if they would take it. But nothing, kind of for real, in terms of efforts to wholesale, we'd ultimately either take it down and flip it ourselves or we would take it down and then just re-list it as is. So it's called like whole tailing. So we really kind of just did that. And I think we might've wholesaled one or two, in that timeframe, but just the people we really knew and trusted, that the deal wouldn't go south with. But yeah, it wasn't until, coming outta Covid that we really decided, hey, let's figure out wholesale and just that decision and committing to that, doubled our volume. Cuz you're buying for yourself. There's so many things that you're saying no to. That fits other people's model. But, I wasn't putting myself out there, I wasn't talking to buyers. I didn't know the varying exit strategies that were out there. So it's either we wanted or we don't. And kinda after we started wholesaling and I realized how much juice you could squeeze out of the orange in terms of marketing budget. I'm like, this is stupid. Why did we ever not do this?

Mike: 25:09

Sure. We'll talk about that shift in your sales process, right? Like you said, that you don't have to lie to the seller. I know a lot of people wholesale and they're telling the seller to the buyer a hundred percent. And then, they kind of obviously feel like that might be a little bit dishonest. How did you shift that? What did that conversation look like now with your sellers compared to when you were only flipping?

Hayden: 25:28

Well, and what I realized that the conversation didn't have to change that much cuz I was still, even at this time, I was a little twerk. I'm still a twerk. Let's not be getting outta hand here. But what I didn't realize is that when we were flipping, I was doing the same thing as when we were wholesaling, I was telling sellers, Hey, I'm not really the decision maker. My boss is, this is what he's telling me, works this, my partner thinks works. So this is what we can do. And then with wholesaling, it's the same conversation. And it was easy for me to make this shift because I was already young in having to face those kind of objections when we were flipping and actually buying stuff. So I created it to be this huge Crazy change. And in reality it really wasn't. It was all the same stuff with just a different meaning really. And so same conversation. Hey, you know, I work with partners, they're the ones who buy the deals. I'm not fooling anybody. I'm a child. Right? Look at dumb old Hayden, ha ha ha, he's not buying anything, right? And you just play into that and people trust you more for coming out and saying that and being honest about it, right? I'm not fooling anybody. I'm young. There's no way I have a million dollars sitting around to just go buy five houses today. That makes people comfortable and it's ultimately what gets contracts is comfort. So I mean, the only difference was, is that I would have to prep sellers, Hey, we're gonna do a full-blown house inspection. And what changed was is, hey I've got a whole team that I work with. I've got realtors that list them. I've got rehab crews that do the projects. I have cash lenders that fund the deals. All of these people have to stamp approval on this for me to move forward and what was maybe different about the way that we wholesale in the beginning was we would also offer them what we would actually buy at without doing any of that stuff. No showings, quick clothes, whatever. So I would say if you give me time to get my scope down to the penny, as low as it can go, if you give my realtor as much time as possible to see how the market's gonna head, and you give me as much time as possible to find a lender at the cheapest cost as possible, then I'm able to pay the most that way. But if I can't do any of those things, then I have to pay this price. And it explains why you have to do showings. It explains why all of these people have to come in and out of the house. So that was really the one tweak, but if you explain it in the right way, it's not a hard sell.

Mike: 27:42

That makes sense. And then you said you used to do it that way, so you shifted. Is that cuz you went to all the wholesale route? Is that why

Hayden: 27:48

Yeah, that was how our sales process worked when we were wholesaling, cause we were also flipping some stuff here and there, so we didn't wanna like pigeonhole that business by wholesaling. And ultimately you'd be surprised on how many people will take the guaranteed quick money that there's no strings attached. Sometimes you make more money that way. So, not something we do at Cash Geeks, we process too many leads and to realistically have that much cash on tap to make those types of deals. But there's still a similar process. price and timeline, there's a relationship there. The less time, the lower the price that type of lingo is very much still alive.

Mike: 28:20

Sure. Gimme flexibility and I can pay you more. And at what point did you discover or did you start working with hedge funds and institutional buyers?

Hayden: 28:29

Yeah. So we discovered them pretty early on. We didn't do a lot business with them until right around 2019. We got our feet wet, but by no means we're doing a ton of business in that realm. Really what happened was we started seeing these like crazy entities buying full cash when we were running comps and stuff. It's like, what? And then we like look into property records and we're like, what? This entity owns a thousand houses in Jacksonville. What is happening? They're paying full value. This doesn't make sense. Is this an investor? That's not how they behave. An intrigue was starting to grow starting in like 2018, which is around the same time Open Door and OfferPad came out, in terms of the Jacksonville market. And so I guess I look at it as like when I was at my most impressionable years in my career in real estate, the hottest topic was iys and hedge funds. Cuz it was this fringe thing that was new to the space that nobody really knew a lot about. And that was fascinating to me cuz I know in business you either cheat you're first or you do something better. So I'm not gonna cheat at this point in my career. I'm probably not gonna do something better, so I just have to do something first. So that I kept that in the back of my head for like years. I'm like, if I could figure out how to monetize this, knowledge that I have of what hedge funds are, how they operate, how they buy, and I can do that first. I could stand a chance to be in a really good position and got my feet wet and just, oh, just looking at spreadsheets, pulling lists, trying to find patterns, trying to identify who is who. I started doing that as early as 2018. In terms of like deep implementation, though, it wasn't till coming out of Covid. So we would flip houses. Had listed inventory here and there. We would sell some of that listed inventory to, to hedge funds. We whole tailed a deal to a, a hedge fund. So we started to get our feet wet. We started to put ourselves out there and get a affiliated with how they work with investors. And at the time there was a ton of roadblocks. They would make you own a house for like 30 days before they'd buy it off of you. There was a high barrier of entry, in terms of flippers or wholesalers. So really all of the breaks were pulled off coming outta Covid cuz we were sent into an inventory crisis at the same time. Interest rates were as cheap as they'd ever been. And so a lot of major financial institutions raised unbelievable amounts of money. And there was no houses for them to buy with that money. So, They started reaching out to all the fringe players like ourselves, and they're like, Hey, we'll do assignments. We'll do double closes. It doesn't matter, like anything you got. So I was lucky. I had done maybe eight or so transactions, maybe I, it's hard for me to say it's been a little while now, but we had done a little bit of business with a few of these funds coming in into Covid. So we kind of knew what to expect in terms of the process how they work

Mike: 31:21

But those eight were just stuff you had listed and they made you an offer on, like you weren't dealing them

Hayden: 31:26

No, we were, yeah we did deal directly on maybe a quarter of those transactions, if not half, somewhere in there.

Mike: 31:33

Had you just reached out to them or did they reach out to you because they had bought some of your listed stuff, or you just, how did that come about?

Hayden: 31:40

So it was Brad really, so I had figured out a way to kind of labyrinth together. Like, okay, so this house is bought and then it's handed to this, property management company and then for a different, it would vary per hedge fund how to get a, get ahold of these people. And sometimes it was calling the property manager company and it's like, Hey when you guys onboard a new house for rent, who do you talk to? And then just get that guy's, you know, contact number and then just go from there. A lot of them you'll see commonalities and mailing address. So you might see five or 10 different entities out there that own a bunch of houses, but they all got the same mailing address. Well, then you can use that mailing address to try to find a place of business to then try to find a business phone number. And then, you. It's not that hard to find out who these people are. It just takes a lot of persistence to get them to take you seriously. Cuz these people own hundreds of thousands of houses. So, rightfully they're not gonna want to talk to some Joe Blow wholesaler. We have a story, actually we have one hedge fund that it took a year and a half and we would send every deal to this hedge fund cuz they wouldn't respond to us, right? It took us a year and a half and 250 deals being sent with no response to the same rep at the same email for them to finally do business with us. right? So it's not that hard to find out who these people are. It's really hard to get in with them and to start transacting. But we just started doing that. My partner Brad found through a property manager, and then he found a direct line tracking down mailing addresses, and we had three or four hedge funds identified that we had direct contact with. And, yeah we leverage those connections to wholesale, hedge fund inventory coming out of Covid.

Mike: 33:11

So you kind of shift your model to all hedge fund at that point, or just, were you still flipping houses or what was happening there?

Hayden: 33:19

Yeah, I think we started buying again in like July or August once it kind of blew over and we realized the sky wasn't falling. I can't remember entirely. I just remember us starting to do a ton of wholesale deals starting in like June of 2020. And I was doing. About half of the dispo work, I would say. So I was onboarding and then offboarding. There was days where it would be, I'm on the phone with a seller call. I'm on the phone with a buyer, seller, buyer, seller, buyer, like all day long. I remember us doing maybe a quarter of our inventory in that timeframe, going to hedge funds. We didn't have a centralized campaign on that inventory. It was just kind of a happy birthday if it came up in the leads. It wasn't until I broke off on my own that I was like, let me figure out how to refine, the exact hedge fund buy box and just go after this type of inventory. Which is kind of what Cash Geeks took from our relationship. And that's kind of what we do.

Mike: 34:13

Got it. So around what time did you decide to break off on your own and make your focus hedge funds?

Hayden: 34:19

Yeah, so it was, September or October of 2020.

Mike: 34:25

And then were you still doing stuff on your own at that point, or was that kind of when you came in to work with cash geeks?

Hayden: 34:32

no, so I wholesaled from September to around February of 2021. So it was about a eight or nine month stint. And yeah it's a funny story. So me and Gonzalo had become good friends up to this point. I met him in 2019 or something like that. He'd had me over for Thanksgiving and all sorts of stuff, right? So, we had a close relationship and I. Started this kind of model where I'm gonna target the exact buy box of a hedge fund and I'm gonna wholesale the properties and it went really well. So basically what happened was I was locking down almost the same amount of contracts that I was with my previous business partners, but now I'm totally on my own. So I had the same sales acumen, I had the same ability to close a lead. I was garbage at transactions, I was not great at dispo, which with hedge funds is like it's whole own sensitive topic. And so what happened was, it went really good and I started just fumbling transactions cuz I was so caught up in the sales piece. I was so caught up in getting that next deal under contract that I was foregoing what was already in the pipeline already. In under contract already going to close. And what happened was I actually got blacklisted by a hedge fund because I didn't respond to a title email for like three, four days. So I call Gonzal, I'm like, dude, I'm in way over my head. I have deals that are set to close that they're spreads on, that I need help closing, and I don't have time to hire people, I was just helpless, I was just overwhelmed. And so he is like, I'm coming to your house tomorrow morning. Like, okay. So Gonzal showed up house and he gave me a dab talk man. He kind of was just like, you're screwing up, you're being an idiot. You're gonna be successful on the short term doing this, but in two years you're gonna be worse off. Like you can do more with a high level of people around you. And, he expressed that he wanted to attempt to instill a little hedge fund arm and cash geeks. And that I could, essentially merge my pipeline and my business with his, and he'd take everything over that I was struggling with and pulling my hair out over. And we'd basically, in the beginning it was just like, here's our dead leads. See if you can pull a couple hedge fund deals out. And yeah, we pulled out like four in a week or two of going through their dead leads. So it became, over time a bigger part of the business model of cash geeks. I was kind of the Guinea pig before cash geeks that was like, Hey, this is a real model. It will work. And then we kind of, you know, puzzle pieced that in with what they already had going.

Mike: 37:02

Yeah, so talk about that transition, right? Cuz I remember there was a point, where Cashs transitioned to almost an exclusively hedge fund model. I don't know how long it, how long that time took, but talk about what transition that look like over what time period.

Hayden: 37:17

Yeah. So by June of 2021, we were a full-blown hedge fund acquisitions company. I showed up in around February of that year. So it took us about five months to shift. In those five months. The biggest issue was, is that for us to get very refined in what the buy box was and with the amount of capacity we had for LeadGen and the amount of salespeople we had. We needed a lot more than just Jacksonville to keep people busy. So Cash Geeks had previously gone into Tampa and San Antonio at a wholesale level and had a horrible experience. And when I showed up in February of 21, they had just pulled out of those two markets and were like, we're never gonna do that again. We wanna just get deep in Jacksonville. So that was the mindset when I showed up, right? So we do like four or five months worth of deals and it's working well, and, but we realize if we really want to go after the hedge fund stuff, we have to get honed in on it. And there's just not enough data in Jacksonville to keep people busy. So we had to go into outside markets and that was one of the biggest challenges with that model, we had to go into Charlotte, Atlanta, Tampa, Orlando, Memphis, Birmingham, Nashville. We had to go everywhere to be able to keep our guys busy. And, we had to change a lot on how we pulled our data as the month, even past June. It's constant iterations with how we would decide what to market to and whatnot.

Mike: 38:39

About that. Like what kind of iterations? Like, the their buy boxes constantly or because like what?

Hayden: 38:44

yeah. So initially it was X hedge fund says they buy in this county and they buy this type of house in X County. Well, what I started doing, I had tracked kind of the labrinth of how these hedge funds operate. I knew what their acquisition entity was, I knew what their stabilization entity was. I know what their securitization entity was, so I could tell what the fresh acquisitions were and what the holds were. And what I cared about is where are they buying fresh acquisitions. We found that we were more successful isolating to a zip code level where these hedge funds were active in the past 60 days. And we would refine the areas that we would target at a marketing level based on, you know, were there more than two buys from hedge funds in the past 60 days in the zip code. And if there were, then we'd market in that zip code. If there was not, we would not market in that zip code. So if you looked at like a geographical view of how we marketed, it would be like Atlanta, and then just these little areas in Atlanta and then Memphis, these little areas in Memphis and Jacksonville, these little areas. And then every 30 days it's gonna shift depending on where the hedge funds are indicating they wanna buy more properties in. But in addition to that, it's also fact checking what they're telling you their buy box is. So we wanna look at all the houses that they buy and we wanna look and see, okay, they say they buy down to 1950. but how many houses in reality did they buy in the years of 1950 to 1960? And how many did they buy from 70 to 80? And how many did they buy from 80 to 90? So on and so forth. And what you can start to piece together is like, it's not a linear relationship between we'll buy every house equally. That's not the reality. The reality is that they target particular assets and each hedge fund are aware of what assets they perform best in, and they try to find their own little niche. So you gotta know what type of asset you're working with, what hedge fund, fits the bill in terms of their strategy. And you have to dance around the country in the areas that they are or are not. And that's the best way to be successful with it because ultimately these hedge funds are balancing a portfolio. So you can't just do it in one city. They have to balance a portfolio geographically. So they might buy a ton in Memphis and now they gotta balance it with Atlanta and now they gotta balance it with Jacksonville. So, it's a constant rotation and you can't predict, we've tried to predict, hey, where are they gonna go on a buying spree? There's really no way, the best thing you can do is just cast a pretty broad net in all the areas that they might wanna buy aggressive in. And then, ultimately it kind of evens out. You have some markets that perform like trash and you have some that are really hot and small spurts.

Mike: 41:19

so you're looking 60 days backwards performing data by zip code and saying, Ooh, even though they say they may buy in this zip code, it's in their buy box, but they're not actually really transacting there, or they're not transacting there for 1970 homes. They're only transacting there for 1990 homes.

Hayden: 41:36

precisely. Yep.

Mike: 41:38

Sounds like a lot of data gathering

Hayden: 41:40

Oh, it's insane, man. When we would pull our marketing data, we have a data VA that would have to go make individual list polls per zip code. And sometimes that would take three full work days of just pulling the criteria per zip at a, national level. So yeah, for sure.

Mike: 41:58

So you guys start kind of figuring out this hedge fund model. You're marketing exclusively to that by June or you're still doing a little bit of Jacksonville's traditional wholesale.

Hayden: 42:08

Only if you bought any wholesale inventory from us starting in like June of 2021, all the way until January of the following year, that was all through JV deals. We were not marketing at all to wholesale deals. So yes, I mean, we still had wholesale inventory, but it wasn't ours. We were selling it for other people. An interesting effect that happened is we had built up this healthy buyer's list for specific types of property that we were no longer selling people. And then people started kind of overpaying just based on the fact that we didn't have as much inventory that we used to.

Mike: 42:43

So I remember a while back you told me, on the headphones side, like you, you were getting really deep into it, right? I mean, you were even looking at like, you guys are wanting to make sure that whoever you were selling these deals to once you had it under contract, Actually gonna move forward with the deal. And you were even looking through securitization stuff, I think, or bond offerings. Can you talk more about that?

Hayden: 43:03

Yeah. So over time, obviously I'm super enthused with this whole business model of owning hundreds of thousands of houses in the US and that just being something that can happen. So, I'm sinking my teeth into it. We go to conferences in which a lot of these institutions go to. I was lucky enough to have. Both an investment banker explained how this works to me. And then I also met an asset manager for one of the largest hedge funds in America, and she actually was able to explain a lot of this stuff to me as well. So that's kind of where this all comes from. And was put what places to look for in terms of bond market data. I could talk literally two hours on this piece and I'm gonna try to dumb it down as much as possible. But essentially in 2014, this lovely financial tool was invented, called commercial mortgage backed security, backed by single family rentals. So this is a product that has existed in times past, but it's never been applied to, an institutional investor owning a rental home or homes. Plural. So how the bond market functions within a hedge funds business model is, it's essentially their way of refinancing properties. And the reason they do this over like a commercial mortgage refinance, is that there's zero regulation on what L t v it needs to be at. There's zero regulation on the interest rate and how it follows the fed rate. There's no, requirements of liquidity. There's no requirements for down payment, nothing like that. So it's like a pretty much a completely unregulated way for the massive the biggest financial institutions in America to be able to exit their debt to then, re allocate their capital. Right. So it's essentially like, if you're familiar with the Berg concept, it's like that, but at the largest scale that you could imagine, right. With very few rules, right? So the bond market is a leading indicator of what hedge funds buying behavior is going to be and how much funding they have. And what we started doing is tracking who exits bonds. Typically when you exit a bond you see a huge influx of capital that you need to reallocate by a certain timeframe. So usually, when somebody sells a bond, there's a nice little buying spree after that, unless, of course they get skinned alive on said bond. And I'll give you an example. A lot of us were selling houses to Tiber Capital in 2021. Now, Tiber Capital was a, subsidiary of another hedge fund called Starwood, which is an international real estate investment hedge fund, essentially. and they ended up getting in a lawsuit in Israel actually for selling a corporate bond backed by some retail space, like massive storefront, stuff like that. They had essentially sold a faulty bond. Tyr was being backed by the same company that got drug into this huge lawsuit. Another thing is kind of at play here because when, hedge funds get into the game and they want to securitize, their goal is to sell bonds to renew their capital and turn a business out of just acquiring houses. When they do that, they have to come up with like a cap rate or a yield that they're willing to buy at. And essentially what they're looking at is what is my spread between what the bond market will yield me in terms of a coupon rate, which is basically just an interest rate. So let's say I can sell a bond for 5% yield. To a pension fund, and let's say I go buy a bunch of real estate that are 7% yield. So I see I have 2% spread there as just the intermediary. You see what I mean? So what happened with Tiger is as the economy got a little more shaky, there's also another level to how those interest rates are depicted. So, if you have a bond full of Class A properties that are newer that need less work, you get a higher credit rating, you get like a AAA rating, and you'll get a cheaper interest rate or bond coupon rate, the higher credit score you get. Well, Tyr was buying a bunch of 1950 crap boxes that needed huge rehab. and they were like the only hedge fund in that space doing that. So every wholesaler end of the sun was slinging as many deals to them as possible. And what ended up happening was they couldn't exit their bond fast enough because they had all these houses with rehabs. So their turnaround time from buying those houses and then stabilizing that portfolio was way longer than any other hedge fund. They can't stabilize it fast enough. The economy starts to turn, people want to invest in real estate still because they're worried about inflation, but they want AAA rated real estate. So if anybody was playing in the hedge fund space in the spring of last year, you might have noticed a lot of hedge funds said, Hey, we want to buy 1990 and up. We wanna buy 1980 and up. the reason that was happening is that anybody who was selling a bond that wasn't a AAA rated bond was getting skin alive on their interest rate or their coupon rate when they would go and sell that bond on the open market.

Mike: 47:50

Because the investors buying that bond felt that it was higher risk, so they wanted a bigger return. Is that why?

Hayden: 47:57

And the yields didn't make sense. So tiger. I wanna say they, I could be wrong. I think it was just one bond they sold. It could have been two, but here's a new hedge fund who doesn't really know how it works. They've never gone through an exit before. They buy a group of houses that are higher risk and their yields were like 7%. I think they ended up securitizing at like six and a half, but I don't think they came out a ahead in terms of L T V. So, that led them to stop buying for the year. In fact, they've never bought since then. whether that be because of the lawsuit of the faulty bond they sold before, or it's because of this current bond. You know, some of those reps ended up reaching out to us to sell portions of that bond package for them, which was a very interesting experience,

Mike: 48:39

of That bond package, like houses

Hayden: 48:41

yep. So the way that the language is written if the bond starts to collapse on itself, essentially it's not making the homes, aren't making the payments back to the coupon holders, there's language in there where certain portions of that bond will be sold off to, to recoup cash value that's necessary to maintain operating capital and cash flow within that bond. So if you run too low on cash and your stuff's not cash flowing, then there's certain clauses that trigger certain amounts of homes to be sold to then try to retain the bond. So I know the bond hasn't fully gone under anything like that, but I do know they've had to sell off assets out of it to keep it

Mike: 49:16

Right. So you're looking at this information, right? All these bond offerings and all this. Are you making decisions of who you're gonna send deals to or who you're going to get a couple offers, who you think is gonna close because you're concerned that. If someone's bond didn't go well, they may not close or talk more about that.

Hayden: 49:34

Yeah. So it really means a lot because most of the time with hedge fund deals, you get one shot at selling that to one fund. Because typically sellers that own houses that are nicer assets that we're trying to target for hedge funds, they're typically not in as much distress. They typically need much less favorable terms than, say, a motivated seller. So the game in hedge fund deals is really less about price than it is about terms, because you need time to go get bids. You need time to get inspections done. If I have 10 days of inspection period, I only have one offer I can accept. And if that offer doesn't pan, I'm screwed. Right? So it's really important and this might be trending out since the market's softening a little bit. We might be able to get easier terms, but I know in the past six months it's been the difference between making money or not. Because it's like, okay, we have three offers there within five grand of each other. Right? How do we decide which hedge fund to take? Well, there's two things. One, what happened last week? What post inspection bids did we get last week from these hedge funds? How much lower or higher or same were they? Were they stable last week? Were they crazy last week? Were they all over the board? So we kind of do a quick look back and just see on the day-to-day how they've been performing. And then we'll also take into consideration, hey, they haven't sold a bond for seven months. They're at the tail end of their funding. We could get axed depending on how many commitments they have out right now versus, Hey, they just sold a bond last month. They made us a good offer. They didn't retrade us that hard on the last deal. I feel really good about taking this offer. So there's a lot at play there. Ultimately a lot of it comes down to gut feel and just day-to-day experience. But, it has made a difference in, our business.

Mike: 51:15

Yeah. And when they cancel, I mean, they're often within their inspection period, right. So you're not even retaining any kind of EMD from them. it's a wash and there goes your profit, whatever you were gonna make.

Hayden: 51:24

which is the nature of hedge fund deals. Man, it takes loading a lot in the hopper to get a lot out at a smaller scale because of how much unpredictability there is with it. It's just law of large numbers is really the best way you can overcome something like that. And while we've gotten as inventive and as smart about it as we can, we're dealing with for the most part a lot of private hedge funds that can do whatever they want at any time. And you have to know that. And you have to be okay with that. Cause they're opportunistic like everybody else. They don't owe anything to you. They're there to get a deal. And it's awesome when they're definition of a deal sucks. And it sucks when their definition of a deal is a deal.

Mike: 52:04

You mentioned actually kind of the seller profile is a little different for a lot of these deals that you're doing. I mean, typical wholesale, at least in my experience, with a lot of deals we do, it's often heavy distress. There's a lot of terms that the seller needs, whether that's stay after closing, whether that's, they need help moving, whether they just don't care about this property anymore. You know, there's code violations, title issues, all that kind of stuff. But it seems like that profile's different. When you guys are going after this kind of inventory?

Hayden: 52:32

Yeah. It's a higher intelligence seller. It's somebody who's got a house that's worth a decent amount of money, three, 400,000 sometimes. Their motivation is they don't want to deal with realtors most of the time. We can be competitive to what they would net with all those fees, at least back in the day we could. Now it's a little different, but still people will take a deal based on convenience, but the language in your contract becomes to be a lot more important. Using standardized state contracts is what we had to start doing. We had to use FAR Bars in Florida. We had to go find the GAR for Georgia. Because the intellect level of seller that owns those types of assets, you can't have your word doc as is contract with every, liberty under the sun in it. Like, these people know what they're doing. No one pagers obviously, there's still times in which that's fine, but buying a large, it has to be a much more honest sales process. Hey, we're acquiring this for a fund that we work with. They have their own inspection that they do whatever. So it is a different process for sure. And yeah, typically you have, worse terms, closing timeframes gotta be faster. People will talk to their realtor friend, you don't need 15 days of inspection, period. That doesn't even make sense. You get more pushback on those types of things with that type of seller.

Mike: 53:45

sure. Yeah. Talk about that sales process, right? How does that sales process differ outside of just, you know, obviously they're a little more picky about the contract terms and all that, and more of a convenient seller. is the conversation different?

Hayden: 53:57

Then say just a hardcore wholesale list with tons of distress. It takes more selling, to be honest. When you are working a motivated list, you kind of wanna find the person who's gonna qualify themselves, and you can almost be more of a confidant and just they'll give you information a lot easier. You'll know exactly their pain points. it's almost an easier sales process in that regard. With the hedge fund style leads, first off, you get a way higher response rate. because a lot more people are willing to sell in the ranges that you can offer. So you're dealing with a lot more tire kickers and a lot more interested leads in general, just purely based off the pricing. Right. And it's a lot more salesy cuz you gotta, it's not you can't go and pull that motivation out. You can't have them give you the full roadmap on how they need to be closed and what they care about. A lot of times they're doing it cuz it makes sense for them. So it's hard when it's not, as you and I know it, like my uncles in this house, there's a squatter in there, my tenant's not paying me. It's none of those things. It's like, hey, if you can pay this price and you can do it by this time, I would do it. But if it's not this price, I don't really need to. So I'm not, so the sales process turned into much more of like, almost aggressive sales to get those types of sellers. Cuz you have to create your own motivation. If there is no motivation there, you gotta create your own urgency however you do that. So in some essence, I think it made our sales team a lot better because you have to get scrappier over contracts and you're also getting scrappy against people who are pretty smart. So it takes, iron sharpens iron, right? So, now that we are kind of cutting our hedge fund lead flow with wholesale lead flow, it's very noticeable. Like, wow, we got a lot better by working this fund leads,

Mike: 55:43

so these people are, they're convenient sellers, And when you're targeting that hedge fund inventory, how do you compete against the ibu, you know, the open door, the offer pad, the, Similar process.

Hayden: 55:52

Fees, what we offer you, you net. So that's the biggest difference, between commissions, acquisition fees, whatever. And it's not necessarily that sellers don't like the offers after you calculate the net nets, like those offers are still good. It's that sellers would feel that it was grimy, that they would get an offer for X amount and then they'd look into it and then it would be this amount. So we would just play into that. If anybody ever tried to pit an IBU against us, it's like, they told you they were gonna offer you that. Go look again. Go and see what that true net is. No. Go through the process. I want you to, and we might not be able to pay as much as they are, but our whole thing was, I'm a real person. I'm on the phone with you now, and this is the price that can be paid. And there's no hidden fees. That's the net. There's no real estate commissions. This is it. This is a strategy that works really well in the south, and I think it's because people are a lot more sensitive to getting screwed. But if anybody has any inkling that there's any funny business, they just stay away. So we would just educate sellers on how those fees and open door and the IBU would work. And you don't win em all. Obviously they're making good offers, but we can stay competitive against them.

Mike: 56:56

And so back to that conversation about, wholesalers from earlier saying that they're gonna buy it a main transparent, this sounds like almost. Same idea, right? You say we acquire for institutional buyers and they need to do inspection or how does that conversation look?

Hayden: 57:10

Yeah. I mean, well, it varies. So each sales guy kind of has their own spin that they like to put, some say, Hey, I work with a group of institutional investors that are looking to buy this type of home. Some will say just partners still, and then say that, hey, my partner has their own, third party inspection that they do, things of that nature. Sellers ultimately care about, they're comfort level with you. You're comfortable with what you're saying and they're gonna be comfortable with you. So whatever that is for you, comfort is all.

Mike: 57:35

And are all those kind of call em wholesale terms that you do. Things like, Hey, you can stay after closing. Hey, I'll help you move. Does that kind of go out the window

Hayden: 57:44

it was out the window. Yeah. Unless we're gonna buy it and sit on it while we let people do a post occupancy or we let people move out, which has happened. I mean, there's deals where you're making enough money where it's like, eh, fine, I'll rack up 10 grand in transactional charges and still make 40. So that, that'll happen quite a bit. You know, we started getting really staunch probably around January of this last year or this year, 2022. We got really staunch on like tenants conveying, so we wanted everything vacant. We actually sold multiple houses that we thought were vacant, and turns out there were as people in them, and it was like a legal nightmare that. thankfully got out of, but kind of from that point forward we're like, Hey, we don't wanna risk this at all. They've just hard line gotta be vacant. If we got a deal and we know we got a deal, then we can bend on that. But if we're anywhere close to M AO then we can't offer anything special. It's gotta be exactly what the hedge fund terms are.

Mike: 58:40

So you guys were a hundred percent into that

Hayden: 58:42

yeah. It's stand fluid kind of as we look at the data, as we feel the market. The reality is hedge funds aren't going anywhere. They're gonna be here and they're gonna. Incredibly big and viable buyer for probably another 15, 20 years. In the same way that institutions bought up, you know, 25% of commercial real estate from 1994 when the commercial mortgage backed security was invented to 2010. Were experiencing the same thing in single family today, with the single family rental bond being released in 2014. You gotta ride the rail with them. The good news is that we are proficient in a lot of areas of business. So we can pivot away from that. We can keep relationships, lower our inventory going in their direction, still see success. But you know, it's really all about the absorption rate across all lines of business.

Mike: 59:27

That mean for people who don't know what Abor Okay. You're about to get into it.

Hayden: 59:30

So it's of how many houses do we put out to our buyers? How quickly are those houses being absorbed by our buyers or being bought? For instance, two months ago, we probably have 80% of our inventory, which is at the time roughly around 40 transactions. Were all hedge fund transactions. Well, when the market itself shrinks if volume is down altogether, then we're gonna feel that even at the micro with scale of our little company, right? So, if two months ago before there was a volume drop, I was able to offload 32 houses to hedge funds, then, I might expect there to only be 22 that are able to be absorbed based on my success and failure rate. So we're following okay, we submitted X amount of deals and X were taken, and we're kind of keeping track of how many can we possibly pump? Because we've already tried to just like get as many as possible, see what happens. They're working with tighter constraints. A lot of these companies haven't sold a bond. They're holding the bag until rates go back down. They're in no position to buy for the next three to six months. So being aware of all those things, it's like, okay, how do we get strategic with our marketing efforts to be able to identify there's this much purchasing power out there based on how many deals we submitted, how many were accepted. And if we can refine our marketing to produce this amount of deals, then we can spend all of these efforts on wholesale flips, whatever, we can cut our activities so they're as efficient as possible. So that's kind of, what we look at now. And The same goes for like Hood Rentals, right? So there's a lower absorption rate of Hood rentals nowadays. For the first time since Cash Geeks has been in business, we have to scale back marketing for Hood Properties because the amount that we can get under contract is not equal to the amount that we can sell. So it's finding that inventory that has the best absorption rate, and really that's flip inventory right now, either on a wholesale level or with you buying the most amount of money is available for those types of properties. So you can pump a ton of volume at that type of property and it'll be absorbed. You can't do that in the hood right now. You can't really do that with hedge funds right now. So refining that down, right?

Mike: 1:01:38

could You talk about kind of how you underwrite hedge funds deals at the moment.

Hayden: 1:01:43

Yep. So we, dropped our max offer at 78% of value minus repairs. We're seeing a trend of somewhere around like 82% at the low end acquisitions price of value from the hedge fund to the highest. I mean, we still are getting some 90% bids here and there. Very rare. Really, the median is like 84, 80 5% is what we expect. So we're looking at that. Obviously we have to be very, strict with the terms that we offer. So that's a given. So you combine the max rule with the terms. One thing that has changed recently is if there's any sort of inkling. That it's somewhat questionable. So I track what hedge funds buy, and I can kind of comp what we're underwriting to other hedge fund purchases. So if I have a hedge fund comp more than like a half mile away, starting to just say no on that stuff.

Mike: 1:02:37

No, based on the price. Right? And then is it just a lower price, or you just will say, well, I just need to buy it. I had a flip price only, or you won't even send it to a hedge fund, even if you have it at a great price. Like how do you look at that?

Hayden: 1:02:48

We'll send it in every time. If it's our own inventory, we don't care, we'll send anything in. But I mainly work with other wholesalers who are trying to do hedge fund deals and so I look at their inventory a little bit differently. I don't want to take gambles on other people's. I want to be as concise as I possibly can. So we put a lot more underwriting efforts into those deals, which is mainly just me. And we talk about this gut feel thing. Who, which is also kind of mainly just me. So it kind of works cuz I'm the one that's looking at all these numbers. I'm getting the gut feel on which hedge funds are good and which ones aren't. And then at the same time, I'm able to convey that to partners. But it really comes down to density of purchasing. So if I see a healthy amount of buys, particularly in that subdivision, there's no buys in that subdivision. I'm starting to say no. So if I see, okay, yes, this is a viable asset. They've bought multiple houses in here, they're definitely likely to buy this one. That makes me feel good. Pricing is a big thing. Condition is a big thing. We're getting a little bit stricter on, you know, what is good condition and what isn't. I don't see any torn up carpets. I don't wanna see any holes in the drywall. We're getting so finicky and basically, if it's the perfect house, if fits the perfect mold in the perfect neighborhood, make your max offer shoot, go up to 80% if you have to, if we're that confident. But if it doesn't fit that exact mold, we're only 3% away from 75% of value. And if we can get even just a tad under 75, we don't have to bank on the hedge funds working out to be able to move that inventory. So if I'm not feeling like fully, let's do it. A lot of the times it's like, you're almost there. So just make the offer that we can pivot to wholesale worst case scenario, and then at least we're kind of guaranteeing our success with that. So, kind of splitting those two groups and then like still giving it a shot on the hedge fund stuff for the stuff that's fringe, but ultimately pricing it to where you can do other stuff with it. Worst case scenario.

Mike: 1:04:39

Yep. so, you guys are now about 25% hedge funds, 75%. Is it just Jacksonville wholesale or are you guys in other markets doing wholesale as well?

Hayden: 1:04:49

So yeah, just Jacksonville, just really deep in Jacksonville. We're in talks. We will, depending on the timeframe in which hedge funds pick up, or if they're dormant until the end of the first quarter of next year, we might have to throw in another wholesale market to keep everybody busy. It's a challenge that I want to take. I love Memphis. I love, low price markets out there. I've been doing a lot of research over the past years on, so at this time we're just kind of gonna see what happens going into January. If January looks bad, then we're gonna pick up another wholesale market. If it looks good we're gonna go back to the hedge fund thing.

Mike: 1:05:23

yeah. You mentioned a kind of absorption rate of like kind of that Jackson rental inventory and how it seems like the fire pools dropped off there. Can you talk about what you're seeing in different types of inventory in Jacksonville? Because that's super interesting to me. Just seeing where was going in the market. I know I'm still buying stuff in the hood, obviously not at the same price that I was. but I'm curious to hear from you guys who are doing, you know, 40 transactions a month, what you're seeing.

Hayden: 1:05:49

Yeah. We were selling a lot of houses to turnkey providers in the hood, specifically. They were like the top buyer. And what's good about that is that they've got a whole business built out of that they need to buy houses. And so they're a very stable buyer for you to do business with as a wholesaler. With lending changes and with interest rate changes, like a lot of people aren't thrilled at owning a top of the market asset in the hood, with limited cash flow because interest rates came up. So the turnkey guys are taking it in the chin a little bit right now, and their offers probably dropped 20 to 30% of what they were, even two months ago. A lot of our hood properties didn't even make it to marketing cuz they would just get sold to VIPs. Which a lot of those were, turnkey guys. Until rates come back they're probably gonna stay like that. So now we have to scrap together one off mom and pop buyers. Which there's way less of those on the north side, say, than on the west side or say in Arlington, right?

Mike: 1:06:45

there's way less on the north side than on the

Hayden: 1:06:48

Yeah. Yes. And then the other piece is that you know, people are way more willing to lend in Arlington or the West side. People don't really wanna lend in the hood right now. People don't really wanna buy in the hood. They can choose. Now there's inventory, there's opportunities out there. So people aren't handcuffed to the 75, 70% rule anymore. They can be like, sure, the numbers make sense, but I wanna buy it cuz I don't have to. Like, what? What? It's a deal though. So the pendulum of like leverage in terms of like buy versus seller has shifted And so you just gotta deal with it. It is what it is. You follow the money. Where are the most amount of transactions happening right now? Who is the most willing to lend on these types of transactions? How big is the market size? And every time I do an analysis like that, I come to the same conclusion. It's starter homes in between 175,000 to 300,000 that are typically a little bit older that might need work. That is the type of house that people feel the most comfortable with, that they're still willing to buy at the same rate that they were. So in the same way that we, which is kind of come full circle, I was telling Doomadgee this yesterday when we went back and studied what made up the 20% of the hedge funds buy box. It's like we are doing that same thing now, but for wholesale inventory. We're looking at all the deals that happen, what house makes up the largest amount of business, that we can hone in on.

Mike: 1:08:09

Not just looking at market data, like jumping on MLS and prop stream or publicly available data and seeing what's traded in the last six 60 days

Hayden: 1:08:17

yeah. That's why we have a Tesla engineer. Listen I'm not fooling anybody, man. I'm from a farm, man. I'm not that smart. I can't figure all that stuff out. I can screw with a spreadsheet, but I can't come up with rules and formulas But essentially, yeah, it's just locating looking at price points, amount of volume, t tranching, price point and volume. Looking at a ratio between those and then seeing which ratio is the highest.

Mike: 1:08:40

Yep. And then going after that inventory can be a little progressive there.

Hayden: 1:08:43

When I got into this, there was almost like a camaraderie of investors where we're all gonna operate on the same rules. We're all gonna make a very similar offer and what Cash Geeks did when I was flipping that made me mad was they were like, yeah, we don't care. We'll just buy it for whatever. We'll see if it sells. And I'm like, this is irresponsible, this is dumb. And over time I understood it. I understood they had exit strategies that I didn't know about. Right? But it feels like we're returning back to that, right? Where it's an even playing field. Nobody's got the secret sauce exit strategy. It's really true sales that wins now it's true sales process. And we're all gonna be making similar offers. So may the best man win, right? That excites me because that's an opportunity for us to get better at that sales. But also, it's an opportunity for Every other investor to operate on an even playing field as well, which helps the little guy, right? If we have to pay the same price a little guy does the little guy who's showing up at their house is probably gonna win, and we're not.

Mike: 1:09:37

Yeah. And it's interesting, there's still a couple people I've found coming across some of the same inventory and competing on offers. But there's a couple guys who maybe they don't do this full-time, they're not on the pulse on the market, and they're still offering prices from four months ago, but they just don't go through. And then you pick that house up four weeks later when they cancel that contract because they still think they can sell that, house in rough neighborhood for 90 grand and it's just not worth 90 grand.

Hayden: 1:10:00

Yeah. It'll probably be until January, tell everybody's really full circle based on the seasonality of volume and everything else. I think everybody should be very well adjusted by January. So, this month's gonna be a little low. November's gonna be a little low. December might be entirely dead. You know what I mean? Like people are looking at this past year and being like, I sold so many profitable house slips through the first six months of 2021 or 2022. I'm just gonna chill for the last quarter. I don't need to take risk. Why can't I take the win while I got one?

Mike: 1:10:31

Cool man. And I know you guys wanna briefly talk about how you have kind of freaks used to be purely wholesale and hedge fund, right? And you guys have jumped in. It was last two months. Why you decided to do that?

Hayden: 1:10:42

Yeah. Well, so we talk about this section of inventory that still has a high absorption rate that's still, in terms of affordability, even in a retail sense, is still a stable asset. And we look at these buyers getting picky, and it was about two weeks of getting lowballed on inventory that we knew was good. And it's like, well, do we just undersell this Cash Geeks did not wanna flip houses when I showed up. They were anti house flipping. And I would flip some here and there. So I was always in their ear. I'm like, guys, we should flip this one. We should flip this one. So it just started to make sense. It's like, okay, we're gonna sell this at a price that we would pay so why don't we just take it at our contract price and do the flip? It's like retail's still, like, okay, and this is gonna sell at two 40 when it's done, or two 30, or. Like, it's at that price point where it's very unlikely that these rate hikes, destroy the buyer pool for us. So let's take some risk. Let's do it. And it's been fun, man. We're learning a lot that we don't know, right? So we don't know much about the retail market. We're not retail agents, right? So, shout out Janna Jordan. She's Yellowbird realtor. She's taken all of our listings so, it's awesome, dude. It's like full circle. I'm like, yes, this is, I remember this. It's nostalgic for me. It's fun, man. It's a passion of mine. It's what I cut my teeth on. And a lot of people need bailout buyers right now. And I'm given offers that people are hating a lot of times, and then they're having to renegotiate and ultimately, we're getting quite a bit of traction on it. We want to be cautious with it. We don't want to go too hard, too fast and have it be unmanageable, but it's humming along. It's about as much as we can handle right now. But we're still, a couple weeks away from getting some of our inventory moved, renewing up the pipeline, ready to hit it again. So I actually just committed to buy one, literally three minutes before we hopped on the call. I have the contract sitting in my inbox. I told the guy on the phone, I'm like, don't think I'm not trying to buy this house because I don't sign this for the next hour. Cause I'm doing an interview

Mike: 1:12:34

you guys have a rule when you go to flip, like you're looking to minimum of X

Hayden: 1:12:38

yep. So we're assuming that the homes are gonna lose 5% of their value by the time we get ready to sell. I'm looking at actives and I'm looking at comps. And if there's a disparity between the active and the comp, then I'm going 5K. Under the active, if the active is lower, I'm 5k under the active, which is well below a r v. If my actives are even with my comps, then that's my arb. I'm just gonna shave 5% off of that just to give my heart some extra warm and fuzzies. And then we gotta make a minimum 40. We've raised our own capital to reduce our transactional expenses, so we can make up for it a little bit there. And then also we have a general contractor who is hooking us up in a pretty big way. He's known G for a long time so, we have a really good relationship in that front. Great realtor now with Jan. So we've kind of set it up. We've got just really high level people at every way or every step of the way in the process. It makes it way easier cuz you can just trust the next guy knows what he's doing. You don't have to think about it. My biggest pet peeve when we flipped houses before was getting a call from a realtor being like, Hey, there's a plumbing leak upstairs, the drywall fell off the ceiling. Now I gotta go drive up to Callahan at, you know, 9:00 PM on a Friday to put buckets down, while the plumber gets out. Things like that. So we have an infrastructure where we could do a lot more than we currently are and we are excited about growing it. We just want to be smart going into the end of the year. We want to see what January looks like. If January looks good, then we're gonna go hard. January looks bad. We're going to pay less and do less deals. But yeah, to be determined, but we love it so far.

Mike: 1:14:13

Makes sense. I mean, you guys have a max rehab size that you're willing to take on at this point to keep things efficient or are you guys long as the numbers or you want more juice if you got a big rehab or

Hayden: 1:14:23

Yeah, like if it's over like a$75,000 rehab, it needs to be juicy. It needs to be like 70% or under, in terms of like value minus repairs. But a cosmetic rehab, if it's a big enough house, I mean, you can spend$65,000 easily on a cosmetic rehab. And the price between say, a$45,000 cosmetic rehab or a 65, there's not really a timeframe difference on those two rehabs. It's more so permits and major systems that slow you down and cost a lot of. So, there's two kind of discre, like you can pay a lot in rehab and have it be a simple rehab, and I'm still okay with that. But if it's a complicated rehab, that's gonna take time, which is almost just as important as the dollar amount of the rehab. I'm gonna look at the deal a little bit of a different way.

Mike: 1:15:08

Yeah. And then you said you guys have raised some private money to take this stuff down. So you're saving on fees, points.

Hayden: 1:15:14

No points. Points are the worst. And we're turning'em in like two to three months.

Mike: 1:15:18

Sold. Sold in two or three months

Hayden: 1:15:20

No, we like rehab within one to two months, and then on the market by month, beginning of month three. So exit timeframe Is faster than I've ever been a part of in terms of my career flipping.

Mike: 1:15:30

While you're working with, the right person. Everyone will share everything in real, except they won't wanna share their contractors.

Hayden: 1:15:35

Yeah, dude, it is one of the biggest headaches you get in this industry, man. I would Ray rather have problems in any other segment than that part of the business.

Mike: 1:15:44

Cool, man. Well, you know, wrapping up here I always ask two questions at the end. You're gonna have to come up with a second story cuz you already left the first one. But what is, what's the second craziest or most uncomfortable situation that you ever experienced with the seller?

Hayden: 1:15:58

I thought that I was gonna escape this question now that I already said the story, so now I gotta think. Oh, I've got a good one. Okay. So I sold this house to a respectable guy in the Jacksonville investment community. This is when we started wholesaling, this is probably two years ago. Right now, the seller of this home, he's a bit of a character. He's got six people living in this house with him, and they're all super into, magic, the Gathering. So they have the game table set up and dudes like wearing, like the first time I met him, he just had casually just brass knuckles on and like a one of those kind of rain jackets that are black and really long, black fingernails. Crazy piercings. But he was like kind of genuinely, like not a bad guy. Like I could have a fine conversation. You wouldn't know that's who he was over the phone, right. But he had all these kind of crazy people living in his house. And so I'm like, I could deal with it, right? I'm young and I don't quite have that big of a, of an issue with kind of how somebody looks or whatever. But this particular buyer that I sold this house to. Was a Saturday. So I finally get, we go under contract with a buyer doing an inspection on a Saturday. And this buyer doesn't tell me he's bringing his family, so his wife and his little child show up, right? So his wife and his kid are with him and we get into the house and I start seeing now that there's a child there. Cause it's just been me up to this point. So I'm not looking around too hard now that there's a child in this house. I'm like really looking around like, what is this kid seeing? And there's like satanic posters up. There's all this stuff that I didn't notice the first time. I'm like, oh, this is a, like, scary place. There's rabid dogs and bedrooms. People like, we're knocking to get into these bedrooms to inspect each one of these six people's, like living quarters. And it's like each room we go into is weirder than the next, like, just absolute living in filth. Like middle-aged people, probably thirties or forties. It felt cultish. It felt like there was like a cult thing happening in this house. And this guy gets so weirded out that they end up backing out of the deal because of how uncomfortable they were in the house. Yeah. But I also was feeling pretty uncomfortable. And I didn't really feel the need to disclose any of it. Right. Because I'm like, whatever, it's a house. You're gonna look at it. And, I dealt with this guy before, so I didn't really think too much about it. But yeah, as we got in there, it was like, oh, wow, this is something else. Yeah. I probably have a better one. Dude, I have so many of these. I wish I should just have a whole hour of just doing that

Mike: 1:18:32

So, oh, so Henry and Jelly says, who lends with no points? He needs a referral for that

Hayden: 1:18:37

I'll tell you what, Henry, if you're raising private money, you can't really advertise for it. So that makes it fun. you gotta ask without asking, but you just gotta work your network.

Mike: 1:18:45

Just hit up Hayden. He's lending at 5%, no points, no fees. Longer term as you need. Cool, man. So final question I always ask everyone, if you could go back in time, give yourself one piece of advice when you landed in Jacksonville, you're looking for that first deal, what would you say to yourself?

Hayden: 1:19:00

I should have recognized the importance. Really the lifeblood of this entire business is sales. And it took me probably six months to realize that I thought that I could come down here with intellect and with some money and to be able to bridge that gap. And that failed incredibly. You can't outsmart a hustler's business, which that's what this is. This is a pound your head against the wall type of business. So, I had to learn that type of work ethic and I had to learn that applied to sales. Obviously, coming from a farm, I worked with my hands a lot growing up. It's what I tied my, satisfaction in life to. So, you know, shifting out, I just didn't want to give that up. A lot of me didn't want to give that up. It didn't feel fulfilling in life for me to. be a salesperson. So if I have any piece of advice, it would've been learn the importance of sales, way faster than I did. Don't prioritize money at all. Money doesn't matter. Work with people who are the best and do things that produce the best results, which is sales. And if you do those two things, you can go into any segment of this business from there, with those kind of just two core concepts. It's really kind of my philosophy in business today. So, I could have saved myself a year or two years worth of eating crap, trying to go it alone, trying to, trying to outsmart what I thought this business was. You can't really outsmart it. You just gotta talk to people, man. That's how it works. You gotta be likable. You gotta be confident and comfortable. And it takes just reps to have all those things. You're not gonna be that way off the jump. But the faster and the quicker that you do it, the better off you're gonna be. I think I pulled that bandaid off really slowly in that first year.

Mike: 1:20:41

Hundred percent agree, man. Sales is one of the most important parts. We've invested so much. Becoming good at sales, becoming a better sales manager makes all the difference. Well man, if anyone wants to reach out to questions for you, or if they have, deals they wanna work with you guys, how would they go about doing that?

Hayden: 1:20:57

Yeah. So I'm not like a huge social media guy. I think that's known. Just email. I do deal submissions through that. I underwrite, I'm really old school man. I like working over the phone. I like to call you. A lot of the times I'm doing role-playing, like as I'm underwriting a deal, of the negotiation with the seller. I really take it to the fullest in terms of working with other wholesalers and doing deals. So I'll say my phone number, my cell line and shoot man. That's the best way to reach me is just to call me. So it's(904) 699-9759. And yeah, text me, call me, whatever. I stay fairly busy, so you will probably have to shoot a text if I don't answer. But it's all about spreading the knowledge and building genuine connections. Deals come from it or they don't. It's fine. No harm, no foul, a fun conversation, learn something and keep it moving.

Mike: 1:21:44

Yep. Cool, man. Well, thanks for joining us today. Really appreciate all the analogies shared and yeah, thanks for being on the show.

Hayden: 1:21:49

No, thanks for having me.

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Real Estate Game Changers Show

Mike McKay

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