Amber: Hi I’m Amber Ambrose and this is The BusinessMakers Show. My guest today is Brian Spitz of Big State Home Buyers and he is the Founder, welcome to the show.
Brian: Thank you very much.
Amber: So tell me about Big State Home Buyers.
Brian: Big Sate Home Buyers is an organization that focuses on working directly with sellers that want to sell their properties without repairs or going to open market.
Amber: As is.
Brian: As is, quickly, cash; we fix a lot of title problems, deal with things that most realtors and other private buyers don’t know how to fix.
Amber: Gotcha, so you do a lot of stuff on the legal end it sounds like.
Brian: We do.
Amber: Would you say you’re a real estate company?
Amber: So primarily.
Brian: Primarily a real estate company, but most of our sellers have either inherited the home or something of that nature where there’s also a little bit of title adjustment that needs to happen.
Amber: So these homes have a story.
Brian: Yes, that’s exactly right. We played with a slogan once that said We Buy Houses with History.
Amber: I like that. So there’s a story behind them, what does a typical deal for you look like?
Brian: A typical deal would be someone who has either inherited a home or they’re taking care of a loved one that’s aging out of a home. Or someone who’s been a landlord that is not wanting to stay in that business. Someone who has a pretty direct need to not own an asset or to take care of someone else with the proceeds of an asset, so they’ll call us. The houses that we buy they’re typically in the $150,000.00 range. We go out, see the property, make them an offer – a few different options usually – sign a traditional contract and then open title and work to do the curative process to make sure that they have the ability to sell it.
Amber: Legally it’s theirs to sell.
Brian: Yes, that’s one of the first questions we ask, how did you come to own this house?
Amber: Good to know.
Brian: It is. We usually have to figure it out and help them through that process. And then we close on it and do one of many things with it at that point.
Amber: What is the next step on your end that maybe a lot of us don’t get to know about?
Brian: It’s funny because not a lot of people ask me that question and it always strikes me as odd because we have bought over 3,000 houses in Houston. What we do next is we typically sell the homes then to other private investors who are building their own rental portfolios, to hedge funds or to our own internal funds where we manage other people’s private investments; we build rental portfolios and then rent those houses out to other families.
Amber: So how at all did you get into this Brian?
Brian: About 13 years ago I was between college and law school. Studied psychology in my undergraduate school and I wasn’t sure that I really wanted to go to law school. And my father, who is in commercial real estate, had this CD course, the kind you get from the middle of the night, be a millionaire, 15 minutes a day.
Amber: Like in the old magazines where you would mail it in? And they would send you a CD set.
Brian: Exactly. Yes that, part of it was on a VHS; it was a while ago, it wasn’t DVDs. Anyway, so he gave that to me and he’s real starry-eyed when it comes to stuff like that so I’m a little more pessimistic. But it sounded like a free 6 months off of school
Amber: You were like all right.
Brian: I thought I’ll give it a shot. But I got really – I did exactly what it said at the time and we ended up closing a transaction in like our eighth week which was very profitable to a 23 year old who didn’t have many bills. And that kind of spurred that entrepreneurial spirit to want to build something of my own. So that’s where that started.
Amber: And then the company is how old now?
Brian: The company will be 10 years old in June.
Amber: So you launched in 2008.
Amber: So that seems like a very important year for real estate, I would love to hear about that.
Brian: It was, it was. I started 13 years ago, so in 2005, and so I had a few years where the market was really at its height to learn about this business and that was a time where you could sell anything to anybody. So when the mortgage market collapsed we had kind of a crossroads where we could pursue the short sale business, which everyone really gravitated to, or continue down the path we were on. I’m very happy I stayed on plan B. And for a long time – the sellers who call us, their problems mirror the economy as well as life circumstances.
So for the first year or two after 2008 same story over and over again; two mortgages, my payment was $500, now it’s $1600. I’m 9 months behind on the mortgage, 22 months behind on the mortgage. So you’re beyond no equity in the homes, they were leveraged to 150% of value. The interesting thing about that is it pushed everybody out of the business so it was a very small competitive landscape for me and therefore there weren’t a lot of people for people to call.
So it pushed all the people out of the market and Houston’s market was never as soft as CNN would have you believe. And the interesting part was the local psychological economy followed. So prices were really low but value was not as low as people were willing to sell for. So I had a lot of just time to learn a lot without a lot of pressure or competition and so that’s where I got into digital marketing in 2009 and that’s become my area of expertise.
Amber: So as far as digital marketing goes, how did you get to this point?
Brian: Digital marketing – it evolves with the technology very, very quickly. Google is extraordinarily advanced, as well as Facebook, so it changes rapidly through the year. Back in 2009 we were at a point where everything was still keyword stuffing. Every page would say we buy houses, cash, sell fast.
Amber: Over and over again.
Brian: It was over and over again and that was the strategy so it was very inexpensive to do keyword marketing and the search engines weren’t nearly as sophisticated as they are today so I got to do a lot of trial and error and it brought us a lot of business. So it was very effective right from the start.
Amber: So people find you, the majority I would imagine online.
Brian: Now? Almost 100%; that and referral. We don’t do – we only do outbound marketing so people call us that have a need.
Amber: That makes sense, so no cold-calling.
Brian: We don’t do that.
Amber: You’re not putting flyers on people’s doors.
Brian: We don’t do direct mail either, it’s just pure digital, reputation management, social and referral.
Editor’s Note: Since the making of this video, Big State Home Buyers has changed their franchising plan to an affiliate program.
Amber: I know that you’re looking to grow – you’re not looking to grow, you are growing in the form of franchising.
Brian: We are currently the largest home buying company in Houston – privately owned company. There are others that are national by franchise and so I have an efficient way to close hundreds of transactions a year, I’m very good at scaling our marketing spend. Marketing is extraordinarily expensive, so to maintain a presence that can grow with the growing need we looked at lots of options and I’ve actually failed at trying to open additional offices in other cities. It’s a lot more work than I thought it would be, a lot harder. And so in the last year we’ve developed and we’ve been through six iterations of financial forecasting to find the right one to create a franchise that would allow me to do what I do best which is marketing, brand management.
Amber: Attracting the clients.
Brian: Attracting the clients, training the people who will have the franchises. Really maintaining the brand standard so very exclusive, small number of franchises in each city and then maintaining everything that we’ve spent all this time building. So we will have 18 franchises in Houston which doesn’t sound small but it is actually.
Amber: Is it? Okay. Because it sounds big to me.
Brian: It’s relative to other companies.
Brian: But we want to provide every resource necessary for people who buy our franchise to be successful. And it’s one of the things I see fail in other non-brick and mortar franchises is that they may provide the resources or the manual, but we really want to provide full service from assistance, backend support, title processing, the marketing branding and training. And so we took a market study of how large we could grow and then cut that in half.
Amber: To make sure you can fully service.
Brian: Yes, to make sure we can fully service and fully support in the long term.
Amber: So obviously a big important issue in Houston and the Texas gulf Coast lately has been flooding, Harvey in particular. I would imagine that affected you guys in some way.
Brian: It definitely had an impact and stretched our capacity for servicing multiple clients in the fall.
Amber: Like all in one fail swoop.
Brian: Yeah we had about three times as many calls on a daily basis we typically do and the good thing was is because we’ve done this for some time we had certain systems in place for the rare flooding. People do flood through some storms.
Amber: It happens.
Brian: Right. And so there’s real niche processes that different banks have for how they manage the payment of a mortgage, the insurance, all of that stuff, so we already had 25 different systems in place for different lenders so we knew exactly how the whole process would work. And so we were able to be really helpful to a lot of people right up front, but we had this calm after the storm – probably about a week – where everything was just shhhh and then it exploded.
Amber: I can imagine. So you had a lot of calls right after Harvey but was it just buyers or just sellers or a mix of both?
Brian: Oh no, the first wave were people that already had their homes on the market pending sale. So even though we didn’t have a lot there were people who were supposed to go to closing that was the first wave. And then immediately lots of sellers that weren’t considering selling but they didn’t want the problem. So sellers mostly, it was a real question about how would buyers respond; really about how both parties would respond. I have to tell you, it was really interesting the way the market absorbed these properties like that. I knew that people would sell because the repair work is overwhelming and if you have flood insurance check, shell of a house, I don’t want this problem. But people were very objective about it and buyers were very willing to come step up and buy and so I’m amazed at how quickly the market absorbed them.
Amber: Thank you Brian for joining us today, we really appreciate it.
Brian: Thank you for having me, sure.
Amber: Once again this is The BusinessMakers Show, I’m Amber Ambrose and our guest today was Brian Spitz of Big State Home Buyers.
brought to you by