Building Wealth and Purpose Through Real Estate with Boo Maddox

Transcript

[Mattias]
Welcome back to the REI Agent. I’m here with Boo Maddox. Boo, thanks so much for joining us.

[Boo Maddox]
Hey, happy to be here. Super excited about this. Love talking about stuff in real estate and investing, so happy to be here.

[Mattias]
Before we jump into it, can you give us a bird’s eye view of kind of what you do and why you’re on the show?

[Boo Maddox]
Yeah, so right now I run a team. I’m a team lead for the number one team. I guess we’re not number one anymore.

Somebody beat us this year, so I can’t say that. But one of the top teams at Real Broker, number one team here in the state of Utah. We’ll do about 1,500 transactions or so this year.

Started off in mortgage lending, did that for three years, hated it, went into real estate production sales. Did that for seven years, sold just under 600 homes in seven years. Large part of those were two investors and then realized I felt like I had more to learn, so I stepped into a team lead role.

And that was about 18 months ago, and we’ve been doing that ever since. Wow.

[Mattias]
Well, thanks for being on the show. That was a very- No, I’m going to dig into it, but I wanted to ask you first where the name Boo comes from, and is it short for something? Yeah, it’s short for Steven.

[Boo Maddox]
It doesn’t make any sense. It’s that childhood nickname that you- do you have kids? Yeah, yeah.

So you know how when they’re just little, you start calling them one name, and then they grow up and you call them another one, and eventually you’ll call them their real name? I just never got called my real name. So my family, close friends, everybody always called me Boo.

I tried to run away from it. I actually just did a TED Talk on this same topic. But yeah, I started to embrace it about 23, 24.

I realized I’m in sales, and the easiest way to stand out is by being a grown man named Boo. So I adopted it. Like I said, we have about 70 agents just in this office.

I bet half of them don’t even know my real name.

[Mattias]
Okay, okay. That’s great. And that’s easier than my name.

I feel like I can’t go by Matt because I feel like everybody would assume my name’s Matthew, which it’s not. And there’s no rhymes and stuff that work well for Mattias. It’s just a tough name to get people to remember.

[Boo Maddox]
But it’s different.

[Mattias]
But it’s different. It’s different. It stands out.

And it reminds me of a man named Boo. It reminds me of that one people that just won The Voice or something, a girl named Tom. It’s catchy.

It sticks out a lot.

[Boo Maddox]
Yeah. Remember those old Jake from State Farm commercials where the wife walks down and the husband’s on the phone with Jake from State Farm at two o’clock in the morning? I’ve had to have a couple of those calls, like where I get a call from someone’s wife who had me saved in their phone as Boo.

I had to correct it. No, no, we met, we met, we met. I helped you buy the house.

I mean, yeah.

[Mattias]
You could do some good social media content with that. That’s great. Yeah.

[Boo Maddox]
I’ve been wanting to start a new segment called Boo’s Clues, where we dive into the clues of what the real estate market is doing. So that’s next up.

[Mattias]
That’s brilliant. I love it. Okay.

So you were a mortgage lender. Did you jump into that pretty early on in your career or did you explore anything else before that?

[Boo Maddox]
Yeah. So that was really it. My dad runs a home building company here.

So I was raised in the industry. I think it’s the biggest unfair advantage I have. I’ve been walking around brokerages and involved in real estate development since I was 10 or 11 years old.

And so that was like my first… Before that, I was the sign guy for the company. I was the one installing all the hangman signs.

Before that, I was moving model home furniture. So it wasn’t my first thing in the industry, but it was the first sales position I would say within the industry.

[Mattias]
And sorry, you probably said it, but remind me again, how long you were in that before you moved on.

[Boo Maddox]
I did that. I did that for three years. I realized I didn’t like the number side.

I like the emotional connection that comes from the selling side. When you’re in the mortgage side, it’s just, it’s different. And it just didn’t hit quite the same as real estate sales.

So I started selling in real estate when I was 20, right after I turned 24.

[Mattias]
Okay, cool. Yeah. And did you have immediate success with it?

Did it take a little bit to get going?

[Boo Maddox]
Yeah, I sold, like I said, I think the unfair advantage I had was I was familiar with a lot of things, how businesses run. That’s the biggest advantage I had. So my first eight months, I sold 58 homes.

My second year, my first full year, I sold 60, then 75. And in 2020, I hit 204 transactions. Wow.

Yeah. Like I said, I don’t even know how to say it because the numbers don’t sound real, but the advantage I had was just that headstart.

[Mattias]
Well, I mean, there’s more to it than that. I mean, if you didn’t do anything, like if you just sat there and didn’t pick up the phone or whatever, you wouldn’t have sold those houses. So did you hire out to help with transaction coordination?

What systems were you using to keep track of 204 people? That’s not even more than 204 people because there’s only a few that closed.

[Boo Maddox]
Yeah. So I would say, and the way that I look at it now, so I was working for a builder, so my splits were never really better than 60-40. And this is where I become such a, if you go look at any of my social media content, I’m a firm believer that the solo model is going to die for most real estate agents in the next three to five years.

I think you’ll still have some exceptions, but I think for the majority of real estate agents, they would be better to operate under a team and not a mom and pop team, not a husband and wife who has too many deals. So they pass it off to a showing assistant. I’m talking a full fledged team that has all of the resources that a brokerage is supposed to offer.

Those are the teams that I’m talking about, I think that will win. So I relied on them for the first couple, two to three years, I relied strictly on their system. So they had transaction coordinators, they helped a ton with marketing.

So I was able just to live on their resources and put a little bit of my own budget behind it. And then when I really caught fire, when I went from 75 to 200 transactions in a year is when I really started, and this is what I think the model should be for agents, when I really started to develop my business within the team to bring in some things to help offset me and my individual production.

[Mattias]
Yeah. So what did that look like? What did you start bringing in?

[Boo Maddox]
So the first thing that I hired was a content creator full time to help me with my marketing. I realized that I was able to outsource a lot of the things to the team for transaction management and whatnot, but my own individual marketing, I had to supplement that somehow and I had to shorten that process. At the time, it would take me anywhere from 12 to 14 months from when I met somebody to get them to transact with me.

And I had to compress that curve and the way I compressed that was social media. So I hired a content creator and used them for two reasons. Number one, I used him to make content for myself and then I used him to make content with my target avatar client, meaning I would send them to go and make content with them that helped support my business.

And then the next person I hired was my own personal transaction coordinator. And then the third person, my payroll for my own little mini team was somewhere between 80 to 100,000 a year when I was at my max production levels. So the third person, I called her a buyer butler.

So it was just a number that I gave to every client. I think the biggest my pipeline ever was was 168 people under contract. So the amount of paperwork, the amount of texts and emails, hey, where is this?

Where is this? Where is this? It was just one central line.

I paid a young gal who’s now on our team selling a bunch of houses for us, but I paid her to, in essence, be me answering those questions. Because with the team I was on, there was a couple of portions that I couldn’t or I didn’t want to outsource and this is one of my nuggets that we’re going to give away ahead of time. But I prioritized my energy when it came to hiring people and I think that’s a little bit different than what the majority of people would tell you.

They’ll say, you need an assistant to do this. You need somebody to do this. I started giving away the things that were the most draining to me emotionally that allowed me to still put myself in the most income producing activities, which was the showing.

So through all those transactions, I never once had somebody else go and show houses for me because I felt like I was better and my conversion rate was significantly higher with me showing. So I had to offload some of the other things that I was doing.

[Mattias]
Yeah, that makes sense. I mean, I think that’s definitely a key piece to the deal. And I know that when I’m driving around showing houses all day, I have appointments all day.

I just feel like there’s just somebody I need to clone myself in front of a computer and people kind of expect me to be able to be in front of my computer for eight hours and be able to go out and show houses and all that stuff for eight hours a day. So it’s a yeah, that makes a lot of sense. And and I think it’s it’s it’s playing to your strengths.

It’s playing to your energy, 100 percent of what I’m writing about in my book. And you really need to focus. I think too many people focus on how they can overcome their deficiencies.

And that’s their kind of main focus when I think really you should be focused on what are your strengths and how do you maximize those? Like you said, for the top dollar activities and then try to work on taking the rest away from you.

[Boo Maddox]
Yeah. And it’s difficult because you have to start to trust people and it’s terrifying at times. But I think if you have anticipations of scaling, that’s the best thing that you can do.

Number two, what I did is those hundred sixty eight that I had any under contract at any given point, it was not one hundred and sixty eight different clients. What are where I really realized in 2019 that I could scale my business is selling one house to one person takes the same amount of time as selling three houses to one investor. And so for me, that became the strategy to being able to scale was going out and figuring out ways to help people leverage their money.

And I identify a product that I was selling as the best investment for them and help them buy three, four. I helped one investor buy upwards of twenty five units at once.

[Mattias]
Crazy. And he said single family, right?

[Boo Maddox]
Those are twenty five single family home. I think the average price was five hundred thousand or so. Five.

Twenty. Wow, that’s awesome. It was it was that one took more time to put together.

That was not the same as selling one house.

[Mattias]
Yeah, I can imagine all the logistics to get through all that at one time. Like you’re going to have a what? Twenty five inspections in a week.

[Boo Maddox]
Like, well, I mean, even getting to the beginning, I mean, you’re having to do verification of funds on whatever. Twenty five times five is one hundred ten million. Yeah.

Fifteen million dollars worth of real estate. I mean, you got to show proof of funds. You have to get those are all individual contracts.

It wasn’t a syndication. It wasn’t a portfolio. So it was it was twenty five contracts, twenty five addendums, twenty five earnest monies.

I mean, it was it was a heavy lift, but I had the team in place. I had the team in place. Yeah.

And it went into my systems and I was able to continue selling and not just focused on that one transaction.

[Mattias]
Yeah, that’s awesome. It’s amazing. Yes.

So now you are in this bigger team. You said you called yours the one, a mini team or whatever, right?

[Boo Maddox]
Tell a mini team within a team. Yeah.

[Mattias]
OK, OK. Tell me about how what you’re running now and what that what that team structure looks like.

[Boo Maddox]
Yeah. So it’s I don’t even know how to like quantify it. It’s we have 70 agents.

We have 200 agents across five offices. I’m responsible for one of those offices. We started last year.

We had four agents. Now we’re somewhere between 70 to 75 agents over the course of the last 18 months. My job is I look at it as recruitment, retention and training is kind of the big three things that I do.

I’ve stopped for the most part with production, but where I spend the majority of my time in production is because I understand how new construction works. We’re going and representing some of these smaller builders that don’t have in-house representation. Got it.

So that’s that’s kind of what my day to day on the team looks like.

[Mattias]
What kind of are you able to customize service to those construction companies to give them like a more tailored or what’s your what’s your proposition to them to work with you as opposed to somebody else?

[Boo Maddox]
Yeah, good question. So I think every builder here’s here’s a nugget for everybody. Every if you’re wanting to go and represent builders, they need four things from their agent representation.

Currently, I have three of them. I’m trying to get I think it’ll take me a year or two to get the fourth one in place. So the three things that agents have to be able to help builders understand and agents have to be able to facilitate.

The first one is marketing. So we are we are heavy Zillow team and we run our splits accordingly on those Zillow deals. So I have brought my builders in, paid my agents a little bit less for those transactions and taken that extra money and delivered it as a marketing budget to these builders.

And so we’re able to offer them fat marketing budgets that they don’t have the budget for. So that’s the first big one. You have to be able to help the market.

Number two is you have to be able to price their homes. And this is where I think most agents think that they understand and they have no idea what the hell they’re doing. If you get a townhome community, for instance, you have to price every townhome to sell the amount that that builder wants to every single month.

So if that’s two, if that’s three, if that’s four, you have to price those entirely different. And most agents completely miss that when it goes time to actually trying to represent a builder. And then third is you have to be able to supply manpower and a sales team.

So you have to. And I have that’s where having 200 agents across four counties is able to supplement and say, hey, I have agents that can sit model homes. I have agents that can throw open houses.

I’ll out market and I’ll price your homes better than any other agent can. Now, as a fourth, the fourth that I don’t have is land acquisition. That’s all.

Ultimately, if you want the guaranteed way to control builders, you have to give them the ground.

[Mattias]
Sure. And you’re saying you’re working on that, like as far as like off market. Are you trying to get like fine opportunities that aren’t presented to everybody?

[Boo Maddox]
Yes. Trying to go and find land sellers that are willing to sell. The demographic for these is very different than what the nationals are building.

So a national company, we have DR Horton, we have Lennar, we have some of those big ones. What they’re looking for is entirely different than what my demographic of builders is looking for. What my builders are looking for is like two to maybe 10 acres and maybe 20 to 40 units total.

That’s my working theory right now is that builders that do about 100 to 150 transactions a year should have their own in-house everything that we just talked about. So up until that, that’s my demographic zero to about 150 transactions a year. The size of dirt that they need is small.

And the scary part is, is that’s the most I think why these big builders are able to leverage so easily is because there’s two or three buyers for the the neighborhood or the parcel of ground that they’re looking at. These small builders, there is so much competition. There are so many buyers for it.

So I have to be able to bring them the land sellers directly.

[Mattias]
Now that makes sense. Makes a lot of sense. Going back to your pricing.

So so obviously if they need to sell immediately, you’re more aggressive on the pricing. Do you look at it as phases as well? Do you project like, OK, we’re going to start these townhouses at X price and then at each phase that you provide them, we’re going to we’re going to bump that up.

Is that part of your pricing strategy as well with them?

[Boo Maddox]
It all depends on the neighborhood. So I have 26 units coming about 20 minutes north of me. For there, we know exactly how many we have to sell every single month.

And I also have my average price per unit that I have to hit. The other the other asterisks, if you want to put it on there, that you have to factor in with pricing, too, is pre-sold are selling very differently than completed product is right now. Completed product.

You’re able to offer a locked in interest rate. You’re able to offer concessions when something seven months out. You can’t buy the money the same way that you can on a home that’s done in 30 days.

And so being able to price those to still move and have that understanding and be able to articulate that. I mean, on top of that, you have lot premiums that you have to factor in. A south facing home in Utah should not sell for the same price as a north facing home in Utah if everything else was the exact same.

An east facing home is going to hit differently. A home in a cul-de-sac, a home with views. And most agents don’t understand how to do that on a listing, let alone 26 of them to go out and pull lot premiums out.

[Mattias]
Yeah, that makes sense. And then and then marketing you’re going through and you’re you’re are you doing social media, paid Facebook, paid Google? What’s that look like?

[Boo Maddox]
Yeah, so for me, what I think the number one winner right now, I think the most undervalued attention that you can be doing is mass outputs of organic content. I think organic content is 100 percent what is going to win going forward. I think a lot of the I think people are overpaid advertisements on their social media feed for the most part.

We can all tell when something’s an ad. We can all tell. So that’s the tip of the spear for me is all organic content.

Then when after 60 days of posting one to two times a day for that builder, then we’re able to go and look at what videos perform the best for the measurables that we want to see. And then we’ll go and do a little bit of ad spend on those after we know that they have worked on organic. And then events, broker, broker relationships.

We provide content at all of our broker opens. So I’m able to get one to 200 agents come in. I’ll create all the content for them to be posting about this brand new builder.

We’ll throw a cool party. We’ll get 200 pieces of organic content made for that builder and we’ll start pushing them that way. And then landing pages, websites.

I mean, as comprehensive my goal for all of them, I tell them this when I sit down, I have two goals with every builder. I want them to fire me at some point because I help them scale to that point where they should bring in their own in-house team. And number two, I will make them competitive with the nationals on all three of those things that I am promising them.

I will make them competitive on marketing. I will make them competitive on the manpower that I have sitting in their model homes, their sales force. And I will price your homes as well or better than what the nationals are able to do because I understand the market better than the nationals.

[Mattias]
That makes a lot of sense. And then you provide them the dirt to build on. Why would they go anywhere else?

[Boo Maddox]
That’s the theory. I want a disgusting amount of this market share. There’s not one go-to person in the state of Utah that’s representing these builders.

And I think it should be me. So that’s what I started working on now that the team’s a little bit more stabilized.

[Mattias]
Now, have you considered as well getting involved as an investor with any of these developments or has that ever come up for you as well? Or do you want to stay in your lane, stay with the marketing of the properties?

[Boo Maddox]
Yeah, I think at some point that will make a little bit more sense once I understand because if you look at the amount of builders that and I’m trying to figure out how to say this respectfully, but most builders aren’t going to make it. Most builders aren’t. And so most builders are desperate.

They approach it from a desperation mindset. And so some of the projects that we have been interviewed on have not made sense. So I think at some point that will make sense to start investing and taking a portion of it.

I think the land element allows us to do that. If we’re able to go and purchase the ground, bring it into the builder as the owner of that ground. Like everything I built enough so that we can start capturing some of the business.

The land piece is how you capture all of the market share and it allows you to do cool things like that investment side.

[Mattias]
Yeah, totally. And then you can also look into the, you know, instead of selling the buy and hold, I’ve had a person on here before that that’s done whole subdivisions like, you know, 200, 300, you know, units that they’ve built and just kept them as rentals. And they were they were single family for the most part, which I thought that was pretty unique.

It’s also kind of cool because you can then, you know, if you do need to sell a little bit of it, you don’t want to sell all of it. You could sell off, you know, 30 percent, 20 percent, whatever you wanted to, as opposed to building an apartment community where you’re just going to have to sell the apartment.

[Boo Maddox]
Yeah. And I, I think that’s what I’m still why I haven’t invested more. I’m still not quite sure on my retirement strategy.

I don’t know if it’s rental properties. We own rental properties. I don’t know if it’s owning mass amounts of them yet.

I also believe in home ownership. And so like the idea of taking a 200 lot subdivision and keeping it as a rental hurts my heart a little bit. I’m sure if the dollars were right, we can get over that.

But it’s I feel like there’s enough rentals out there. If I can help get more builders scaled and help more consumers purchase real estate, I think it’s only going to get harder as more and more. And I’m guilty of helping them buy 25 homes at once.

But as some of these corporations that are coming in, I’ve seen how they operate. They don’t care about the dollars the same way that a first time home buyer does. They don’t they don’t care about the same stresses and anxieties.

And I think that those are only going to get worse as time goes on. But that’s that’s a that’s an opinion more than anything. So I mean, it’s people that are there’s people that are doing it.

And I think it’s really, really cool. I think there’s some incredible tax savings. I think that the fact that you if you do feel like you need to pull capital out, you can pull capital out tax free with a refinance instead of having to sell it.

I’m very aware of all the benefits of it. It’s just I don’t know. I have some weird rules, I guess.

[Mattias]
No, it’s true. I mean, you do raise a good point. I mean, and I think that there are I’ve talked to developers, too, and people have thought through like things like where they were building, especially like through twenty twenty one, where interest rates are so low, they’re putting stuff out there.

And it was primarily getting bought up by investors. And they’re like, you know, this product is also perfect for first time home buyers. Like, do we do we put in some sort of rule that, you know, has to be, you know, the first five out of the six townhouses in that section need to be owned by owner occupants at first or that’s like the first that will be considered.

And we’ll open one up for investors until maybe the other ones don’t sell or something like that. But it’s hard to yeah, it’s hard to know how to handle all that.

[Boo Maddox]
Yeah. And it’s I mean, it’s a ethics dilemma more than it is like because I mean, the dollar is definitely pencil like that. If you’re looking at it purely from the numbers as an investor, I promise you it pencils.

It’s just the I don’t know. I don’t know. I think like I look at my wife and I is like mom and pop investors.

We have enough rental properties. Our goal is to be able to give one to each of our kids when they graduate high school that’s paid off free and clear. And there’s your gift from mom and dad.

They’re worth five hundred thousand dollars. You can keep it as a cash flowing asset. You can sell it and liquidate and take your money and run.

So for me, I think that’s probably the most unless I have a big year financially, I do think that one of the biggest advantages that real estate agents have when it comes to investing in real estate, especially with the new the old rule coming back of accelerated depreciation. There was two years where in my top two producing years, I earned seven figures worth of GCI. And I think in both of those years I paid under forty thousand dollars in taxes because I was able to do the bonus depreciation and offset a fat tax bill.

So I do think that there are still advantages to buying onesie twosies if I have some of those big income years. But I think for the most part, that’s that’s the biggest advantage that an appreciation.

[Mattias]
So you bought individual properties and did a cost seg on those those years. Yeah, so it’s definitely definitely a way to do it. It’s maybe a little bit heavier a lift, but it’s also something that you could you can understand better.

Like if you’re if you know your market, obviously, and you’re buying in your market, you’re going to know your product really well, where if you get into syndications, you know, you’re not going to have to do as much work. But you might not know as well like the product that you’re investing in. And to your point about the, you know, you know, the differences between homeownership and rentals, like I think one of the things I do like about parks, mobile home parks, is that it is like you’re kind of helping make the bottom of the barrel nicer.

Yeah. First of all, that’s like going to be the cheapest place that somebody can live. Often people do own their own homes and pay the lot rent.

But it’s not an investment like, you know, a single family is obviously, but it that that demographic by buying in as a renter, you’re not really forcing somebody out as a buyer. Like, yeah, buying in as an investor.

[Boo Maddox]
Yeah, for sure. Yeah. Somebody has to own that.

And I think, yeah, I think that those make a ton of sense. But I think where most investors go wrong is there’s a million different ways to invest in real estate and they don’t identify their play. So the first question I always ask any investor I meet with, are you looking for cash flow?

Are you looking for appreciation? Very rarely can you buy both in a marketplace. And the reality is, is if you’re looking for a cash flowing asset, my market is the worst market for you.

If you’re looking for a long term hold and an appreciation play and you might break even. I have some great units that I can push your direction. So that was always the first question I asked.

And the amount of investors that and like I said, a lot of them I worked with from mom and pop, a couple of the bigger ones, but the mom and pop ones, I think that’s the biggest advice I would give to agencies. Make sure that you clearly identify your investment strategy before and a syndication looks really sexy. But for what you’re trying to do, a one time townhome purchase in a neighborhood that is brand new construction, you’re taking advantage of incentives and whatever might make more sense.

[Mattias]
You could. So with your mom and pop people, they’re mainly people in the area, I would imagine, right? They’re just investing in their backyard.

I think there’s advantages to both. Like you’re saying, I think that we’re in a not like you, I’m sure, but we’re in a more appreciation heavy cash flow, less market. I think there’s definitely advantages to being that kind of, especially if you have a decent income and your goal is to immediately retire.

Yeah. You just make the make the thing at least break even. You know, hopefully you’re making a little bit of money for CapEx and that kind of stuff, or you should be factoring that into your analysis.

But, you know, just look at it as a long term pay play. I do self manage, but I don’t do any repairs. And for me, I’m okay with the self managing part, but I know if I’m going to fix toilets, I’m going to be selling that.

[Boo Maddox]
It takes too much time. It takes too much time. And that’s why all of my units that we have purchased were all new construction units.

You’re going to notice from our conversation, I’m very partial to new construction, especially right now. But they were all brand new. They were all in neighborhoods that capped the amount of investors that could purchase in the neighborhood to 30 percent.

I feel like that helped with the long term and it also helps kind of stabilize the rents just a little bit than if a hundred percent are owned by investors. And then I really liked new at the time when I was buying them new was more expensive than used. I always came with a little bit of a premium.

I would. My argument right now to my team is that’s flipped. New construction is cheaper than existing right now, but it was cheaper for us at the time because there was no management.

Everything was under warranty for a year. If something breaks or something goes out and then your lifespan on everything was just generally a little bit higher. And then I noticed that my occupancy rates that that’s what a lot of people aren’t factoring is how hard is it going to be to fill if I’m self-managing and those have always been incredibly easy to throw up on Zillow and have a couple of people.

[Mattias]
I’m sure. Yeah, the new construction is definitely appealing for people like it just looks good. It’s going to have a trendier feel.

We’ve we’ve gone mostly with the Burr method. So we’ve we’ve bought like rehabs and we flip them and then refinance them. Got all the money back out.

And so we’ve had almost that, you know, where we’ve had like kind of thing ready to go for the most part. I think all of our shingled roofs were like either replaced in the process or like were recently replaced. And then I think most of the HVACs are also new.

So we were able to come into a property with like, you know, pretty much new everything. But when you’re doing a flip kind of thing, there’s sometimes there’s some some hiccups that you. Yeah, yeah.

[Boo Maddox]
I think the amount of hours that those take, if you don’t know what you’re doing, obviously, if you can get to the point and that’s I mean, one of my other nuggets for today is keep the main thing, the main thing. If you can develop a system to do it, the fact that your agent allows you to identify properties that are undervalued, that are coming to market, that are the best opportunity for you. So you get access to the deal flow.

So if you have the systems in place to build that, it’s great. But I think there’s a lot of agents that are in production. They want to do a flip and they spend all of their hours flipping instead of producing and their income actually goes down even if they make fifteen thousand dollars on their flip.

[Mattias]
Right. Yeah. And that, again, was not me doing work.

It was it was me managing. And I have learned to systemize that a lot more because, yeah, like things like even just if you’re showing up to Lowe’s every morning with your contractors like that takes up time. And like, you know, that seems silly.

Like we could probably think through this a little bit better and order stuff in bulk and have it delivered. But anyway, I digress.

[Boo Maddox]
So I’m going to give you your can I give you your new construction version of a burr when the market’s appreciating where we had the most luck because we would go because market in twenty eighteen, twenty nineteen, twenty twenty, twenty twenty one was going up. We were going and finding homes that were in new construction developments where we knew that the builder was going to be increasing prices as home sold, but that they guaranteed your pricing in the contracts. This works when the market is appreciating.

But we had buyers that were closing with like ninety to one hundred thousand dollars in equity and they only had about four or five thousand dollars tied up in deposits while the home was being built. So if you can find those markets where it’s appreciating at a quick rate, run your appreciation schedule over a six to an eight month build time. Make sure that your builder is one that will lock in their pricing and will not go up, not cancel the contract.

They exist. They’re out there locking your price with a small amount of deposits and let the market for it for you almost.

[Mattias]
That’s yeah, that’s amazing.

[Boo Maddox]
But it only I think we’re a year out from that happening for what it’s worth. I still think that we’re going to be in a troubled market for the next year where your method currently will work a lot better because there’s more homes on the market. There’s less buyers out right now.

I think that your strategy is the most effective right now in a year or two when home builders have to start increasing their prices. That’s when you want to find one of those to lock in.

[Mattias]
Well, I think I think it’s it’s kind of harder in general now because like, you know, it’s also hard to make the deals pencil out because at the end of the day you want that bird of cash flow. And if the interest rates are killing that, it’s it’s either got to be even more of a screaming deal or, you know, you’re gonna have to find a creative solution. So we we we recently turned our one into a midterm rental for that reason.

It was a screaming deal. And I mean, everything was great about it. Home run, love the property, but like interest rates make it very difficult to rent long term on the long term model.

So we went midterm and we’re we’re still feeling that out because it is a different animal.

[Boo Maddox]
Can I give you one other tip that we’ve had a couple agents take advantage of with new construction? You’re in what market? I’m to our south of D.C. In a tertiary market, Harrisonburg. OK. Do you guys have a bunch of new construction or is it mostly existing homes?

[Mattias]
What we have had a good amount of development. We have some national builders.

[Boo Maddox]
And are they offering crazy concessions?

[Mattias]
Yeah. Often. Yeah.

[Boo Maddox]
So we had one builder that was offering an 11 percent concession. We had a couple of agents and a couple of. Yeah, mostly agents that went in, they took the 11 percent plus their 3 percent commission and in essence took all of that concession as a down payment, as a commission paid out on the transaction.

So it was a 14 percent payout and then they were able to bring in a total of about 10 percent to get it up to 25 percent down. And that’s kind of where we start to cash flow is 25 percent down. So they were able to get investment properties for in essence 10 percent in this marketplace.

OK. Yeah. Crazy strategy.

I haven’t. The only the only way that that makes sense is if you plan on taking advantage of the bonus depreciation, because otherwise you just brought 14 percent of the purchase price in as income. You have to be willing to do the bonus depreciation, do your costs, do everything after that first year or it hurts you.

But there’s a there’s a little tip.

[Mattias]
That’s awesome. So I guess most people would be using that 11 percent to like buy down the rate. Like is that normal?

[Boo Maddox]
Yeah, that’s that’s how the builders offering it currently. I threw out the idea. I said, hey, what if we took this as a commission?

My little brother actually just did this. He’s an agent as well. He he got 14 percent between the 11 percent concession.

Had that paid out as a commission instead of paying down the interest rate. Had that paid out as commission plus is 3 percent that the builder was offering for him to represent himself. Brought in an additional 11 percent and was able to get a cash flow and investment property for 11 percent down in an appreciating market.

[Mattias]
OK. There you go. That’s a great tip.

[Boo Maddox]
See if it helps anybody. If one person uses it, DM me and let me know.

[Mattias]
Yeah, man, I feel like we have a lot of other ground we could cover. But yeah, I think to your point, too, about kind of like staying, focusing on what you know or focus on what you do well. There are some overlaps with the you know, again, I’m not doing the actual work in a flip or in the whatever.

But there has been some overlaps of how it will really benefit me in my business, because like now I can take on I can I could market to distressed properties, for example. And if somebody comes in, that’s not really that distressed and they have capital to to get their house ready. Well, I still have that team that can help them get their house ready for the market and we can just listen normally.

And and then also just your average person has been in their house for 30 years. Like, you know, we can I have the people I have the contractors that do bulk work for me that will, you know, work reasonably and quickly to come in and get their house ready for the market just to sell at a normal commission rate.

[Boo Maddox]
Yeah. And I think that’s when I say let the main thing be the main thing. There’s too many and we have a lot of new agents in here and I’m talking to them here for a second.

In your first two years of the business, I don’t think that you should be trying to add in all these ancillary things. Yes. My my theory is that if you can get in and crank on production for the first two to three years, these avenues will start to open themselves up to where that crossover exists.

If you try to force that crossover, I had this conversation with an agent the other day who’s been in it for a year. He’s feeling disheartened because open houses aren’t working perfectly. And he’s like, well, maybe I’ll go start doing property development.

I it’s like, dude, you’re going to get your ass kicked. You are going to get destroyed. Just focus on production.

Production leads to deal flow. Once you have the deal flow, then you can start adding on some of these ancillary services that also benefit your production. Right now, you could go and win with a listing because I don’t have any of these vendors that you do to come in and help fix the roof and to come and help with flooring because I’m working with the builders who already provide that.

I can’t help with that. And so that is a massive value add if you’re competing against me in the same market for the same listing. Hey, I can get this thing ready for you.

Show ready in two weeks because of this. It also helps you. Your main thing be the main thing.

And when you come across these deals, because you are in production, you have the deal flow.

[Mattias]
Yeah, no, you’re absolutely right. I think it can be hard starting out and not. And if you feel like you’re spinning your wheels and it I mean, it can be a good two years of, you know, really grinding before you start seeing the turn.

You know, I I personally didn’t do any kind of Zillow type thing. I know that you said your team does. But, you know, with that, like, you know, it is working your sphere and it’s going to take it is or they’re going to trust you.

They’re going to think of you that are going to use you. And then when that starts slowly turning, it just you see these jumps like I think that’s like you’re three, you’re five. Yep.

But yeah.

[Boo Maddox]
Yeah. And it’s two years. The analogy I use is you’re pushing a massive boulder up a hill and you have no idea.

The builder is so big you can’t see around you to see how close you are to the downhill. I don’t think it matters what team, what brokerage, what state, what market, whatever. I don’t think it matters where you are, what situation you’re in, whatever.

It’s going to take you two to three years for that learning curve for you to finally get that boulder to go downhill. But when it goes downhill, my wife hit that this year. She’s on our team.

This was year two, literally month twenty three. She was like, this is stupid. This is dumb.

I hate social media. I hate generating buyers. And then since that time, I think she’s had 14 listings in like the last like nine months, literally on month twenty four is when it picked up.

[Mattias]
That’s awesome. Yeah, so true. So do you have any other you’ve shared a couple of the golden nuggets already?

I just ask if you have anything else you want to share in that front.

[Boo Maddox]
Yeah, I think those are the big things. Number one, simplify your life. Less is more.

You’ll get paid more the more hyperlocated locale and the more hyper focused you are. The smallest demographic that you can come up with is the best. Simplify, simplify your life.

Number two, like we talked about, make the main thing the main thing. Focus on one thing and then slowly start adding in a couple more. As the skills come up, don’t force it.

And then number three is prioritize your energy. If doing paperwork like most agents are doing paperwork absolutely kills you to pay somebody to come in, help with the paperwork. Take that time, apply it to the marketing or the showing or whatever gets you excited about this business.

Apply that time and your business is going to double. And those are kind of the three big things that I try to preach on a regular basis.

[Mattias]
I love it. That makes a ton of sense. How about a favorite book, fundamental book you think everybody should read or one that you just currently really enjoy?

[Boo Maddox]
Yeah, so my favorite one right now is Unreasonable Hospitality. I’m a big fan of pulling from outside of the industry. I think real estate can be an echo chamber at times.

So Unreasonable Hospitality is the story of a dude who took a restaurant. He wanted to make it the number one restaurant in the world. The way that most restaurants were approaching it at the time was they would try to have the top chefs, the top food, the top menu, and it was all about the food and the experience that people had while they were eating the food was secondary.

To that, this dude went and flipped it on his head and said, we are going to create an experience for everybody that comes in through our doors and we’re going to watch what happens to our rating. And they became the number one restaurant in the world by focusing on unreasonable hospitality. And so for me, that’s what I think most agents have.

Agents, you have two jobs. Number one, your job is to be a entertainer. Your job is to get eyes on you, paying attention to you and entered into your ecosystem.

Once they enter your ecosystem, you now are in the hospitality industry. You are in the service industry. And however you can create, I think real estate is beautiful because you are going with people on it.

Even if it’s an investment, there’s still an emotional attachment to this property and to what it’s going to bring for them and the financial freedom and all of the things that come with it. You’re in the hospitality industry and you’re with people through a really, really cool time in their life. Make it special.

It’s not a bottle of wine at closing. It’s not the same rotational closing gift that you give every single person from the gift shop down the store. That’s $57.

It’s creating an unreasonable experience for these people in this transaction. So that’s my favorite book right now.

[Mattias]
I love it. That’s great. I think the Disney approach, if you look at business archetypes, I think the Disney business archetype is a great example of that and how you can really focus on the experience of the process being amazing.

[Boo Maddox]
Well, I think this is where Apple was one of those for a while. They’ve fallen from grace, as I would say. I got a couple of clips, as I do around this time of year when Apple’s launching a new product.

The way that Steve Jobs announced the MacBook Air, have you ever seen this? He held up a vanilla envelope and said, the laptop can now fit in this. And he pulled the laptop out the way he did the iPod Nano, right?

You and I are old enough that we can remember what the iPod line was like. He said, you know that little coin pocket on your jeans? People have always asked me what that’s for.

Now it’s for holding 1,000 songs. And he pulled it out of his pocket, like that experience, like that friendship. And now Apple’s trying to win on specs.

And when they’re trying to win on specs, they’re losing to Android. So it has to be about the experience that you create for these people.

[Mattias]
Very well said. Yeah. Well, I mean, if people are interested in finding out more about you, what you do, is there a good website, social media, et cetera, for them to go to?

[Boo Maddox]
Yeah. Instagram is the best. I check my requests all the time.

@Boo_Maddox on Instagram.

[Mattias]
Awesome. Well, Boo, thanks so much for being on the show. This is a really good conversation.

I think we could have probably talked for at least two more hours.

[Boo Maddox]
Hey, I love this stuff. Like I said, keep the main thing, the main thing. If you want to talk about politics, if you want to talk about global, I can’t help you there.

But if we want to talk about residential real estate, we can go on for as long as you want to. So I appreciate the time today. I love it.

Thanks so much. Of course. Have a good afternoon.

[Mattias]
Thanks for listening to the REI Agent.

[Erica]
If you enjoyed this episode, hit subscribe to catch new shows every week.

[Mattias]
Visit REIAgent.com for more content.

[Erica]
Until next time, keep building the life you want.

[Mattias]
All content in this show is not investment advice or mental health therapy. It is intended for entertainment purposes only.